Globe’s credit profile seen to improve over next 6-9 months

GLOBE Telecom, Inc.’s credit profile is expected to improve over the next six to nine months, financial research firm CreditSights, Inc. said, citing the company’s “improving credit story.”

“We see potential for Globe’s deleveraging and capex (capital expenditure) funding buffer to enlarge from recently approved P32-billion equity rights offering (and) P80-90-billion tower sale…, (which) is expected to be completed by (the end of the year),” CreditSights said in its latest outlook report for Globe.

With these developments, the research firm anticipates “further improvements in Globe’s credit profile over the next six-nine months.”

Globe announced on Friday last week that it signed two sale and leaseback agreements for 5,709 telecom towers and related passive telecom infrastructure for over P71 billion.

It said that P53.5 billion of the proceeds will be used for capex and other major infrastructure expansions, with the remaining P17.7 billion going toward debt servicing.

“The first portfolio being sold consists of 2,180 telecom towers in Luzon, which will be acquired by MIESCOR Infrastructure Development Corp. for a total consideration of P26 billion, and leased back to Globe for an initial period of 15 years,” the Ayala-led company said in a statement.

The expected pre-tax transaction gain from the first portfolio will be P10.6 billion.

The second portfolio consisting of 3,529 towers will be sold to Frontier Tower Associates Philippines, Inc. for P45 billion, and also leased back over an initial period of 15 years. Pre-tax gain will be P15 billion.

It is in “advanced discussion” with another tower company for the sale and leaseback of an additional 1,350 telecom towers and related passive telecom infrastructure.

“We maintain our outperform recommendation on Globe, as we believe that its modest… growth and credit profile improvement prospects should cushion the credit risks from its sizable (2022) capex,” CreditSights said.

“Valuations are currently attractive in our view too.”

Outperform, according to finance website Investopedia, means “the company will produce a better rate of return than similar companies, but the stock may not be the best performer in the index.”

“We believe Globe’s hefty (2022) capex of P89 billion is sufficiently funded for, which should reduce the need for additional debt incurrence,” CreditSights added.

According to the research firm, its report is for informational purposes only. “Neither the information contained in this report, nor any opinion expressed therein is intended as an offer or solicitation with respect to the purchase or sale of any security or as personalized investment advice.”

Globe Telecom shares closed 3.57% higher at P2,320 apiece on Monday. — Arjay L. Balinbin