Hoopla Over Maxis & Market Mood

I am happy that Maxis did not get whacked by retailers to stratospheric levels. I really think private investors have grown up a lot. They listened, they read, most of them know this Maxis is not the Maxis of old. I hope they also appreciate that the mobile penetration rate is vastly different from what it was ten years ago. I also hope they did not get fixated at the previous privatisation / sale at around RM15 (I think, I forgot). Most importantly, they refused to pay above fair value (deemed as having a properly competitive dividend yield) for what is basically a 70% dividend stock. By that, I mean they did not "take out the institutions" or gave them more gains than necessary. We all deserve a pat on the back. The players have grown up - if you lose enough money, you will learn, we all do.

What about the liquidity drain that Maxis was supposed to effect on the bourse? Yes, I have heard some selling their other shares to ready funds to buy Maxis, thankfully they have been few and far in between. Is there liquidity being soaked, yes of course, its not a small issue. A lot of funds had to rebalance their portfolio to accommodate Maxis. Due to the very tiny issue to the public, not an excessive amount of funds was tied up. In fact, the sluggish markets over the last ten days can be attributed to this liquidity being drained, or it actually scared many players into not participating in the markets owing to the fear of a possible down trending market.

So, if the US and China markets continue to behave, will the next few days be OK for local bourse? Most would believe that with Maxis out of the way, the markets should resume its uptrend to try for 1,300 ... will they be proven right. The markets have reached my target of 1,280 for the year. To me, it could overshoot that but it will be difficult to breach 1,300 this year, regardless of how well the US and China markets are performing. To conclude, the risk-reward is not particularly attractive. I have been scaling down holdings, and sticking to very selective stocks with near term catalysts only - in other words I would stay very selective and stick to diligent stock picking. As it is, I am finding it increasingly difficult to pick stocks to feature - the markets is trying to tell me something.

I do think there will another good round come January/ February 2010, but it will have to come down a bit first for that rally to occur. You cannot possibly have a good run for more than 3 months, it will over extend itself and be tired. One should always read markets like they view an athlete, they will show signs of fitness, strength, confidence, or weakness, tiredness, sluggishness etc. They way to read the signs is to monitor the top volume and top gainers, is there constant rotation or the same names, are the leaders moving with good catalysts or just simply goreng stuff. There will always be goreng stocks, the stronger they can do it, the stronger the underlying willingness of the market to participate, but when these stocks fail to attract followers, the answer is obvious. I would stick strictly with stock picking mode only and reduce mid-term or long term stocks.


p/s photos: Jessica C. (Wacoal's top model)

Mutterings On Maxis

I tried to evade the question on Maxis, but everyone seems to be keen to find out more on Maxis. During the talk, the Maxis thing came up during Q&A time. Short answer, it will go up, possibly hold above RM6.00-6.50 for the medium term but could stay locked in that range for a long time.

a) Owners are selling 30%, no new shares issued, money going to the pockets of owners. Not necessarily a bad thing, but it goes to show that not much of reinvestment is planned. Not much reinvestment means "not much growth and excitement, and a lot less risk" - but what is Maxis if you are not buying their expertise in running telco operations, why are you paying for people who are turning into just gatekeepers, just maintaining the operations. Getting to be another dividend stock?

b) Malaysian telcos are trading at a steep premium to their regional peers. Some fund managers have said they will most likely own a smaller portion of Maxis shares in their portfolios than the stock’s actual weightage in the benchmark FTSE Bursa Malaysia KLCI. Maxis above RM6.00 is already very pricey. However, it is likely to stay above that because the local institutions will be picking up more shares and the cornerstone institutional investors (with the exception of Fidelity) will not be selling as they "need to have sufficient exposure to a critical component of the index - as explained during my talk). So, who will be selling??? .... well, if it goes beyond RM6.50, I think even Ananda and the Saudi owners will sell in the open market.

c) Maxis is this company is a different animal now compared to seven years ago. The market is already saturated with very little room for growth regardless whether in the postpaid, prepaid or wireless broadband segment. So, no growth story, the bulk of the growth trend has been in the past, now its jockeying for market share, and usually that is largely churning and will only result in a lot of work for their respective marketing folks but the revenue will come with very thin margins. Hence, Maxis’ latest sexy offering is of course the exclusive partnership with Apple Inc.’s is a good thing but will need keep getting hits out of the park to really dent the competition.

d) The reason why I am loathed to write about Maxis is that the company made its money from the Malaysian public, and we all have had to endure a lot of "cumbersome technical glitches, capacity issues, dropped calls, etc..." When the going was good, they took it private but obviously knowing that there is likely to be an even better offer to sell Maxis to somebody else, not nice, smart biz but poor form. Now, I don't know for what reason, they choose to relist a likely "dividend counter", with such a pathetic offering to the public. Did Maxis forget who the fuck gave them the revenue and critical mass in the first place. Yes, the Maxis dealers got some, and a very limited number preferred customers did get something... what about the rest, the company was built by selling solely to Malaysians. There was no acknowledgment of that from the offering. The entire offering was passed to institutions and basically Maxis want loyal Malaysians to buy the shares from the institutions in the open market - hey, thanks!