Need for capex funds will drive Maxis to relist?

(The Star) PETALING JAYA: A need to raise funds for capital expenditure (capex), especially for operations in India, will drive Maxis Communications Bhd to relist on the local stock market, analysts said.

But the company may also want to wait for a stronger recovery in capital markets before relisting, they said.

ECM Libra Research said if Maxis were to be relisted in the near term, the major driving factor would be the need for funding due to high capex requirements for its 74%-owned Indian subsidiary, Aircel.

Maxis had said in March it was planning to invest US$5bil in Aircel over the next three to five years to accelerate its cellular coverage expansion in India.

As Maxis is private, there is no data on its most recent earnings per share (EPS).

Maxis’ last reported EPS was 84 sen/share in financial year ended December 2006 (FY06). Assuming that Maxis had achieved growth of 8% per annum, “this implies that Maxis’ FY09 EPS is RM1.06 per share,” according to ECM Libra.

And ascribing Axiata’s average FY09 price to earnings (PE) multiple of 16 to 19 times, Maxis could possibly be relisted at a market capitalisation of RM40bil to RM50bil, assuming a similar share base as before, the research house said.

Maxis’ market capitalisation was about RM40bil when it was taken private in 2007.

OSK Research said Maxis’ major shareholders would have to address some key issues and challenges before its relisting exercise.

“Most notable is the decision as to whether Maxis should be floated as a clean entity comprising solely its Malaysian operations,” said an analyst from the research house.

OSK Research told clients in a note that Maxis’ overseas assets in India and Indonesia, Aircel and 49%-owned PT Natrindo Seluler, were at various start-up and expansion phases, which would be a drag on the listed entity given their significant funding needs.

My comments: It was under-appreciated that led Ananda to take it private. It is also because of multiple businesses that need cash stretching their balance sheet that led them to turn to private funds, thinking that they are more patient. Breaking up the business and list it in overseas(to raise fund) will make more sense unless Ananda and other "share-owners" are really behaving like owners and pay no attention to how the market will value their company. Listing to boost liquidity is not a strong argument.