Maxis posted a 10.8% YoY decline in 1QFY22 net profit to RM298m, as an increase in revenue was offset by higher costs namely direct cost, depreciation and amortisation charges, and tax costs. Effective tax rate was higher at 31% mainly due to the imposition of Cukai Makmur. The results were within expectations, accounting for 24% and 23% of our and consensus full-year estimates respectively. Our FY22-24F earnings forecasts remain unchanged. We maintain our Neutral call on Maxis. A first interim dividend of 5.0 sen per share was declared (1QFY21: 4.0 sen per share).

• 1QFY22 revenue improved by 7.4% YoY which we attribute to higher device sales and home fibre revenue. Home connectivity continued to chalk higher subscription, increasing by 19.2% YoY. Although postpaid subscribers improved by 9.2% YoY, ARPU fell 4.9% YoY. Meanwhile, prepaid subscriber base was down 6% YoY on a flat ARPU.

• 1QFY22 net profit was down 10.8% YoY. Despite the increase in revenue, net profit was down by about 11% due to higher costs, particularly direct cost (+22.3%), network cost (+11.9%) staff cost (+14.8%) and depreciation and amortisation charges (+8.0%). The increase in direct cost (contributed to the bulk of total cost of goods at 66%) was due to higher contracted device volume, leading to an increase in device subsidies. The increase in depreciation and amortization charges, the second largest cost component, was largely due to higher spectrum rights amortisation.

• 5G discussion still on-going. The four mobile network operators (MNOs), including Maxis, are still in talks with Digital Nasional Bhd (DNB) to finalise the terms of the reference access order (RAO). The RAO generally contains terms and conditions on access to the network facilities and services that will be made available to acess seekers. Reaching an agreement with DNB and the Malaysian Communications and Multimedia Commission is crucial before all parties can proceed with the discussion on commercial acess agreement. Last month, the government announced that DNB would retain the single wholesale network model for the nation’s 5G rollout with the MNOs pledging their support and commitment in playing an active role in the country’s 5G implementation.

Source: PublicInvest Research - 29 Apr 2022