Published October 6, 2009

Maxis hopes to raise at least RM11b in IPO

Share-sale price set at between RM4.95 and RM5.50 apiece, say industry execs

By PAULINE NG
IN KUALA LUMPUR

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MAXIS Communications Bhd (MCB) hopes to raise at least RM11 billion (S$4.48 billion) in the initial public offering (IPO) of Maxis based on the lower end of its price valuations of slightly under RM5 a share.

The telco's IPO price has been set at between RM4.95 and RM5.50 apiece, industry executives say. Given that MCB's planned sale involves 30 per cent of the company or 2.25 billion shares, that means that it should net between RM11.14 billion and RM12.38 billion.

The price range values Maxis at between a minimum of RM37 billion - only RM2 billion lower than its market capitalisation at the time of its privatisation in 2007 - and RM41.25 billion.

MCB plans to offer 2.075 billion shares of 10 sen par to institutional investors with the remaining 174.8 million shares or a mere 2.3 per cent of its total paid-up capital of 7.5 billion shares to the public, according to a draft prospectus lodged with the Securities Commission last month.

The country's biggest IPO in years does not entail an issue of new shares but existing shareholders reducing their stakes. It is also confined to the company's Malaysian assets only, and excludes its Indian and Indonesian operations which while more capital-intensive offer better growth prospects.

Maxis's largest shareholder, tycoon Ananda Krishnan who controls privately held Binariang GSM through his flagship Usaha Tegas, is seen as a clear winner in the re-listing exercise of the company which is the current leader controlling about 40 per cent of Malaysia's 28.5 million mobile subscribers in near saturated market.

In 2007, Binariang GSM paid RM15.60 per share (then valued at a PE of 18 times) or some RM16 billion to buy up 41 per cent of the company when it took Maxis private. Its share capital then was some 2.53 billion shares or about a third of its current size.

The rationale at the time was to spare minority shareholders the risks and share-price volatility of its expansion overseas in Indonesia and India which are capex-intensive markets.

But Maxis executives had assured the company would be re-listed after three years following some enhancements or value-added.

Soon after taking the company private, Mr Ananda sold a quarter of Binariang GSM and 51 per cent of its interest in Indonesia's PT Natrindo Telepon Selular to Saudi Telecomm Co for US$3 billion.

Now that the Indian and Indonesian assets have not been included in the impending IPO, analysts believe they would likely be listed separately at an appropriate time.

But for now, the anticipated RM11 billion to RM12 billion raised from the IPO exercise coupled with nearly RM8 billion in dividends declared from Maxis's subsidiaries plus a sale of assets in conjunction with its pre-listing restructuring, is expected to net MCB close to RM20 billion - a sum that would cover the debt incurred in taking Maxis private two years ago.

However, Binariang, which owns MCB, would still control some 70 per cent of the new listed company, and fully own its overseas operations.

Even so, because of the dearth of quality big caps and Maxis's reputation as a blue-chip reasonable dividend-yielding stock - it plans to pay out 75 per cent of its net profit going forward - its IPO is expected to be fully subscribed with investors lining up for a piece of the company which for the fiscal year to end December last year posted a profit of RM2.4 billion on a revenue of RM8.5 billion.

Hwang-DBS said its preliminary fair value for Maxis ranges from RM4 to RM4.70 per share, based on enterprise value/Ebitda, dividend yield and discounted cashflow methods. 'This is derived from a target market capitalisation of RM30-RM35 billion and 7.5 billion shares in issue.'

Maxis's retail and institutional IPO share price will be determined after a book-building exercise.