Investment Highlights

• We maintain Maxis’ HOLD rating with an unchanged DCFderived fair value of RM5.50/share. This is based on a WACC discount rate of 6.3% and terminal growth rate assumption of 2%, implying an FY20F EV/EBITDA of 13x and is on par with its 3-year average.

• Maxis has entered into a strategic partnership to offer converged solutions to Petronas Dagangan’s customers focusing on safety, security and sustainability for businesses to create unique retail experiences at Petronas stations as part of its retail transformation strategy.

• The partnership would focus on leveraging big data and advanced analytics to co-create hyper personalisation for an enhanced and differentiated retail experience for over 1,000 Petronas stations through big data and advanced analytics with Maxis as the technology enabler.

• The companies will also go to market with converged end-to-end business solutions that will offer greater convenience and cost optimisation while ensuring the safety and security of Petronas’ assets, fleet and drivers.

• This will enable the customers of Petronas Dagangan and Maxis Business to benefit from a suite of solutions ranging from asset management to logistic services.

• This is part of Maxis’ enterprise business, which contributed 7% of the group’s 9MFY20 service revenue. While this partnership is positive over the longer term for Maxis, we do not expect a substantive enhancement to the group’s earnings in the near term. Hence, we maintain our FY20F–FY22 earnings for now.

• Besides this new development, the group has also partnered with Amazon Web Services’ Solution Provider Program and supported AmBank’s digital solutions for small-medium enterprises while helping the Penang state government to launch IoT pilot projects. These include offering cloud and bandwidth-on-demand services.

• Meanwhile, given the uncertain impact from the Covid-19 pandemic, management is still not confident in providing a fresh guidance following the withdrawn expectation of a “flat to low single-digit increase” for both FY20F service revenue and normalised EBITDA.

• Against the backdrop of intensifying competition in the cellular and fibre market, the stock’s FY21F EV/EBITDA of 12x is slightly below with its 3-year average of 13x, while providing a fair dividend yield of 4%.

Source: AmInvest Research - 14 Jan 2021