Investment Highlights

• We maintain our UNDERWEIGHT recommendation on Maxis with an unchanged DCF-derived fair value of RM4.60/share, based on a WACC discount rate of 6.4% and a terminal growth rate assumption of 2%. The FV implies an FY19F EV/EBITDA of 12x and is on par with its 3-year average.

• Following Maxis’ Home Fibre promotional launch with 3 temporary free cellular SIM cards earlier this month, the group now offers faster business fibre plans at 300Mbps priced at RM199/month, 500Mbps at RM269/month and 800Mbps at RM349/month. The broadband provider is also providing 2X Mesh WiFi devices and a cloud-based internet security solution for its 300Mbps plan and above.

• The new faster plans come with one IP voice line that offers unlimited calls and options of 5 extra lines for additional RM110/month and 9 extra lines for an additional RM200/month. The additional IP voice lines come with unlimited on-net calls and 1,000 shareable minutes.

• For business users, Maxis currently offers RM99/month for 30Mbps and RM139/month for 100Mbps, which are far more attractive compared with Time dotCom’s RM188/month for 20Mbps, RM318/month for 50Mbps and RM348/month for 100Mbps. For further comparison, Unifi Biz Lite offers RM179/month for only 10Mbps, RM249/month for 30Mbps, RM299/month for 50Mbps and RM349/month for 100Mbps.

• Since the recent broadband price revision as a result of the implementation of the Mandatory Standard on Access Pricing (MSAP), Maxis is the only broadband provider that has aggressively slashed its pricing for business users. Additionally, Maxis is currently the only broadband provider that offers a backup 4G LTE connection should there be a fibre connection issue.

• Maxis also offers a cloud storage & e-mail solution for RM22/month. This provides 1TB of cloud storage for storing photos, videos and documents, as well as 50GB for emails. Other add-ons include free WiFi to customers, managed WiFi solution at RM80/month that enables bandwith control for business and customer use, and a customised WiFi login page for promotional strategies or customer data collection for marketing purposes. The managed WiFi add-on also comes with a free enterprise-grade WiFi access point worth RM2,000.

• Besides targeting demographically younger customers, Maxis is aggressively targeting the small-medium business and enterprise segments. While positive on this fresh initiative from Maxis, we remain wary of eventual counter-measures by Time and Unifi who could reignite further price competition. Hence, we retain our forecasts for now.

• With the upcoming 1QFY19 results this Friday likely to be weak due to the lingering impact from U Mobile revenue loss, we view the premium FY19F EV/EBITDA of 14x vs. its 3-year average of 12x as unjustified.

Source: AmInvest Research - 23 Apr 2019