Investment Highlights

• We maintain Maxis’ HOLD rating with unchanged forecasts and DCF-derived fair value of RM5.00/share. This is based on a WACC discount rate of 6.3% and terminal growth rate assumption of 2%, which reflects a neutral 3-star ESG score. This also implies an FY20F EV/EBITDA of 12x, on par with its 3- year average.

• Maxis has introduced new bundled fibre combos with Hotlink Postpaid 60 starting from RM149/month. Under the Jaringan Prihatin programme, eligible subscribers can apply for a RM180 subsidy (12 months x RM15) with the plan.

• 5 fibre options are available, ranging from 30Mbps to 800Mbps. All plans, which include a new WiFi 6 router, come with Hotlink Postpaid 60 offering unlimited calls and SMS together with 30GB of high-speed data and 30GB of YouTube data quota.

• The base postpaid + 30Mbps fibre plan costs RM149/month while the higher 100Mbps combo charges RM189/month and 300Mbps combo option RM209/month. For higher speeds, the 500Mbps combo costs RM279/month and the 800Mbps combo RM359/month. These two plans also come with free 2x Mesh WiFi nodes to expand the wireless coverage in homes.

• To get a TV, a monitor or a tablet, Maxis also offers devices on a contract which starts from RM1/month. For the Samsung 50″ UHD Smart TV, the plan will cost an additional RM1/month for 800Mbps combo customers or RM79/month for customers on the 30Mbps combo option.

• While the new package for RM149/month costs more than the earlier RM99/month Hotlink Postpaid + fibre bundle, it offers 3x the mobile data quota. Even so, the lowest plan is 25% lower than the unlimited bundled plan for cellular and fibre combo currently priced at RM198/month for 30Mbps.

• As such, we view the new plans as offering more flexible price points to new entrants while aiming to mitigate erosion in average revenue per user for the cellular and fibre segments.

• Recall the group's strategy in providing converged solutions involves accelerating fibre penetration is in line with the National Fiberisation and Connectivity Plan to position its brand as the preferred partner to all types of businesses.

• The group will continue to expand its Hotlink prepaid base among the youth segment, value seekers, B40 segment and foreign workers while building its postpaid division with familybased plans bundled with fibre and handset options.

• We expect the group’s 1HFY21 results, which will be announced this Friday, to be within our expectations. Amid a matured cellular market with intense competition and tepid revenue growth prospects, the stock’s FY21F EV/EBITDA of 11x is slightly below with its 3-year average of 12x, supported by a decent dividend yield of 3%.

Source: AmInvest Research - 28 Jul 2021