STRATEGY: Maxis in KLCI - What’s Hot and What’s Not

While our Sep 23 report on Maxis’ upcoming IPO focused on the Telco sector and Maxis, in this report, we look at the potential impact on the FBM KLCI if indeed Maxis is listed before Dec 11, ’09, which is when a revision to the index’s constituents, if any, will be announced. As we believe Maxis may be included in the FBM KLCI to replace a less liquid and smaller cap component with a lower free float, we believe that Malaysian Airline System (MAS), Petronas Dagangan and RHB Capital could potentially bereplaced. If MAS were to be replaced by Maxis, the latter would be the 5th largest KLCI component stock, with a weightage of 7.3%. The KLCI’s adjusted market cap would then rise 7.4% to RM396.1bn. We believe Maxis will spur some short t erm interest inthe market, with non-T elco dividend plays such as Petronas Gas, Petronas Dagangan, PLUS and Tanjong potentially seeing an outflow of funds, other than Telco dividend plays such as Digi and TM. Market interest should be a boon to Liquid Foreign Darlings such as CIMB (BUY TP: RM13.00), Genting (TRADING BUY TP:RM7.90) and Axiata (BUY TP:RM3.68).