Business

Friday November 20, 2009

Maxis offers long-term gain

By RISEN JAYASEELAN


Celco’s capital expenditure expected to taper off post-2010

PETALING JAYA: While retail investors in Maxis Bhd are already enjoying a 14% capital gain after the first trading day, those taking a long-term position will have more to look forward to come 2011.

That’s when Maxis’ capital expenditures will begin to taper off, leaving the celco more cash to pay out heftier dividends.

“Maxis’ capital expenditure is expected to taper off post-2010 because by then, lumpy expenditures such as (rolling out) our mobile broadband footprint, in terms of coverage and capacity, would have been done,” chief executive officer Sandip Das told StarBiz in an interview.

Dividends are ultimately paid from free cash flow, which is essentially a company’s cash profits or EBITDA (earnings before interest, tax, depreciation and amortisation) minus capital expenditure.

From left: Maxis chairman Raja Tan Sri Arshad Raja Tun Uda, Sandip projections to Das, Datuk Seri Nazir Razak and Finance Minister II Datuk Seri Ahmad Husni Hanadzlah at the listing ceremony.

Maxis will spend an estimated RM1.2bil in capital expenditure this year and Das expects the figure to be the same in 2010 but to decrease after that. Maxis generated RM4.4bil in ebitda in 2009.

Chief financial officer Rossana Rashidi said based on its planning, Maxis expected free cash flows to be “very high” in 2011 and 2012. “So, there’s expectation from the street of potentially very good dividends,” she said.

Maxis may also take on more debt, which will give it more money to pay dividends.

“Our principal shareholders have made it very clear that they do not want the company to have an idle balance sheet.

“So, the funds will either be invested judiciously for strong returns or if that’s not available, we will push it out as dividends.

“The aspirations of principal shareholders and minority shareholders are aligned – they will get the best dividends the company can generate,” Rossana said.

Maxis has stated that it intends to pay out at least 75% of net profits as dividends.

Rossana said Maxis’ net debt to ebitda level post-listing of 1.1 times gave the company an opportunity for “active capital management”.

She added that Maxis did not play to pare down its debts quickly but instead optimise its capital structure.

“The markets can allow companies of our profile to gear up to two to three times of net debt to EBITDA. So, technically, there is ability to gear up to support capital expenditure or for active capital management.

“At this stage, we are very confident we can generate sufficient cash to support our capital expenditure. Therefore, any surplus cash will be paid out,” she said.

Maxis, post-listing, will have a net debt of RM5bil, which will be taken in order to repay debts to its parent company.

Investors keen on dividend yields should be pleased with Maxis’ re-listing. It has not only provided investors with a decent dividend yielding option but also brought about competition among large listed companies to make sure their dividend payments remain attractive.

DiGi.Com Bhd raised its dividend payout policy to 80% on Oct 28.


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