Investment Highlights

• We maintain HOLD call for with an unchanged DCF-derived fair value of RM5.00/share, based on an unchanged WACC discount rate of 6.3% and terminal growth rate assumption of 2%. This reflects a neutral ESG score of 3 stars, and implies an FY22F EV/EBITDA of 11x, below its 3-year average of 12x.

• Our forecasts are maintained as Maxis' 9MFY21 normalised net profit of RM1,019mil was within our expectations but slightly below consensus, accounting for 74% of our FY21F earnings and 72% street’s. While 9M accounted for 77% of FY19–FY20 normalised net profit, we expect a stronger 4QFY21 following the relaxation of movement restrictions.

• Maxis’ 9MFY21 tax-exempt DPS of 12 sen (flat YoY) translates to a payout ratio of 92%, which is also in line with our FY21F– FY23F assumption.

• YoY, Maxis’ 9MFY21 net profit slid 4% despite flattish revenue due to an 11% increase in depreciation/amortisation charges arising from the reduction in the useful lives of the group’s spectrum rights following the MCMC’s reassignment of operators’ portfolios for 4G usage.

• Likewise, Maxis’ 3QFY21 normalised net profit dropped 10% QoQ to RM325mil mainly from an 11% QoQ increase in depreciation/amortisation charges.

• Sequentially, Maxis’ 3QFY21 net subscribers slid by 20K to 11.7mil as postpaid and prepaid segments lost 26K subscribers each to the impact of Covid-19 movement restrictions, partly offset by an increase 32K (+18% QoQ) wireless broadband (WBB) users from non-fiberised areas.

• 3QFY21 blended ARPU slid by RM2/month YoY to RM47/month. However, 3QFY21 revenue-generating postpaid subscribers (below 30 days) rose by 7% YoY or 248K to 3.7mil. All in, the 9MFY21 proportion of postpaid to mobile revenue rose by 1% point YoY to 59%.

• The best performance came from WBB, which managed to increase its subscribers by an impressive 84% YoY to 210K. This is followed by the fixed line business which maintained its upward momentum with home fibre users rising 26K QoQ to 470K while business fibre slid 1k to 42K amid MCO constraints. Home fibre ARPU slid slightly by RM1/month QoQ to RM108/month.

• Maxis’ 9MFY21 capex decreased by 20% YoY to RM590mil from the slower spending during the various MCOs. Towards the year-end, we expect spending on network capacity to surge as capex to date accounts for only half of management’s unchanged FY21F capex guidance of RM1.2bil, excluding JENDELA projects which will be utilising the MCMC’s USP fund. The group still refrains from offering any FY21F guidance given the ongoing Covid-19 impasse, in continuation of management’s stance since last year.

• The stock’s fair FY22F EV/EBITDA of 12x currently is at parity to its 3-year average while providing a fair dividend yield of 3%.

Source: AmInvest Research - 29 Oct 2021