KUALA LUMPUR: The Supreme Court of Nepal's order for Axiata Group Bhd
's 80%-owned Ncell to pay capital gains tax to the Nepali government substantiates concerns of high regulatory and investment risks for the telco's overseas operations, says PublicInvest research.
In a note, the research house maintained its underperform rating on Axiata with an unchanged target price of RM3.65.
To recap, Axiata previously paid a sum of US$227mil on behalf of TenliaSonera Group, which was NCell's vendor ordered to pay capital gains tax for its sale to Axiata.
The Swedish-Finnish telco had refused to pay, arguing that the shell company, Reynolds Holdings, that sold its Ncell stake to Axiata should not attract taxes in Nepal as it was registered in Saint Kitts and Nevis.
"We understand that Axiata has booked in USD157m as negative goodwill and in the event of non-recovery, the net earnings impact on Axiata would be USD70m," said PublicInvest.
Given that Axiata has already paid US$227mil, the order by the Supreme Court could mean an additional tax bill of US$340mil, based on PublicInvest's estimates.
The research house said Axiata should have sufficient funding to pay for the tax as it recently raised RM1.65bil via the sale of Singapore's M1 Ltd.
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