Friday, May 04, 2007

Aseambankers Advisory on Maxis

My Dearest Moo Moo Cow,

Just got the copy of Aseambankers research report on Maxis. Asemabankers is advocating its shareholders to ACCEPT the GO.

Now if I am the minority shareholder, don't I need to reason out if the GO price valuation is justifiable? Have a look at what Aseambankers is saying.

  • Binariang offers a healthy 20% premium. Binariang, made up of shareholders accounting for 59% of Maxis shares, surprised the market by offering a 20% premium to Maxis’ last done share price in an effort to take Maxis private. The now unconditional general offer (based on 59% of irrevocable acceptances by Binariang’s shareholders) hopes to attract 100% acceptances in taking Maxis private and thus de-list it.
    A historic landmark deal that should benefit shareholders. Binariang listed a slew of factors for the proposed privatization, not least the greater-thanguided investment costs required for its overseas operations. In light of these developments, Binariang is offering to relieve shareholders of the short-term uncertainty faced by Maxis – although it did not rule out re-listing Maxis in the future (with no timeline suggested).
    Accept GO. In light of the unexpectedly phenomenal amount of investments by its competitors in both the Indian and Indonesian markets over the last few months, we suspect that from a competitive standpoint, Maxis needs to bite the bullet now and review its spending plans upwards. After a 46% share price appreciation over the last 6 months, investors should accept an additional 20% premium to its current share price for a total gain of 66% in 6 months or 132% annualized, by accepting the GO.

Is anything new being said?


I feel that it's like a recording of what CIMB had said in the news conference.

How about showing us reasoning that the VGO is actually a fair representation of Maxis valuation and potential?

Comparing the VGO price to the traded price and the IPO price makes no sense.

Maxis IPO price was based on Maxis potential back in 2002. And Maxis 2002 differs from Maxis 2007 and differs from Maxis 2008 or Maxis 2009.

VGO price versus traded price? That's a non-issue comparison.

Now have a look at the screen shot of Aseambankers financial data for Maxis.

Let's look at what Maxis had achieved in 2006.

Look at the EPS growth stated for Maxis in 2006. 24%. Now that's a fact. And the net profit actually grew some 429.7 million or some 25.7%.

Now see how Aseambankers projected Maxis growth to be in 2007. A mere 7% for fy 2007 and a mere 8.9% in fy 2008.

Now is that a fair projection?

Someone once said to me, that it's very normal that in IPO, research reports tend to display extreme optimistic projections and for privatization cases, these projections tend to turn very pessimistic!

Are we seeing the case here?

Now given the fact that India has started to contribute maiden earnings of around 180 million, surely the growth potential is far greater for Maxis?

Now if i use a simple 22% growth projection for the next two years, Maxis eps based on Aseambankers table should be 101.8 sen for fy 2007 and 124.2 sen for fy 2008.

And if ever a pe multiple of ONLY 15.6 is deemed fair for a company that has a potential growth of over 20%, then the company is worth at least rm19.30 sen.

But is it fair?

And not forgetting such valuation is TOTALLY ignored the immense operating cash flow shown currently by Maxis.

Maxis in its fy 2006 balance sheet, depreciated some 1.014 billion from its earnings.

Now this 1.014 billion is money which hadn't really vanished into thin air and neither has it gone to the money heaven. Want to try including these money into the valuation?

Yeah, rm24.00 would have been a fair value based on current data. Not a sen less!