KUALA LUMPUR: MAXIS is likely to re-list in its entirety to maximise its market capitalisation which may fetch up to between RM40 billion and RM50 billion, to take advantage of rising investors' risk appetite, says ECM Libra Investment Research.
In an investment research note today, ECM Libra also stated that valuations are quite attractive for Maxis to re-list now.
"Pushing the case for its re-listing are richer market valuations as investors turn to stocks due to very low interest rates and the belief the global economy is on the mend," ECM Libra added.
ECM Libra highlighted that recent developments and market talk surrounding Maxis Communications Bhd point to a potential re-listing before the end of the year.
The research house said, should Maxis list in its entirety, Axiata would be the telco player most comparable given the similarities with both having domestic and foreign operations in India and Indonesia.
However, Axiata, ECM Libra noted, has additional foreign mobile operations in Sri Lanka, Bangladesh, Cambodia and an associate in Singapore.
"Axiata is currently trading at a Price Earnings(PE) multiple of 18.8 times its Financial Year 2009 consensus Earnings Price per share (EPS)," ECM Libra said.
In comparison, ECM Libra added, in 2007 when Maxis was privatised at RM15.60 per share, it was trading at a historical PE mutliple of 18.6 times based on its FY06 EPS.
According to ECM Libra, this may signal that investors are willing to pay a premium for Axiata''s growth story and do the same for Maxis.
ECM Libra also indicated, those willing to take a bet on Maxis and its management, may opt to invest with the company for a more exciting growth story.
ECM Libra pointed out that Axiata's stable of higher quality but more matured foreign assets offered more comfort for those also seeking growth but with a correspondingly less risk.
"The re-listing of Maxis, whether in its entirety or only its domestic operations, will have very minimal impact on Telekom Malaysia (TM) given its constrasting business models and appeal.
"TM's earnings growth is somewhat tepid.But investors like TM for its high dividend yields and stability in earnings," ECM Libra said.
In the research note, ECM Libra also said while Maxis offered high growth potential, it had less stable earnings and is unlikely to pay generous dividends due to high capex needs.
ECM Libra also said if Maxis were to list its domestic operations only - it thought this is unlikely - investors would have an alternative pure domestic mobile operator to invest in, besides DiGi.
"We believe DiGi will not be marginalised entirely as it will continue to attract interest as a decent dividend yielding stock.
"Even, without special dividends, we expect DiGi to generate a dividend yield of 4.5 percent. With special dividends, yields could be as high as 8.1 percent," it added.
As for the overall telecommuciation sector, ECM Libra maintained its overweight stance on the sector.
ECM Libra said there may be a potential earnings surprise for Axiata when its second quarter 2009 results are released towards the end of the month.
"This may result in an upwards earnings revision given the turnaround in the global economy, leading to a potential re-rating of the stock," it explained.
The research house also suggested switching from Axiata to Maxis for those seeking the greatest risk-return trade-off.
"If Maxis re-lists in its entirety, we suggest switching from Axiata to Maxis, given that its Indian and Indonesian operations are starting from smaller bases and offer the greatest growth potential.
"As a result, Maxis will offer the highest potential for capital appreciation compared to Axiata," ECM Libra noted.
Nonetheless, investing in Maxis, ECM Libra disclosed,carried a higher risk than Axiata as the formers foreign operations are not as established on account of being very competitive.
"Maxis' foreign operations are at greater risk should a consolidation occur in the overcrowded markets of India and Indonesia.
"Investors seeking defensiveness should stay with TM or DiGi," it said. - Bernama |
