Maxis relisting

To                   : Maxis postpaid users & Public offering Investors

Introduction:

Maxis Communication supplies mobile communication services to business and individuals in Malaysia. The company also provides domestic fixed line network which offers voice anda data services and an international gateway network which offers cross border interconnect services.

Isssues:

Maxis will re-list back after PM urges them to do so in order to attract foreign investors. With that will make our currency to appreciate and sustainable. It will make our country have such a great company in our equity market. Investors will question why privatised quality company and left a bad company in Bursa Malaysia?

Maxis will be listed on Bursa as a clean entity (Maxis Berhad) without the excess baggage, namely its loss-making overseas operations, PT Natrindo Telepon Selular (NTS) (44%-owned) and Aircel (74%-owned), which will be novated to its

ultimate parent and the former listed vehicle, Maxis Communications Bhd (MCB). This would be achieved via a pre-listing restructuring exercise that would culminate in a flatter corporate structure comprising solely its core domestic operations.

A lot of investors doubt with Maxis re-list back because T.Ananda (owner) privatised maxis in 2007 (RM15.60 a piece) and sell some stakes at higher price to Saudi Firm. Then they come back to seek money from investors.

Forget the past:

Investor should not let go the company. Forget the past, let us rewind the first day maxis listed on 2002. at an issue price of RM3.80. Closed RM4.60 that day.

We should consider Maxis’ key investment merits:

(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.

(significantly higher profile, market capitalisation and trading liquidity.)

For a long term, we can get higher return in terms of dividend or capital gain. Take a look at chart below:

Pro:

Investors will be attracted to invest in Malaysia. Money inflow to Malaysia will make our currency strong. A lot of fund manager will put their money in Malaysian equity.

Our Country will be well-known in the world. This is because investor can invest anywhere they want in this IT era.

Investors will know what is happening in Maxis as they went public, they have to announce their account.

Malaysian can participate in country’s wealth position because they will earn what company gain named dividends Maxis free cash flows to remain strong averaging RM1.6-2.0bn over the next 2 FY  commitments. The relatively robust cash flow position should allow Maxis to maintain a strong dividend payout without gearing up further.

Investors can fight inflation with invest in quality stock. Just imagine invest in 2002 and sell in 2007, its about 310% gain in capital. Not included dividend had been paid.

Contra:

Maxis may use the money to pay its debt which is unethical way to be use.

Maxis have managed to retain its dominant share of the market in terms of total subscribers and revenue despite the intense competition and the entry of MVNOs. Maxis’ revenue and subscriber market shares to remain under pressure going forward on the back of saturation in the mobile market and competition remaining intense.

Other company may use the same method in handling their company like what Maxis did.

Investor may switch from other stock for example Axiata and Digi and invest in Maxis.

Conclusion:

In my opinion, investor should follow what big investor did. They might afraid of market turmoil. But as we see economic data from all regions, it indicates recovery stage is on the scene. First of all we do see Asian country lead by China out of recession faster than EU country.  Futher more, MIDF Research is upgrading its forecast on Malaysia's gross domestic product (GDP) growth to -3.3 per cent from -4.5 per cent, or a 1.2 per cent point revision, on the strength of the stronger than expected recovery in the services and manufacturing sectors. A 2010 budget plan will coming soon, and will boost our financial market.