Investment Highlights

• We maintain our HOLD recommendation on Maxis with unchanged forecasts and a DCF-derived fair value of RM5.60/share, based on a WACC discount rate of 6.3% and a terminal growth rate assumption of 2%. The FV implies an FY20F EV/EBITDA of 13x and is on par with its 3-year average.

• Maxis and property developer Gamuda Land have signed a memorandum of understanding (MoU) to form a strategic partnership with Maxis appointed as the preferred connectivity and solutions provider to create Malaysia’s first Maxis-delivered 5G township for Gamuda Cove, a 1,530-acre development located in the southern part of the Klang Valley, along the Elite Highway, opposite Cyberjaya and near KLIA and KLIA 2 (See Exhibits 1 & 2).

• Besides the Paya Indah Wetlands and Kuala Langat Forrest Reserve, the township is envisaged to comprise over 20,000 residential units. Under the MoU, Gamuda Land will be working with Maxis to fibre up parts of Gamuda Cove with its high-speed broadband connectivity and explore smart city and retailing solutions across all Gamuda Land townships in Malaysia

• This comes on the back of a 2018 collaboration where Maxis provided a customised MaxisOne Home fibre plan for Gamuda Land’s twentyfive.7 township in Kota Kemuning, Shah Alam.

• This development is not a surprise as it is part of Maxis’ plan to expand its fibre broadband services deploying TM’s highspeed broadband network, following the implementation of the Mandatory Standard on Access Pricing (MSAP) last year.

• As the only mobile player currently with nationwide fibre connectivity, Maxis has indicated its intention to offer innovative bundled plans while negotiating access agreements with multiple partners, including property developers. Maxis is currently also the only broadband provider that offers a backup 4G LTE connection should there be a fibre connection issue.

• As such, Maxis’ home connections have grown impressively by 67K YoY to 251K. Besides targeting demographically younger customers, Maxis is also aggressively targeting the small-medium business and enterprise segment.

• 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.

• We view the stock’s FY20F EV/EBITDA of 13x as reasonable and on par with its 3-year average, while providing a fair dividend yield of 4%.

Source: AmInvest Research - 18 Jul 2019