Maxis' MyKRIS acquisition reasonable, will scale up network, says Maybank IB

NST Fri, Oct 15, 2021 12:01pm - 2 years View Original


KUALA LUMPUR: Maxis Bhd's potential acquisition of managed network services provider MyKRIS Asia for RM157.5 million could be a reasonable deal for the telecommunication giant, said Maybank Investment Bank Bhd (Maybank IB).

Analyst Tan Chi Wei said the deal would allow Maxis to strengthen its enterprise capabilities, while MyKRIS could theoretically scale up by leveraging on Maxis' network.

Maxis has proposed to acquire MyKRIS Asia with a RM115 million base plus RM42.5 million add-ons over three years upon fulfilment of revenue targets.

Based on MyKRIS Asia's financial year 2021 earnings, the amount represents 7.5 times of earnings before depreciation and amortisation (EBITDA) and 19.5 times price-earning-ratio," he said in a research note today.

He said MyKRIS Asia is the principal operating subsidiary of MyKRIS International, specialising in managed network services.

"The transaction requires the approval of MyKRIS International's shareholders (co-founders of MyKRIS collectively owns an 86.6 per cent stake), and is targeted to be completed in the first quarter of 2022."

Tan said MyKRIS Asia specialises in the provision and management of internet and intranet network services to enterprises.

"It owns wireless internet networks in Klang Valley, Penang and Johor, and leases fibre bandwidth from fibre network owners.

"The on-boarding of MyKRIS Asia, along with its 70-strong workforce comprising network and security specialists, would allow Maxis to enhance and expand its managed network portfolio, both in terms of product offerings and service standards."

Maybank IB maintains a Hold call for Maxis with an unchanged target price of RMR4.40, pending deal completion.

"Non-compete and personnel retention clauses are in place to safeguard Maxis' interest. However, we have not yet observed a sharp revenue uplift from enterprise."

However, he said there are several risk factors for our earnings estimates, price target, and rating for Maxis.

"Competitive developments, such as price wars, would adversely affect monetisation and thus profitability.

"Regulatory developments about spectrum fees, taxation or product pricing also pose a risk to Maxis' earnings," he added.

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