Journey to Wealth
Maxis Berhad ('Maxis') - MCB to sell 5% Maxis shares?
News Reuters reported that Maxis Communications Bhd ('MCB'), a company controlled by tycoon Ananda Krishnan and owned 70% of Maxis Bhd ('Maxis'), has disposed up to 375m or 5% of its Maxis stake worth around RM2.4b (USD740.5m). No official announcement has been made by Maxis to Bursa Malaysia.
The shares are being priced at a range between RM6.21-RM6.34 per share, representing a 3.2% discount to yesterday's closing price of RM6.54.
Comments The buyer(s) of the above 5% Maxis stake is unknown at this juncture but we believe that EPF, KWAP and Invesco, a foreign fund from US, may be one of the potential buyers judging from the company's latest shareholders movement list.
We suspect the disposal may be related to Maxis' India unit Aircel, which has targeted to invest USD500m to deploy 4G services in 4QCY12.
We also do not rule out that Ananda could have some bigger plans in mind that is prompting him to dispose part of his Maxis share above.
There were also some reports in mid-July speculating that Ananda may consider exiting Aircel and Russian conglomerate Sistema JSFC was named as the potential buyer. The reason cited for the probable exit from Aircel included the regulatory uncertainties in India and an alleged probe on Ananda and other top officials over Aircel shares purchase.
Outlook Maxis remains as a solid high yield play given its firm 40.0 sen DPS in the next 1-2 years.
However, its ability to maintain its market share remains doubtful at this juncture, in our view.
There could also be potential erosions in its EBITDA margin as a result of an aggressive rollout of its FTTH plan.
Forecast No changes in our FY12-FY14 earnings forecasts.
Rating Maintain MARKET PERFORM
The company's current strategy in focusing on customer retention instead of maintaining its margin may add pressure to its near term financial performance.
Valuation Maintaining our Target Price at RM6.76 based on a targeted FY13 EV/forward EBITDA of 11.4x (+1.5SD).
Risks Higher than expected margin pressure.
Continuing loss in market share to its peers.
Source: Kenanga
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