Maxis drawing retail interest

PETALING JAYA: Maxis Bhd’s listing is having a lot of interest from retail investors, given its track record of decent dividends and leadership position in the mobile telephony market.

“There are more people talking about Maxis’ listing than about Budget 2010. In fact, there are more people who understand Maxis’ business then they do the Budget,” said James Lau, senior director-equities of Kenanga Investment Bank Bhd.

Kenanga and other broking houses have been offering high net-worth investors the chance to take up large blocks of Maxis shares, with positive response so far. This will come from the institutional allocation of Maxis shares.

It is understood that Maxis shares are being offered by the brokers in minimum blocks ranging from 40,000 to 100,000 shares. Going by the indicative pricing of RM5.20, this means retail investors taking up these blocks are forking out anywhere between RM208,000 and RM500,000. Brokers are charging administrative fees of 1% to 2% for this.

There has also been a rush by some Maxis customers to collect their green and blue forms from Maxis outlets. These forms are being offered to preferred customers of Maxis. It is understood that these investors will rank higher than the general public in the balloting of Maxis’ retail portion.

Many of the interested investors are those who were previously Maxis shareholders and who had enjoyed the high yields and capital appreciation from the investment. Investors who bought into Maxis’ first IPO and exited when it was taken private, enjoyed total shareholder returns (including dividends) of 301%, representing an annual rate of return of 36%, Maxis officials said at its recent prospectus launch.

Lau added that retail investors were also drawn to Maxis as it was an industry that was not difficult to understand. “The growing use of data services on mobile phones is there for everyone to see. It’s a no brainer that Maxis will be poised to tap on this,” he said.

Meanwhile, OSK Research’s Jeffrey Tan said in a report that Maxis’ shares had a fair value of between RM5.30 and RM5.80 per share, which translates into a forward price earnings ratio of 14.8 to 16.2 times its earnings in the financial year ending Dec 31, 2010.

He wrote that this represented only a modest premium over regional mobile companies.

“This is supported by Maxis’ strong fundamentals, execution track record and superior earnings before interest, tax, depreciation and amortisation margins,” the report said.

Tan’s report also highlighted that Maxis would have a free cashflow yield – essentially a company’s operating cashflows minus its capital expenditures against its market price per share – of 8% to 10%. This is higher than Maxis’ projected net dividend yields of 5.2% to 5.5%, which means that there is scope for Maxis to pay out more than its stated dividend policy of 75% of net earnings.

Meanwhile, Maxis’ listing was also being touted by its advisors, CIMB Investment Bank Bhd, as the first Malaysian listing where “cornerstone investors” were taking part at the IPO stage.

“This is a feature more common in large international offerings, where a select group of major institutional investors demonstrate its endorsement with a firm investment commitment upfront and on transparent terms,” Datuk Seri Nazir Razak, CIMB Group chief executive, said in his speech at the recent prospectus launch.

The four institutions involved are the Employees Provident Fund (EPF), Kumpulan Wang Persaraan (KWAP), Permodalan Nasional Bhd (PNB) and Fidelity Investment, which will collectively take up close to 30% of the 2.25 billion Maxis shares on sale.

As part of the deal, the four will not be able to sell their shares for at least six months. They will, however, enjoy a small discount for their Maxis shares, compared with what other institutions will have to pay. It is left to be seen if the discount will be similar or more than the 5% that retail investors will receive.

A party close to the deal said there was no correlation between the retail discount and that of the cornerstone discount. “So don’t be surprised if the cornerstone investors get a discount higher than 5%. That is justified considering that they have to be compensated for their lock-up period.”

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