The media reported a speculation that Ananda Krishnan may sell his 29% effective stake in Maxis for MYR35bn or MYR16/share, more than double its current market value. We are neutral to the speculation as this involves the holding company, MCB instead of Maxis. Note that MCB also has mobile operations in India and Indonesia, which partly explains the high valuations. Maintain NEUTRAL on Maxis. 

-  Ananda exiting Maxis? The media reported over the weekend that there is speculation, although not for the first time, that T Ananda Krishnan may sell his controlling stake in Maxis. These rumours were fueled by the “house-cleaning” exercise in Maxis involving the departure of several top management staff and that Ananda’s 29% effective stake in Maxis could fetch MYR35bn or MYR16/share (market value is MYR14.8bn). Ananda owns 45% (via Usaha Tegas Sdn Bhd) in the holding company, Maxis Communications Bhd (MCB), which in turn owns 65% in Maxis. The other shareholders of MCB are Saudi Telecom (25%) and certain bumputra shareholders (30%). 

-  Impact to share price.We are neutral to the speculation as this involves the holding company, MCB instead of Maxis. We found it difficult to see any party who has the financial capability to acquire Ananda’s stake or the willingness to pay more than double what Maxis is currently trading at. Note that MCB also has mobile operations in India and Indonesia, which partly explains the high valuations. Besides that, Ananda may not need the cash given that he had sold Tanjong Energy Holdings to 1 Malaysia Development Bhd (1MDB) for MYR8.5bn last year. 

-  Changes to strategic plans? With no CEO and an internal reorganization at the top, we doubt there will be any changes to Maxis’ strategic plans even if a new party acquires Ananda’s stake. 

-  Investment case. We maintain NEUTRAL on Maxis with unchanged DCF-derived fair value of MYR7.15 (WACC=7.5%, TG=1.5%). We expect earnings growth to remain tepid as margins may still be at risk if device subsidies escalate or cost discipline is not maintained. But dividend yields of 5.9% look attractive based on FY13 DPS forecast of 40 sen.

Source: RHB