Business

Friday July 24, 2009

Pricing and valuations main factors if Maxis wants to re-list

By YEOW POOI LING


lingyp@thestar.com.my

PETALING JAYA: It’s a question of pricing and valuations rather than timing if Maxis Communications Bhd is considering re-listing on Bursa Malaysia.

Anal ysts say if M axis is listed at a discount of its voluntary general offer price (VGO) of RM15.60 back in 2007, its current shareho lders will not be able to realise their investments.

On the other hand, it may be difficult to secure a premium over the VGO price in the present economic climate as markets are still trading at relatively low valuations from their peak.

The last thing that Maxis wants is to list at a premium only to see its share price succumbing to market pressure.

In its listing in 2002, Maxis shares were sold to institutional investors at RM4.85 each and retail investors at RM4.36, raising over RM3bil in proceeds. On its last day of trading in July 2007, the shares were traded at RM15.20 each.

Analysts contacted by StarBiz were unable to estimate the possible list-ing price of Maxis shares as the group has been operating as a private entity in the past two years.

Efforts to get comments from Maxis chief executive officer Sandip Das were unsuccessful.

“We believe the idea to re-list is being toyed around and the recent comments by the Prime Minister might have come after his visit to potential Saudi investors.

The question remains whether Max is itself is ready to re-list given its funding issues and slower-than-expected growth in I ndia.

What will make Maxis an interesting stock with these surrounding issues?” said an analyst.

Maxis already has a Saudi investor in Saudi Telecom Co, which paid RM11bil for a 25% stake in Binariang GSM, the parent company of Maxis, he said.

The valuation of Maxis today is subject to a wide range of factors such as future earnings potential, business risks as well as funding requirements.

Another teleco mmunications analyst said having Maxis back on board would definitely add breadth and flavour to the local market, as well as attracting funds back into the country.

“There were speculations be fore that t he British and Hong Kong exchanges could be considered but, with Maxis’ business very much Malaysia-centric, it makes sense t o do it locally.

“Having a listing status does make it easier to raise financing. At the point of privatisation in 2007, Maxis’ board of directo rs indicated that it might consider re-listing when earnings were less volatile,” he added.

As the group’s Indian operations under Aircel Ltd were still pressured by the competitive market, Maxis might have to hive off its Indian unit before returning to the market , he said.

“There is talk that Aircel would be merged with Astro’s pay-TV ops in India with a separate listing there to fund the US$5bil required for expansion over the next five years,” the analyst said.

Both Maxis and Astro are controlled by billionaire T. Ananda Krishnan.

An analyst of a bank-backed brokerage said this or next year would be “a good time to list” as Maxis could garner an attractive valuation on the back of rising market appetite.

“Being a listed company increases profile and would naturally enhance credit rating,” he said.

Maxis’ domestic operations require about RM5bil of capital expenditure (capex) in the next four years while Aircel needs RM16.4bil.

RAM Ratings, in its report, said capex for the Malaysian business could be funded via internal financing while that in India needed additional equity and/or debt as the cash flow boost from Aircel was slower than anticipated.

The rating house said Aircel, the seventh l argest mobile operator and the fifth among GSM players in India, faced intense competition due to the crowded market place despite the vast potential of the country.

India’s mobile penetration is only 30% versus Malaysia’s 97%. For the first quarter, new mobile subscribers every month in India were about 15 million.

By year-end, Aircel planned to achieve 29 million users with operations in 18 circles compared with its user base of 18.48 million in 15 circles as at end-March, RAM said.

The competitive pressure in the Indian mobile market, nevertheless, could eat into Aircel’s profitability over the longer term, especially if competitors were to engage in price wars, and it would be compelled to slash prices to keep up, it added.

“While Aircel’s user base last year jumped 70.5% year-on-year vis-a-vis the sector’s 48.5%, its ARPU (average revenue per user) was lower than the industry average,” it added.

On Wednesday, it was reported that Prime Minister Datuk Seri Najib Tun Razak wanted the mobile operator to re-list on the local bourse to attract investors to the exchange, and that the management was “considering it very seriously.”

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