Maxis Bhd
(Oct 11, RM5.25)
Maintain neutral at RM5.10 with fair value of RM5.20: Several media reports yesterday highlighted an alleged telco graft scandal involving the major shareholder of Maxis Communications and few influential parties in India involving the purchase of a 74% stake in Aircel Ltd in 2006. A statement issued by Maxis said the group has been aware of the case for some time and the developments do not have any impact on its operations in Malaysia.
The case involves Maxis Communications Bhd, the previous listed entity (taken private in 2005) that acquired Aircel in 2006. Under an internal restructuring to facilitate the listing of its Malaysian operations in 2009, Maxis Communications became the parent company of currently listed Maxis Bhd. While the issue should not affect the group’s domestic mobile operations, it is nonetheless discomforting given that it involves a controlling shareholder of the group. We contrast the latest development with the protracted legal suit affecting Maxis’ sister company and pay TV operator, Astro, in 2009 in relation to a failed pay TV venture in Indonesia. Astro was subsequently taken private in June 2010 after stock sentiment was battered.
Maxis remains a “neutral” based on fair value of RM5.20. Apart from the generous dividend yield of 7%, which provides share price support, Maxis’ prospects remain unexciting on the back of falling voice revenue and margin downside arising from the recent launch of its fibre-to-the-home (FTTH) service. For pure mobile exposure in Malaysia, we prefer DiGi.Com Bhd for its execution track record. — OSK Research, Oct 11
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