Investment Highlights

• We maintain HOLD on Maxis with an unchanged DCF- derived fair value of RM3.90/share (WACC: 8.1% & terminal growth: 2%). This implies FY24F EV/EBITDA of 10.8x, which is 0.5 standard deviation below the 5-year mean of 11.3x. We expect limited earnings upside for Maxis as profit margins may be eroded by Digital Nasional’s 5G wholesale charges.

• Maxis’ FY23 core net profit was within expectations and consensus estimates. The group has declared a final gross DPS of 4 sen, which brings total gross DPS to 16 sen for FY23.

• Maxis’ CNP increased by 3% to RM1.4bil in FY23 as service revenue grew by the same quantum to RM8,572mil. This stemmed largely from the consumer postpaid (+8% YoY), home fibre (+10% YoY) and enterprise (+6% YoY) segments. The growth in these segments helped cushion a 3% drop in prepaid revenue.

• Postpaid subscribers rose by 8% in FY23 thanks to offerings of attractive monthly postpaid plans of RM30 to RM199. Also, fixed-mobile convergence gained traction as consumer home fibre subscribers rose by 87k (+15% YoY).

• Sequentially, 4QFY23 CNP rose by 5% to RM360mil in 4QFY23. This was supported by service revenue growth of 3% in all core segments, particularly in enterprise fixed & solutions (+9% QoQ), consumer fibre (+5% QoQ), and enterprise (+3% QoQ). The growth in enterprise revenue was mainly driven by the successful completion of projects for fixed connectivity solutions.

• Maxis’ capex declined by 27% to RM0.8bil in FY23. This was largely due to selective expenditure on network capacity growth and fibre assets.

• Moving forward, Maxis is guiding for a low single-digit increase for service revenue, flat EBITDA and capex of less than RM1bil for FY24F.

• Maxis is currently trading at a fairly valued FY24F EV/EBITDA of 10.6x, which is 6% below its 5-year average of 11.3x, with an appealing dividend yield of 4.5%. A lack of rerating catalysts coupled with limited earnings growth are expected to cap the stock’s upside.

Source: AmInvest Research - 23 Feb 2024