One key investment merit of Maxis Malaysia is its target dividend yield of over 5 per cent, says an analyst
THE top reasons for investing in soon-to-be-listed telecommunications company (telco) Maxis Bhd (Maxis Malaysia) are its potentially high-dividend yield, dominant share of the local mobile market and superior margins, analysts say.
Maxis Malaysia, the year's most anticipated initial public offering (IPO), is largely expected to be listed in November with a go-to-market valuation of around RM37 billion to RM40 billion.
"Maxis Malaysia's key investment merits are its target dividend yield of over 5 per cent on the back of the domestic operation's strong and steady cashflow, dominant share of the domestic mobile market and superior margins," OSK Research analyst Jeffrey Tan said in a note to clients yesterday.
The listed entity, which will comprise only Maxis Communication Bhd's domestic operations, could have a negative impact on other listed telcos such as DiGi.Com Bhd and Telekom Malaysia Bhd (TM).
Tan believes that with Maxis Malaysia's "significantly" higher profile, market capitalisation and trading liquidity, investors are likely to switch to it from DiGi.Com and, to a certain extent, TM.
"We believe the re-listing of Maxis will be negative for DiGi.Com given (the latter's) smaller share liquidity and market capitalisation and Maxis' relatively more superior EBITDA (earnings before interest, tax, depreciation and amortisation) margin and dividend payout potential," he said.
Meanwhile, as Maxis will be relisted without its overseas operations, it is not seen as a direct threat to Axiata.
Tan believes that Axiata provides a more compelling longer-term investment proposition given its regional footprint in 10 countries.
He has a "buy" recommendation on Axiata, which is his top pick in the telco sector, with a target price of RM3.68. DiGi.Com and TM were a "neutral" with target prices of RM22 and RM2.80, respectively.
ECMLibra Investment Research said Maxis will likely trade at around RM5.60 a share, based on a price-earnings (PE) multiple of 18 times, taking into account its mobile market leadership.
It deserves premium valuation over DiGi (PE multiple of 16 times) but a discount to TM's fixed-line and broadband monopoly (20 times), it said.
The research house has a "buy" call on TM with a target price of RM3.98, but a "hold" on both DiGi-Com RM20.10) and Axiata (RM2.85).
Analysts expect Maxis to be included as a component stock of the FBM KLCI, which would be a boon for index-linked funds.
Maxis, in its draft prospectus on the Securities Commission's website, said it would not be issuing new shares, but will offer 2.25 billion shares.
Of these, about 92 per cent will be offered to institutional investors and the rest to retail investors.
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