Maxis Bhd (Maxis) posted an 8.6% YoY decline in 2QFY22 net profit to RM329m, dragged by higher operating expenses and tax cost. This was mainly due to the successful postpaid contracting with device campaign, which led to higher device cost and higher costs for network expansion. For 1HFY22, results were within expectations, accounting for 50% and 49% of our and consensus full-year estimates respectively. We maintain our FY22-24F earnings forecasts. As we roll forward our valuation, our DCF-based TP is revised to RM4.00. We maintain our Neutral call on Maxis. A second interim dividend of 5.0 sen per share was declared, bringing total dividend for 1HFY22 to 10 sen per share (2QFY21: 4.0 sen per share, 1HFY21: 8 sen per share). We are forecasting an attractive yield of about 6% p.a.

• 2QFY22 revenue improved by 6.6% YoY due to higher contribution from postpaid, home fibre and device sales. Postpaid revenue rose 5.7% YoY due to a 6.4% increase in subscriber base, though ARPU was lower at -3.6% YoY. Home fibre continued to deliver higher revenue, +23.8% YoY, mainly due to stronger customer base (+22.7% YoY). ARPU for home fibre was flat at RM108. Meanwhile, device revenue jumped 23.2% YoY, attributed to the successful postpaid campaign.

• 2QFY22 net profit was down 8.6% YoY. Despite the increase in revenue, net profit dropped by 8.6% YoY due to higher costs, particularly direct cost (+11.5%), network cost (+14.5%) and staff cost (+9.0%). The increase in postpaid contracts have led to higher device cost and network expansion while the increase in staff cost was mainly due to acqui-hires i.e. MyKris Asia. As a result of the increase in costs, EBITDA margin contracted by 1.7 ppts to 48.7%. Depreciation and amortization cost was also higher (+4.8%) due to the revision of the spectrum rights’ useful life. Also, tax cost surged 38% YoY following the implementation of Cukai Makmur.

• 5G negotiation is still underway. According to Communications and Multimedia Minister Tan Sri Annuar Musa, six local telcos have agreed to take up the stake in Digital Nasional Bhd (DNB). A total of 70% stake in DNB will be equally held by these six telcos (a 12% stake is estimated to cost some RM200m) with the remaining 30% owned by the government. However, Maxis has yet to make any official announcement on the signing of wholesale agreement with DNB. Meanwhile, all the identified 5G spectrum, namely the 700MHz, 3.5GHz and 28GHz bands, have been assigned to DNB for the rollout of 5G services.

Source: PublicInvest Research - 29 Jul 2022