Maxis has unveiled its draft IPO prospectus, confirming its plan to relist after months of speculation. We expect the group be relisted by end-4Q09, with a go-to-market valuation of RM37bn-RM40bn, pricing the stock at a fair 15-16x FY10 earnings and 8-9x EV/EBITDA. This compares with Digi’s 16.2x and Axiata’s 14.5x FY10 earnings and 6-8x EV/EBITDA respectively. Maxis’ key investment merits are its:

(i) target dividend yield of over 5% on the back of the domestic operation’s strong and steady cashflow,
(ii)dominant share of the domestic mobile market, and
(iii) superior margins.

Given its significantly higher profile, market capitalisation and trading liquidity, we believe investors are likely to switch from Digi (NEUTRAL, TP- RM22.00), being the other pure domestic telco play and to a certain extent, TM (NEUTRAL, TP-RM2.80). As Maxis will be relisted without its overseas operations, it is not a direct threat to AXIATA (BUY, TPRM3.68), which provides a more compelling longer-term proposition via its regional footprint in 10 countries. We maintain our NEUTRAL sector weighting as valuations are not attractive coupled with the intense competition in the mobile space. (Read more inside ..)

Written by Joseph Chin
Wednesday, 23 September 2009 14:13

KUALA LUMPUR: Maxis Bhd's share price under its initial public offer (IPO) may trade around RM5 and RM6.20 assuming a price-to-earnings (PE) multiple range of between 16 times and 20 times based on ECM Libra Research's FY10 earnings per share (EPS) estimate.

"However, we believe Maxis will likely trade at around RM5.60 based on a PE multiple of 18 times, taking into account its mobile market leadership thus deserving premium valuation over DiGi (16 times), but a discount to TM’s fixed-line and broadband monopoly (20 times," it said in a research note issued on Sept 23.

ECM Libra Research said at a prospective RM5.60 per share, Maxis would generate minimum dividend yields of 4.2% in FY10. It added such yields were lower than its estimates for DiGi and TM, but perhaps investors might overlook this to have a stake in a blue-chip company that may fetch a market capitalisation of RM42 billion.

A draft prospectus lodged with the Securities Commission on Sept 17 outlined that Maxis Communications Bhd (MCB) would re-list only its Malaysian operations under an IPO involving 2.25 billion shares (30% of its paid-up share capital), of which 2.075 billion shares will be offered to institutional investors and the remaining 174.795 million shares to the public.

ECM Libra Research said the final IPO price however had not been fixed with news reports, quoting sources indicating the IPO was estimated to raise US$2 billion to US$2.5 billion (RM7 billion to RM9 billion) which implied an IPO price of RM3.11 to RM4. Other reports said the IPO shares may fetch as high as RM5 to RM6 each.

On Sept 17, a draft prospectus lodged with the Securities Commission which outlined that Maxis Communications Bhd's (MCB) decision to relist only Maxis Bhd, which comprised of its Malaysian operations.

The IPO involved 2.25 billion shares (30% of its paid-up share capital), of which 2.075 billion shares will be offered to institutional investors and the remaining 174.795 million shares to the public.

"What is clear however is that no new shares will be issued, implying Maxis will not receive a single sen from the IPO exercise. Instead, the proceeds will go to the shareholders looking to trim their stakes through the IPO exercise. This is perhaps not too surprising as the Indian and Indonesian operations which need the funds most are kept private for now, suggesting separate listing exercises in the future.

"However, MCB did manage to squeeze RM5 billion from Maxis via a prelisting restructuring exercise, which we believe will be used to fund the heavy capex of its foreign subsidiaries," ECM Libra Research said.

Read more... (Read more inside ..)

KUALA LUMPUR: Penang Chief Minister Lim Guan Eng has conceded that Datuk Seri Najib Razak will be more difficult to displace as prime minister as he has proven to be a more effective political leader than his predecessor, Tun Abdullah Ahmad Badawi.

In an interview with the Financial Times of London published yesterday, Lim, who is already setting his sights on the next general election, said: “There is a chance (of the opposition winning a parliamentary majority), but it is not going to be easy. It is probably harder under Najib than under Abdullah. I think Najib can get things done better than Abdullah.”

The report, written by its Singapore correspondent Kevin Brown, said the comments of Lim, who is also DAP secretary-general, were in contrast with the aggressive rhetoric of Opposition Leader Datuk Seri Anwar Ibrahim, who had suggested that the Barisan Nasional-led federal government could be forced out before the next election by defections from its parliamentary ranks.

The Pakatan Rakyat coalition has 83 seats in the 222-seat Dewan Rakyat and needs to win 29 more parliamentary seats to take power.

The report said that Najib, since taking over as prime minister in April, had been reaching out to woo voters by being more encompassing in his policies for all ethnic groups, speaking out against corruption, freeing political prisoners and focusing campaigning resources on winnable seats.

To drive home the point, the report said Najib recently announced an inquiry into the Port Klang Free Zone, a port development project alleged plagued by cost overruns.

Recently, CLSA Asia-Pacific Markets, an independent brokerage and investment group headquartered in Hong Kong, said Najib had covered good ground since taking office with a number of positive and impressive policies and actions.

These include liberalising the New Economic Policy, ensuring greater transparency, speeding up the award of government infrastructure projects and improving ties with Singapore to draw more foreign direct investments into Iskandar Malaysia, a development region in Johor twice the size of Singapore.

Labelling Najib’s positive economic and social reforms as “Najibnomics”, given his economics background, it said they were aimed at stimulating the local economy, attracting foreign investments and foreign talent, reducing bureaucracy, tackling crime and corruption, effecting greater accountability and promoting national unity (through the 1Malaysia concept).

With his background on industrial economics from the University of Nottingham, CLSA said, Najib had been quick to effect various fiscal, government and structural reforms. — Bernama

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KUALA LUMPUR: More positive signs of recovery, though at a slow pace, in the US economy could provide an impetus for investors to pick up equities in the regional markets including Bursa Malaysia on Wednesday, Sept 16.

Overnight on Wall Street, the Dow Jones industrial average rose 56.61 points, or 0.59 percent, to close at 9,683.41. The Standard & Poor's 500 Index gained 3.29 points, or 0.31 percent, to 1,052.63. The Nasdaq Composite Index added 10.86 points, or 0.52 percent, to 2,102.64.

Federal Reserve Chairman Ben Bernanke declared the worst U.S. recession since the Great Depression was probably over, but the recovery would be slow and it would take time to create new jobs.

At Bursa Malaysia, agrochemicals specialist Halex Holdings Bhd will make its debut on the Main Market of Bursa Malaysia.

Other stocks to watch are PROTON HOLDINGS BHD [], Multi Purpose Holdings Bhd (MPHB, AIRASIA BHD [],  MUDAJAYA GROUP BHD [], POS MALAYSIA BHD [] and PETRA ENERGY BHD [].

HwangDBS Vickers Research values the stock at 91 sen based on 7.5 times price-earnings multiple on Halex's calender year 2010 earnings, while OSK Equity Research said its issue price of 78 sen per share was reasonable based on a FY09 PE of 8.3 times, which is lower than that of its peers.

The company is principally involved in the manufacturing, formulation, repackaging, distribution and agency of agrochemicals; propagation of ornamental plants; propagation and sales of foliage cuttings, potted and festive plants; and manufacturing and distribution of healthcare disposable products.

Halex is the sole distributor in Malaysia for several agrochemical products developed by MNCs such as Chemtura Corp, AMVAC Chemical Corp and Sumitomo Chemical.

Proton Holdings Bhd's counter continues to deserve careful scrutiny on market talk the government was looking to pare down its holdings in the national carmaker.

Market buzz has it that Khazanah Nasional Bhd, which owns 43% of Proton, would be willing to let go of a stake in the share should it find a right buyer. The stock closed yesterday among the top 10 gainers, picking up 20 sen to close at RM3.91 per share.

The company's stock has surged since the first week of this month on the back of better-than-expected earnings results following healthy sales of its Exora marque.

Analysts are mostly bullish on the stock with eight out of 13 research houses recommending a buy on the stock. The price of Proton's share has already exceeded Bloomberg consensus target fair price of RM3.77 per share.

MPHB has proposed to buy a 41.63% stake in U Mobile Sdn Bhd -- which had been pledged with AmBank Bhd -- for RM280 million under a put option.

MPHB had entered into a put option agreement with AmBank to purchase the option shares, comprising of 157.95 million shares of RM1 each, at any time during a 13-month period.

The audited net assets of U Mobile as at Dec 31, 2008 was about RM1.44 per share. MPHB said the put option price would be financed by its own funds and/or borrowings.

AirAsia completed its bookbuilding exercise which involved the offer for sale of 380 million new shares, representing 16% of the paid-up as at Sept 10.

The issue price was fixed at RM1.33 per placement share, which was a discount of 6.71% to the five-day volume weighted average market price of AirAsia shares up to and including Sept 14 of RM1.4257 per AirAsia share. (Read more inside ..)

WASHINGTON: Federal Reserve Chairman Ben Bernanke said on Tuesday, Sept 15 that the worst U.S. recession since the Great Depression was probably over, but the recovery would be slow and it would take time to create new jobs, according to Reuters.

"Even though from a technical perspective the recession is very likely over at this point, it's still going to feel like a very weak economy for some time," Bernanke said at the Brookings Institution, a Washington think tank.

In declaring the recession over, Bernanke sounded a slightly more upbeat tone than in late August when he had said simply that prospects for a return to growth were good.

However, he cautioned that growth next year would probably be sluggish and that unemployment would only fall slowly.

"The general view of most forecasters is that that pace of growth in 2010 will be moderate, less than you might expect given the depth of the recession because of ongoing headwinds," Bernanke said, citing tight credit conditions and other economic restraints.

He spoke on the one-year anniversary of the collapse of Lehman Brothers investment bank, an event that sparked a global financial panic, and a week before Fed officials meet to review their policy options.

The Fed -- the U.S. central bank -- slashed benchmark interest rates to near zero in December and has been buying mortgage-related securities and longer-term U.S. Treasury debt to give the economy a lift.

Bernanke, in a nod to recent relatively upbeat economic signals, said it was possible the recovery could be stronger than expected, but cautioned that it could also be weaker.

"There are risks on both sides of that forecast," he said. "But if we do in fact see moderate growth, but not growth much more than the underlying potential growth rate, then unfortunately, unemployment will be slow to come down."

Bernanke's comments implicitly acknowledged the possibility of a stronger-than-expected "V-shaped" U.S. recovery. The latest Blue Chip survey of economists predicts that growth will expand by a brisk 3 percent annual rate in the third quarter.

Economists generally estimate U.S. trend potential growth to be around 2.5 percent. Growth above that level would be needed to bring down the unemployment rate, which hit a 26-year high of 9.7 percent last month.

After its last meeting on Aug 11-12, the Fed said the "substantial" slack in the economy would likely keep inflation subdued for some time, adding that exceptionally low interest rates would likely be needed for "an extended period."

Fed policymakers meet next Tuesday and Wednesday and are expected to opt to keep stimulating the economy via ultra-low interest rates and massive asset purchases.

With the benchmark interbank lending rate virtually at zero, the Fed has focused on driving down other borrowing costs by buying mortgage-related debt and U.S. government bonds. - Reuters (Read more inside ..)