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Saturday, June 13, 2009

Maxis to relist?

We think so too. We think there is high likelihood of a relisting of Maxis. Firstly, RAM
has placed Binariang GSM’s long- and short-term ratings on rating watch with a
negative outlook. Binaring GSM is the company that acquired minority shareholders’
stake when Maxis was privatised in 2007. The rating watch is premised on RAM’s
growing concerns over Aircel’s eroding profitability and cashflow due to intensifying
competition, particularly when it its ramping up its capex programme. RAM Ratings
reported that “…management has represented that efforts are underway to obtain
equity support in the form of cash injection from shareholders that would be available
to the Group on a staggered basis over a few years. RAM Ratings views the timely
infusion of funds to be critical in preserving Binariang GSM’s debt protection
Secondly, our industry sources also indicate that Maxis may be seeking a relisting,
possibly as early as Sep 09. We also gather that there are no plans to inject Maxis
into Astro as speculated by the market.
Possible impact on listed telcos. We believe the entry of Maxis may be negative for
DiGi given its poor trading liquidity as well as for Telekom Malaysia (TM) which has
the smallest market capitalisation among the listed telcos. Investors may switch out of
these stocks in favour of a bigger-cap telco which is very likely to have better trading
If it seeks a relisting, we believe Maxis will position itself as a high-dividend yielding
stock given that it has gone ex-growth. Furthermore, its major shareholder will attempt
to extract maximum dividends to help fund Aircel’s capex. We do not think Maxis will
be listed without Aircel and Natrindo Telepon Selular as their large start-up losses will
be a large drag on Maxis’s earnings and will dampen the appeal of the company.
Among the listed telcos, Axiata should be the least affected by Maxis’s entry as it
offers growth and regional exposure, which the rest of the Malaysian telcos do not,
and has a large market cap and high trading liquidity.
Our back-of-the-envelope estimates suggest that Maxis could have a market
capitalisation of RM32bn-40bn based on:
• 13-15x forward P/E, a discount to DiGi’s 15-16x. This high multiple may be achieved
if its dividend yield is attractive. We estimate Maxis’s core net profit from Malaysia to
be about RM2.5bn-2.7bn vs. RM2.0bn in FY06.
• 7x forward EV/EBITDA, a discount to DiGi’s 7-7.8x. We estimate that Maxis
generates an EBITDA of RM4.5bn-4.7bn.
This will dwarf Axiata, Malaysia’s largest listed telco with a market cap of RM20bn,
and will place Maxis among the top 4 or 5 stocks on Bursa Malaysia by market cap

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