Maxis Bhd (Maxis) posted a 3.1% YoY decline in 3QFY22 net profit to RM315m, mainly due to higher operating cost and tax cost. As contracted revenue increased, device cost also increased while allowance for doubtful debts reverted to pre-pandemic levels. For 9MFY22, results were in line with both our and consensus estimates at 74% and 73% of full-year forecast respectively. Our earnings forecasts remain unchanged. A third interim dividend of 5.0 sen per share was declared (3QFY21: 4.0 sen per share). We maintain our Neutral rating on Maxis with an unchanged TP of RM4.00.

• 3QFY22 revenue improved by 5.9% YoY due to higher contribution from postpaid, home fibre and device sales. Postpaid revenue rose 6% YoY due to a 9% increase in subscriber base, though ARPU was lower at -2.9% YoY. Home fibre continued to deliver higher revenue, +21.6% YoY, mainly due to stronger customer base (+20% YoY) as ARPU remained flat at RM108. Meanwhile, device revenue jumped 24.8% YoY, attributed to the successful postpaid campaign.

• 3QFY22 net profit was down 3.1% YoY. Despite the increase in revenue, net profit dropped by 3.1% YoY due to higher costs, particularly device cost (+31.4%) and staff cost (+5.5%). The increase in postpaid contracts has resulted in higher device cost. Meanwhile, there was no allowance for doubtful debts in 3QFY21 but for the current quarter, an allowance of RM25m was provided, essentially reverting to the pre-pandemic level. Due to the implementation of Cukai Makmur, tax cost jumped 33.6% YoY.

• 5G wholesale agreement. Despite its non-participation in Digital Nasional Bhd’s (DNB) equity shareholding offer, we believe access to the 5G wholesale network would still be available for Maxis, though we do not rule out that rates may differ from other telcos. Although Maxis has yet to execute any access agreement with DNB (pending shareholders’ approval by January 2023) after the October 30 deadline, it remains committed to playing an active role in the country’s 5G rollout plan. While Maxis is lagging five of its peers which have signed agreements with DNB and are already offering 5G services to their customers, we believe Maxis is not likely to lose its competitive edge given our expectation that the take-up rate for 5G services would be slow in the near future.

Source: PublicInvest Research - 7 Nov 2022