Investment Highlights

• We maintain HOLD recommendation on Maxis with an unchanged DCF-derived fair value of RM3.90/share (WACC: 8.4% & terminal growth: 2%). This implies FY23F EV/EBITDA of 10x, below its 5-year average of 12x, which reflects limited earnings upside due to the inflationary environment impacting consumer affordability.

• We maintain FY23F-26F earnings which already account for the minimal impact from price cuts in the home fibre segment, as the reduction in home fibre’s average revenue per unit (ARPU) will be cushioned by lower network costs. The contribution from home fibre accounts for 8% of the group’s 1HFY23 total revenue.

• Maxis has announced a price reduction between 13%-32% in its home fibre plans, post-finalisation of the access agreement with Telekom Malaysia (TM), which is based on the new Mandatory Standard on Access Pricing (MSAP).

• Maxis’ most subscribed monthly plan at RM99 for 100Mbps is now on par with the new pricing of CelcomDIgi and Unifi. However, at higher speeds of 300Mbps and above, Maxis’ monthly prices are now more competitive, cheaper by RM10 for 300Mbps and 500Mbps.

• In addition, Maxis has introduced standalone fibre plans at 1Gbps for RM249 and 2Gbps for RM319 to capture data intensive consumers. While Maxis’ 2Gbps price is similar to unifi’s, the 1Gbps plan is substantively lower by RM40 (-14%) than both Unifi and CelcomDigi’s options.

• We reckon that this is part of Maxis’ strategy to offer more tier-pricing options for customers. For existing customers subscribing for plans at 100Mpbs and above, Maxis is providing with free speed upgrades.

• We believe FY23F earnings contribution from home fibre will remain unchanged given that the reduction in ARPU in the home fibre unit would be compensated by lower network charges. We reckon the home fibre price reductions benefits Maxis by remaining competitive against its peers, as well as potential growth in its home fibre subscriber base from more attractive bundling offerings, supported by its superior customer service quality.

• From a valuation perspective, the stock is currently trading at FY23F EV/EBITDA of 10x, slightly below its 5- year average of 12x while providing a decent 3.8% dividend yield. We view these valuations as fairly valued at this juncture as earnings growth will be capped by affordability pressures coupled with the lack of near-term rerating catalysts.

Source: AmInvest Research - 30 Oct 2023