Maxis’s Dominance in Malaysia’s Phone Market May Limit Stock

By Soraya Permatasari and Chan Tien Hin

Nov. 18 (Bloomberg) -- Maxis Bhd., Malaysia’s largest mobile-phone operator, may climb in its trading debut tomorrow after institutional investors bid for 3.7 times more stock than was offered in the $3.3 billion share sale. The lack of growth prospects may limit further gains.
“There is some pent up demand coming from local fund managers that will definitely push up the price at the opening bell,” said Pankaj Kumar, who manages 1.9 billion ringgit of assets as chief investment officer at Kurnia Insurans (Malaysia) Bhd. He expects the shares to rise to as high as 5.30 ringgit when the market opens tomorrow.
Maxis, controlled by 71 year-old billionaire Ananda Krishnan, joins China Minsheng Banking Corp. and Sands China Ltd. in raising at least $12.7 billion from Asia’s equity markets, aided by the steepest stock rally in six years. The company is only listing its domestic operations and the number of mobile- phone subscriptions exceeds the nation’s population by about 4 percent, according to the latest estimates on the Malaysian Communications and Multimedia Commission’s Web site.
“Given that the market is already saturated, growth will be lackluster, which is normal for a telco in a matured market,” said Johan Tazrin Ngo, managing director of Amara Investment Management Sdn. “You would not buy Maxis for growth.”
Share Price
The company priced the stock at 4.75 ringgit apiece for individual investors and 5 ringgit a share for institutional investors, raising 11.2 billion ringgit ($3.3 billion) for its parent Maxis Communications Bhd., which will use the money to expand operations in India and Indonesia. Malaysia’s stock exchange said yesterday it set the reference price for trading of Maxis shares at 5 ringgit.
With an estimated market capitalization of more than $11 billion, Maxis will become the third-biggest phone company in Southeast Asia, ranking it behind Singapore Telecommunications Ltd. and PT Telekomunikasi Indonesia, according to Bloomberg data.
“You need to have it in your pocket because it’s such a big stock” that will be included in the MSCI indexes, said Lye Thim Loong, who helps manage $500 million of assets at Avenue Invest Bhd. in Kuala Lumpur.
The MSCI indexes are widely used by fund managers worldwide as a benchmark to gauge the performance of their investments. Changes to the MSCI indexes can spur investors to buy a stock if it’s included, or sell stocks that are reduced in weighting.
Dividends
Maxis plans to pay out 75 percent of its annual profit in dividends, according to its prospectus last month. On Oct. 28, smaller rival Digi.Com said it will raise its dividend payout ratio to 80 percent next year from 75 percent this year.
Maxis is “attractive” because it could be paying dividends of as high as 50 sen a share, implying a yield of 10 percent, according to Amara’s Ngo. That would be the highest among its Asian peers, Bloomberg data show.
Starhub Ltd. in Singapore offers a dividend yield of about 9 percent, according to data compiled by Bloomberg. The yield for MobileOne Ltd. is about 7.4 percent, the data show, while Digi offers a dividend yield of about 7.3 percent.
“Investors buy stocks for either growth, dividends or both,” said Ngo. “In Maxis’s case, it can only be dividends.”
Maxis is fairly priced at 5.30 ringgit to 5.80 ringgit a share, according to Jeffrey Tan, an analyst at OSK Research Sdn. in a report on Oct. 29. That values the stock at least 12 percent more than the 4.75 ringgit a share paid by individual investors and 6 percent more than the 5 ringgit apiece paid by institutional investors.
Yvonne Choo, an analyst at PM Securities Sdn. values the stock at 5.26 ringgit a share, rating it a “buy.” ECM Libra Sdn. values Maxis at 6.10 ringgit a share.
Southeast Asia
The IPO is the biggest in Southeast Asia, according to CIMB. It is also more than double the amount Petronas Gas Bhd., the state-controlled natural gas company, raised in 1995.
Maxis controls about 40 percent of Malaysia’s mobile-phone market, making it the biggest wireless operator in the country, followed by Celcom Malaysia Bhd. and Digi.
Maxis Communications, which was taken private by Krishnan in a 16 billion ringgit buyout deal in 2007, decided to float its domestic unit after Prime Minister Najib Razak encouraged it to re-list to attract more investors to Malaysia.
Krishnan is Malaysia’s second-richest person, with wealth estimated at $7 billion, according to Forbes magazine. The billionaire also owns Astro All Asia Networks Plc, Malaysia’s biggest pay-television operator, and has stakes in real-estate, marine transport and oil and gas companies.