Business

Saturday September 26, 2009

Big question – how much a piece?


OVER the week, equity analysts in the telecommunications sector were busy number crunching and making back of the envelop estimates on Maxis Bhd’s potential IPO price – that all important determinant of market value that sways public perception and holds a major influence on how the share price will perform on its debut and there on.

If it’s too low, the company promoters will balk and say the bankers did a bad job. A low price also reflects weak demand. Too high, it risks pricing investors out of the market. Also, bankers should avoid pricing the IPO at its full potential market value, for where then is the upside for investors?

Bankers will definitely have those considerations in mind when they embark on a book building process to determine the offer price for Maxis stock offering not too long from now.

For Maxis’ controlling shareholder T. Ananda Krishnan and his trusted aides, it’s déjà vu. The company pitched its appeal on a similar book building path back in 2002 for its initial listing, with roadshows to woo investors from Singapore, Hong Kong, US and UK. But there’s an added sweetener this time – with Saudi Telecom Company as a major shareholder, sources say the net will be widened to include the moneyed lot in the Mid-East.

Estimates by analysts have pegged the offer price at anything from RM3.60 to RM6.20 a piece. Back of the envelop estimates based on net earnings per share of 30 sen (annualised) in FY09 and assuming a PE multiple 18x (a premium over DiGi’s trading PE of around 16x given Maxis market leader status), Maxis shares could be valued at RM5.40 per share. (As part of the book building exercise, institutional investors will be invited to submit their interest at an indicative price. The retail IPO price will be tagged at 90% of the final book building price).

At RM5.40, it has an implied equity value of RM40.5bil. Based on a dividend payout ratio of 75% of earnings, Maxis will generate a minimum net and gross dividend yield of 4.2% and 6% respectively.

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The big picture

Why so small, Maxis?

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