KUALA LUMPUR: All eyes will be on Malaysia’s top mobile operator Maxis Bhd’s debut on Bursa Malaysia today, but rationality is expected to prevail among investors in pricing the stock.

“We think investors will be pretty rational at pricing Maxis,” said Choo Swee Kee, chief investment officer at TA Investment Management here, which manages about US$200 million (RM674 million) in funds.

While oversubscription rates of 3.7 times indicate a sizeable potential unfulfilled demand from institutions for Maxis shares, also the biggest ever IPO in Southeast Asia, fund managers do not expect any “mad rush for Maxis shares (today)”.

For one, many investors have turned cautious on pricing Asian IPOs after performances of several recent new listings in Hong Kong slid on debut, sparking fears that valuations were stretched.

Last month, South Korea’s Posco Engineering & CONSTRUCTION [ ], for instance, scrapped its planned US$924 million IPO after failing to get its intended pricing.

Singapore CapitaLand’s CapitaMalls IPO, the biggest in 16 years for the city-state, reportedly saw shares priced at S$2.12 (RM5.15) apiece yesterday, below the mid-point of the S$1.98 to S$2.39 range indicated to investors.

Moreover, Maxis’ weight on the FBM KLCI — estimated at 2.7% by OSK Research based on the 30% investability weighting or free-float ratio — is below investors’ expectations.

“Maxis, at its current weightage, is no longer a stock that investors cannot afford to have,” TA’s Choo told The Edge Financial Daily. His fund was only accorded 5% of the number of Maxis shares it had asked for at the book-building exercise.

OSK Research, for instance, had expected Maxis to be accorded an investability weighting of 70%, instead of 30%.

In a note dated Nov 12, OSK said Maxis’ adjusted market capitalisation (based on 30% weighting and RM4.75 reference price) of RM10.69 billion gave it a 2.72% weight on the FBM KLCI and put it at 11th place, just below AMMB HOLDINGS BHD [ ]’s RM11.1 billion.

To illustrate, SIME DARBY BHD [] is the largest stock on Bursa Malaysia in terms of absolute market capitalisation, but it ranks second after CIMB Group Holdings Bhd in terms of adjusted market capitalisation and weight on the FBM KLCI due to the difference in free-float ratio (CIMB 100%, Sime Darby 75%, Maxis 30%).

Put another way, Maxis’ absolute market capitalisation of RM35.63 billion (at RM4.75 reference price) would make it the sixth-largest stock on Bursa Malaysia.

But Maxis’ weight at 2.7% pales next to the top five capitalised stocks — CIMB’s 11.85%, Sime Darby Bhd’s 10.39%, PUBLIC BANK BHD []’s 9.85%, MALAYAN BANKING BHD []’s 9.25% and TENAGA NASIONAL BHD [ ]’s 6.95%.

Maxis’ weight on the FBM KLCI is also below industry peer Axiata Group Bhd’s 4.98%, but is above TELEKOM MALAYSIA BHD []’s 2.08% and DIGI.COM BHD [ ]’s 1.68%, according to OSK’s estimates in the Nov 12 note.

Nonetheless, TA’s Choo said Maxis’ weight on the bellwether index could increase “if its major shareholders sell down or place out more shares in the market”. “That’s one way that would allow its free float to be adjusted (upward),” he said.

He reckons Maxis would “open around RM5.30 to RM5.50 range” this morning. “It’s difficult to say how the stock would perform the first day, but longer term, there is potential for the stock to appreciate,” Choo said.

Maxis will replace MALAYSIAN AIRLINE SYSTEM BHD [] (MAS) on the 30-member FBM KLCI tomorrow, the second day of trading. OSK Research reckoned that “the potential adjustment to the calculation of the investability weighting” could see Maxis accorded “a heavier weightage in the upcoming months”.

The more conservative of investors expect Maxis to see little price fluctuation, trading “close to” what the market thinks is the “appropriate” level of yields it should give. Amara Investment Management Sdn Bhd managing director Johan Tazrin Ngo was yesterday quoted by Bloomberg newswire as saying that investors “would not buy Maxis for growth”, but for dividends alone, which he thought could go as high as 50 sen a share, implying a 10% yield.

OSK, which values Maxis between RM5.30 and RM5.80, has a buy call and a RM5.80 target price. The range indicates a potential 6% and 16% capital gain for institutions that paid RM5 apiece for Maxis.

Kenanga Research yesterday initiated coverage on Maxis with a RM5.50 fair value, which implied 16.8 times FY10 estimated earnings and 4.7% yield. This, it said, was at “a slight premium” to DiGi’s 16 times and 6% yield, “justified given Maxis’ leadership in the mobile space and profitability”.

ECM Libra Research last week initiated coverage with a RM6.10 fair value, being 18.1 times its FY10 earnings estimate of 33.7 sen. KAF Research has a RM5.40 fair value on Maxis while Affin Investment Bank’s fair value of RM5.63 implies 17.3 times its FY10 earnings estimate.