MAXIS Delisting – Good News for DIGI and TELEKOM Stocks

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Apr 30 2007
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Ananda Krishnan, the low profile Sri Lankan-origin billionaire drop a bombshell when he surprises the stock market by announcing his intention to take his cash-cow, Maxis Communications Berhad (KLSE: MAXIS, stock-code 5051) private. Maxis had requested for suspension of trading of its securities from 9am on April 30 to 5pm on May 3. It is believed the offer will be made by Thursday.

The tycoon (with a net worth of $6 billion according to Forbes magazine) via his private vehicle, Usaha Tegas Sdn Bhd (UTSB) and its affiliates intended to launch a voluntary general offer (VGO) through a special purpose vehicle for all of Maxis shares. With the remaining 53.3% of Maxis not already owned directly or indirectly by Ananda Krishnan, the plan would be valued at RM17.47 billion at its last traded price of RM13 per share.
Maxis gave no concrete reason for the buyout but analysts speculated that Krishnan, the country’s second richest man after Robert Kuok, might want to relist Maxis offshore and raise foreign capital to fund international expansion. Telecoms analyst at Malaysia’s Aseambankers said the buyout plan could be a first step toward raising money to fund major investments in India and Indonesia. Maxis owns India’s Aircel and Indonesia’s PT Natrindo Telepon Selular – both unlisted.
Aseambankers Research maintained a “Buy” call with RM14.50 price target based on 14.5 times price-to-earnings for FY08. A local fund manager said he expected Krishnan to offer no more than a 10 percent premium over Maxis’ last traded price of 13 ringgit for the remaining shares.
Maxis stock is trading at multiple of 16.2 projected times, lower than India’s top mobile phone services firm, Bharti Airtel’s (BOM: 532454) 38 times and China Mobile Ltd.’s (HKG: 0941) 18.2 times.

There’re some reasons why Ananda plans such a move. Amongst them are:

  • Malaysia’s telco market has already reach saturation level. Hence, expansion to oversea is the next logical move.
  • Investment costs in both India and Indonesia might exceed the original projection budget. To transfer additional money over there might not be easy for a listed company like Maxis as paper-works and approvals might take time. Also it might affect the balance sheet and indirectly the stock price.
  • It’s the only way to re-direct or transfer Ananda’s huge fortunes elsewhere to reduce risks to prevent putting all the eggs in the same basket.
  • Besides easier relocation of funds into India and Indonesia market, Ananda could easily double or even triple his money by re-list Maxis offshore where foreign investors’ presence are more imminent.

# TIP: With Maxis’s delisting, investors who are existing shareholders might realize the cash on hand to re-invest in other stocks. Telco lovers might be looking at either DIGI.com Berhad (KLSE: DIGI, stock-code 6947) or Telekom Malaysia Berhad (KLSE: TM, stock-code 4863) as their next landing stock.

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When beginning investing in the stock market, it is wise to invest a small amount into many different stocks.

The stock market is risky, and if you just invest in one company, and it happens to not do well.

You will be losing a lot of money. If you have more than
one stock, you will be more secure.

I follow the stock market

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