Friday, May 04, 2007

Windfall for Maxis?

The following article was the Front Page Headlines posted on Star, Windfall for Maxis shareholders

Sorry but windfall for whom?

For a company that has earnings growth of over 30% the last 2 years, a net cash flow from operating activities of over 3.3 Billion and had already invested some 2.7 billion of its shareholders money in a country which has extreme potential, India, would a general offer price of rm15.60 be considered a windfall?

How about rm24.00?

That would have been my bare minimum of what Maxis should be worth at least.

So I do hope you do not mind me asking a silly question. If the company is worth rm24.00, would a offer of rm15.60 deemed generous?

Would any sane minority shareholder be happy?


  • This means that an investor who had bought 1,000 Maxis shares at RM13 each just before trading was suspended on Monday will make RM2,600, or a 20% gain on his investment.

The above was mentioned in the article and it's really kind of silly. How many would have 'invested' at rm13.00? Did they know of this VGO? If no, then this 20% gain of investment is irrelevant. Nothing but a feeble attempt to make this VGO sound generous!

And posted on the Star Biz Section. VGO allows shareholders to exit at attractive price

First of all, one needs to realize that CIMB, ABN AMRO win Maxis mandate again. So do bear in mind the possibility of the minority getting a slightly biased comments and opinions from CIMB because this Maxis privatization represents business to them.

  • “Shareholders who have held shares in Maxis since its IPO in July 2002 would enjoy a total return of 301%, including dividends, which represents a 36% internal rate of return should they accept the offer,” Nazir said.

This is not a right comparison to make.

The right comparison is what Maxis should be worth now based on current facts and not comparing the IPO price versus the VGO price!!

When one makes such a comparison then the comparison ASS-U-MEs that the VGO price is fair.

Is it fair?

Let me repeat again, we are talking about a company that has earnings growth of over 30% the last 2 years, a net cash flow from operating activities of over 3.3 Billion and had already invested some 2.7 billion of its shareholders money in a country which has extreme potential, India.

Is rm15.60 fair?

So if the investor knows that the share is worth at least rm24.00, why isn't the minority investor not given a fair chance to be adequately compensated for the risk to invest in the company since 2002?

  • To grow further, it needs huge funding and it is learnt that Maxis needs over RM12bil from now up to 2010.

    The risks are also greater when operating in markets away from home and, given the huge cash outlay needed, a strain on its cash flow can be expected to limit its ability to pay dividends and affect its share price.

    “The privatisation will eliminate the impact of earnings volatility on public shareholders,” said Raja Datuk Arshad Raja Tun Uda, chairman of Binariang GSM Sdn Bhd, the company created to undertake the privatisation exercise.


Shouldn't the minority shareholder be given a fair chance to decide on this issue?

My say is simple. If Maxis requires massive funding in the future, Maxis could easily have asked its minority shareholders first. Why is it so important to ask them? Well, they should have never forgotten that the minority shareholders are part owners of the business.

So for the sake of the integrity of the company, the company should have asked the minority shareholders if they want to continue to be a owner of this company given this heavy funding issue.

And this could be easily achieved by asking the minority shareholders to partake in a RIGHTS ISSUE to generate fund for the company to help it grow. By issuing a VGO meant the company had not taken into the consideration of its minority shareholders!

Why aren't they being a fair chance to participate in the company further?

And remember, rm2.7 billion of the shareholder money had already been invested in India. So in all reality, they are already part of this massive plan to invest in India.

By issuing a VGO simply takes everything away from the minority shareholder!

  • Taking Maxis private is seen as a viable option as it gives Ananda greater flexibility to chart the forward direction for Maxis and re-enter Bursa when it has “stable earnings” again.

Once Maxis is taken private, will Maxis the PRIVATE ENTITY be willing to share its earnings books with everyone on the outside? Would this be acceptable?

  • Raja Arshad also did not believe the de-listing of Maxis would erode the company’s strong brand value as it would be business as usual at the company with no “management changes” expected.

The minority shareholder is now NOT GIVEN A CHANCE to participate in a company that could grow tremendously in India. And worse still, part of their money, some rm2.7 billion had already been invested. So how do you think these minority shareholders feel about the brand Maxis???? Would some even go the extremes of switching to DiGi or Celcom?

Posted on Business Times, Maxis could be relisted later

  • Q: Is the offer a fair one?
    A: Definitely. The offer price of RM15.60, payable in cash, represents a huge premium over the last traded price of RM13. It represents a price level which Maxis shares have never achieved since its listing on Bursa Malaysia. A shareholder who subscribed to Maxis shares at IPO (initial public offering) and accepts the cash offer would have enjoyed a total return of 301 per cent (including dividends).
    This represents an internal rate of return of more than 36 per cent.

Come on. The issue of fair is based on the VGO price.

So how about asking is the VGO a fair price representation of Maxis true value?

How about RM24.00?

  • Q: Delisting Maxis will reduce the large number of large, liquid, high-quality companies available to investors on Bursa Malaysia. Will this not reduce the attractiveness of the Malaysian stock market?
    A: The market capitalisation of Maxis is more than RM33 billion and Maxis ranks in sixth position in terms of market capitalisation on Bursa Malaysia. However, as this only constitutes four per cent of the KLCI 100 market cap, we believe the presence of other big companies and medium- cap counters will ensure the continued robustness of Bursa Malaysia.

Here's a simple issue.

Given the fact that privatization happened in Powertek, in Bumi Armada and now Maxis, one cannot DENY that the threat of privatization would not happen in other sister companies of Maxis. So how would fund managers and investors feel about their investment in Astro, Measat or Tanjong? What if they do the funky privatization again?