PETALING JAYA: Although no offer price has been set for Maxis Bhd’s initial public offering (IPO), analysts have tagged the price to come in at between RM4 and RM6 per share.
The stock is expected to be relisted on Bursa Malaysia main market by year-end.

HwangDBS Vickers Research said while it had not contacted Maxis about it, its preliminary fair value for the stock ranged from RM4 to RM4.70, which was based on enterprise value (EV) over earnings before interest, tax, depreciation and amortisation (ebitda), dividend yield and discounted cash flow-based (DCF) methods.

“This is derived from a target market capitalisation of RM30bil to RM35bil and 7.5 billion shares in issue,” it said.

Maxis had a 39.9% share of the mobile subscribers market as at June 30 compared with Celcom (M) Bhd at 34.4% and DiGi.Com Bhd’s 25.7%, with the balance going to newcomers such as U Mobile Sdn Bhd.

“Despite growing first half revenue by 4% year-on-year to RM4.2bil, Maxis’ normalised ebitda and normalised net profit fell by 2% and 10% respectively. This gives an implied normalised ebitda margin of 50.5% for the first six months of this year,” HwangDBS said.

It also said Maxis reported a 21% jump year-on-year in net profit in financial year ended December 2008 (FY08) following a 6% year-on-year drop in FY07 net profit due to a RM505mil “lumpy expense” for an employees’ share option scheme programme when Maxis Communica-tions Bhd was privatised in 2007.

“On a normalised basis, its 2008 net profit improved by 2.5% year-on-year,” the research house noted.

According to ECM Libra Research, Maxis’ IPO may trade at between RM5 and RM6.20, assuming a price-to-earnings (PE) ratio multiple range between 16 and 20 times based on FY10 earnings per share estimate.

“However, we believe Maxis will likely trade at around RM5.60 based on a PE multiple of 18 times, taking into account its mobile market leadership thus deserving premium valuation over DiGi (16 times) but a discount to Telekom Malaysia Bhd’s (TM) fixed-line and broadband monopoly (20 times),” it said in a research report.

The research house said at a prospective RM5.60 per share, Maxis would generate minimum dividend yields of 4.2% in FY10.

It said such yields were lower than its estimates for DiGi and TM, but perhaps investors might overlook this to have a stake in a blue-chip company that may fetch a market capitalisation of RM42bil.

ECM Libra noted that news reports, quoting sources, indicated that the IPO was estimated to raise US$2bil to US$2.5bil which implied an IPO price of RM3.11 to RM4.

Other reports said Maxis’ IPO shares may fetch RM5 to RM6 each.

OSK Investment Bank said the IPO price would be determined by way of bookbuilding and would be 90% to 95% of the institutional price.

“While the IPO pricing has yet to be confirmed, we gather that institutional investors are being invited to submit their interest for the institutional blocks at an indicative price of RM5.50 per share.

“Assuming this is the final bookbuilding price and the retail IPO price is tagged at RM4.95 (90% of book-building price), this would imply an equity valuation of RM37.1bil, or a PE ratio of 16.3 times annualised first six months of 2009 earnings and 9 times EV/Ebitda,” it said.

The valuation was on par with the prospective PE ratio of 14 to 16 times at which domestic and regional mobile companies were trading, albeit at a premium to the region’s 5.2 times EV/ebitda, OSK said.

“We deem this fair considering Maxis’ superior ebitda margin of over 50%,” it noted.