Doubling down on enterprise

Enhancing enterprise capabilities

Maxis is again strengthening its enterprise capabilities, this time through the proposed acquisition of managed network services provider MyKRIS Asia for up to MYR157.5m. Deal multiples are reasonable, and MyKRIS could theoretically scale up leveraging on Maxis’ network. Maintain HOLD with an unchanged DCF-based TP of MYR4.40. We prefer TM (T MK, BUY, CP: MYR5.91, TP: MYR7.40) in the telco space.

Acquiring MyKRIS Asia

Maxis has proposed to acquire MyKRIS Asia for up to MYR157.5m (MYR115m base + MYR42.5m add-ons over 3 years upon fulfilment of revenue targets). Based on MyKRIS Asia’s FY21 (Mar) financials, the total
consideration represents 7.5x EV/EBITDA and 19.5x PER. MyKRIS Asia is the main operating subsidiary of LEAP Market-listed MyKRIS International (MYKRIS MK, CP: MYR0.65, Not rated), and specialises in managed network services. The transaction requires the approval of MyKRIS International’s shareholders (co-founders of MyKRIS collectively owns an 86.6% stake), and is targeted to be completed in 1Q22.

Adding managed network expertise

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.

Forecasts unchanged for now

Our earnings forecasts and MYR4.40 TP (DCF-based assuming 7.2% WACC and 2% LT growth) are unchanged pending deal completion. Non-compete and personnel retention clauses are in place to safeguard Maxis’ interest. We have not yet observed a sharp revenue uplift from enterprise.