- We re-affirm our HOLD rating on Maxis at unchanged DCF derived fair value of RM6.55/share.

- Maxis reported net profit of RM475mil for its 1Q13 which accounted for 23% of our FY13F earnings and 22% of consensus. This is slightly dragged by a RM60mil accelerated depreciation charge coming from its progressive network modernisation. Revenue and EBITDA were in-line, accounting for 25% of our FY13F forecast.

- Management is guiding for a further RM40mil accelerated depreciation for the rest of FY13F. The total of RM100mil accelerated depreciation guidance for FY13F is slightly less than the RM120mil booked in FY12. Maxis is also guiding for accelerated depreciation to gradually lessen beyond FY13F.

- Revenue grew 4.4% YoY. This was driven largely by data revenues while voice revenues were down 2% YoY and SMS was down 11%. Management continues to see theseas challenging over the next few quarters due to competition.

- EBITDA margin trend recovered in 1Q13 after 3 consecutive quarters of decline following price aggression initiated by Maxis since 2Q12. This came despite higher device sales (+30% YoY) in 1Q13. Maxis does not intend to focus on device sales (which is not profitable), contrary to peers’ move to do so in securing market share in the highend smartphone segment.

- Net addition trends remain encouraging (1Q13: +144subs vs. Digi’s -122subs in same period). Pricing trends has not yet seemed to stabilise – blended RPM contraction of 11% YoY in 1Q13 following 4Q12: -7% YoY. MoUs improved for prepaid (+5% YoY) but postpaid voice usage dropped 9% YoY.

- Group launched the Astro IPTV bundling recently and this will put slight margin pressure on its home fibre division (still small accounting for <1% of group revenue) as Astro will take a cut off Maxis’ fibre broadband ARPU and given the costs involved.

- Capex guidance is maintained at RM1bil of which RM750mil has been allocated for network capex (including 4G-LTE rollout) and the remaining RM250mil for IT.

- Maxis announced dividends of 8sen/share for 1Q13, at apr to what it paid out in 1Q12. This however, represents a higher 126% payout ratio (1Q12: 104%). Group has little retained earnings reserve left and we think maintaining FY12 dividend payout could be challenging.

Source: AmeSecurities