KUALA LUMPUR: The stage is set for the country’s and Southeast Asia’s biggest-ever IPO that will raise RM11.2 billion, with the final selling price for Maxis Bhd fixed at RM5 per share for institutions and RM4.75 for retail investors.

The final institutional price is at the lower end of the RM4.80 to RM5.50 range initially indicated to investors, who had been playing hardball in securing enough upside for themselves as they weigh the top mobile operator’s dividend-paying ability versus its growth potential in a highly competitive market.

Even so, by no means does it spell languid demand for Maxis shares, whose debut on the Main Market come Nov 19 is also aimed at raising the local equity market’s profile among international investors.

“Based on our experience and what we gather from the market, there is a sizeable unfulfilled order from local institutions. Our allocation was only 5% of the amount we asked for.

“Fund managers, who are benchmarking against the KLCI, may decide to buy more Maxis shares from the open market, given that it is included almost immediately as an index constituent,” TA Investment Management chief investment officer Choo Swee Kee told The Edge Financial Daily.

In a statement yesterday, Maxis said the IPO attracted orders of over RM26.5 billion in total and institutional investors (excluding cornerstone and Miti-approved bumiputera investors) had asked for 3.7 times the amount of shares allocated to them, eliciting demand worth RM19.3 billion from some 500 global investors.

The four cornerstone investors — the Employees Provident Fund Board, Fidelity Funds-Malaysia Fund, Kumpulan Wang Persaraan (Diperbadankan) and Permodalan Nasional Bhd — will also be paying RM5 apiece.

They have promised to take up 626.08 million shares or 27.8% of the offer shares and hold them for at least six months.

“The book-building exercise attracted significant foreign interest, from leading institutional investors who have had a history of investing in Malaysia and including a number who are returning, 10 new institutional investors to Malaysia with orders of RM1.3 billion in Maxis shares, as well as sovereign wealth funds,” Maxis said.

Funds from foreign institutions made up “over US$800 million [RM2.7 billion]” or just over half of the RM5.3 billion raised in total from the institutional offering.

The Ministry of International Trade and Industry (Miti) and cornerstone tranches attracted total funds of over RM5.2 billion  for about one billion shares, Maxis said. Retail investors had asked for a total of 381.2 million shares or 1.8 times the 212.3 million shares allocated to them, it added.

“We believe the strong support shown for Maxis reflects its position as Malaysia’s leading telecommunications provider. Today’s announcement marks an important milestone in the development of Maxis and supports the company’s plans to focus on developing and growing its operations,” Maxis chairman Raja Arshad Raja Tun Uda said.

The final IPO prices imply a potential 11.6% to 22% upside for retail investors (6% to 16% for institutions), if one were to measure its performance using the RM5.30 to RM5.80 fair value range accorded by OSK Research.

The range implies a valuation of between 14.8 times and 16.2 times FY2010 earnings, within the multiples of regional comparables as well as rival DiGi.Com Bhd’s 16.1 times, OSK said, initiating coverage on Maxis with a buy and a RM5.80 target price.

DiGi, which is also positioned as a good dividend-yielding stock, closed 10 sen lower at RM21.90 yesterday with 691,100 shares done.

The counter slid 1% or 22 sen to as low as RM21.78 intra-day. However, TA’s Choo shrugged off the decline, saying that the change “is not outside its ordinary movement”.

Under the IPO, reclusive tycoon T Ananda Krishnan, bumiputera foundations and Maxis’ partner, Saudi Telecom Co Ltd, are offering for sale 2.25 billion shares or 30% of the unit that houses Maxis Communications Bhd’s  operations in Malaysia.

Ananda’s Usaha Tegas Sdn Bhd and its affiliates own 45% of MCB, with the remaining 30% and 25% blocks held by bumiputera foundations and Saudi Telecom, respectively.

Maxis had needed to be priced at RM5.20 apiece to get a market capitalisation of RM39 billion, the amount that disappeared from Bursa Malaysia when “the old Maxis” was taken private 28 months ago. Still, Maxis is expected to return more than RM39 billion in market capitalisation on its debut on the Main Market in a week’s time.

At the final institutional price of RM5, Maxis’ market capitalisation would stand at RM37.5 billion, making it the fifth largest stock after Sime Darby Bhd, Malayan Banking Bhd, CIMB Group Holdings Bhd and Public Bank Bhd.

Maxis would come just ahead of Tenaga Nasional Bhd’s market capitalisation of RM36.8 billion with its share price resting at RM8.48 apiece yesterday.

Maxis’ relisting is still set to boost total market capitalisation by over 4%. The RM11.2 billion that will be raised also makes it the country’s largest IPO, unseating “the old Maxis” which raised RM3.1 billion in 2002. The relisting is also the largest telecommunications IPO in Asia-Pacific since 2000.

“Maxis will be automatically included as a component of the KLCI with effect from Nov 20. It would be the largest telco constituent (estimated weightage of 6.1% based on our calculation), raising the overall telecoms sector weightage on the index to 14.5% from 8.8% previously,” OSK said.


This article appeared in The Edge Financial Daily, Nov 11, 2009.