KUALA LUMPUR: AmBank Research is maintaining its “hold” call on Axiata Group Bhd (Axiata) with an unchanged fair value of RM3.86 per share following news on Nepal Supreme Court’s decision on its liability with regards to the Ncell Private Ltd (Ncell) buyout deal.
In a note today, the research house said the court had issued a full written order on the company’s liability to pay the capital gains tax (CGT) arising from the indirect transfer of an 80 per cent stake in Ncell to Axiata UK through its purchase of Reynolds Holdings Ltd from TeliaSonera Norway Nepal Holdings AS.
It said the order affirmed that Nepal’s Large Taxpayers Office (LTO) should determine the outstanding tax amount to be paid in relation to the transaction within three months from the date of receipt of the order and that the responsibility to pay tax lies with Ncell and Axiata.
Additionally, the court order also stated that the distribution of dividends and any sale of Ncell shares should not be granted until the tax obligation was satisfied.
“While we maintain the view that the court verdict is unreasonable, Axiata’s regulatory risk profile has worsened as the group may not have any further legal recourse except to pursue an uncertain claim from Telia,” it added.
According to the LTO, the CGT totalling 61 billion Nepalese rupees (RM2.3 billion) could rise to 66 billion Nepalese rupees (RM2.4 billion) if late fees are included.
“As Ncell has already paid tax instalments totalling 21 billion Nepalese rupees, Ncell and Axiata will bear only 45 billion Nepalese rupees (RM1.7bil).
“If the group were to make a provision this year, Axiata’s financial year 2019 (FY19) net profit of RM1.3 billion could reverse to a loss of RM400 million. – Bernama
