Maxis’s 1Q23 net profit of RM320mn was in line with ours and consensus expectations, accounting 25.0% and 23.0% of full year estimates respectively. Net profit rose by 7.4% YoY supported by growth in consumer business revenue but offset slightly by a dip in enterprise business revenue (-5.9% YoY). We foresee a flattish earnings growth and remains concern on Maxis near term outlook on the back of challenging financial performance and uncertainties over 5G resolution. Maintain a HOLD call with a TP of RM3.95. Our valuation is derived based on DCF valuation with a WACC of 8.0% and a long-term growth of 1.0%.
- Within expectations. 1QFY23 net profit of RM320.mn (QoQ: +33.9%, YoY: +7.4%) was in line with ours and consensus expectations accounting 25% and 23% of full year forecast respectively.
- Dividend. The group declared a first single-tier-tax-exempt of 4.0 sen per ordinary share. The current dividend is equivalent to a DY of 0.9% based on current market price. We estimate total FYE23 DPS of 20 sen, translating into a yield of 4.6%
- QoQ. Maxis’s 1QFY23 revenue slightly down by 1.1% QoQ while Maxis’s earnings jumped by 33.9% QoQ due to better performance from postpaid and home connectivity business as well as lower marketing costs after year end promotions in the previous quarter.
- YoY/ YTD. Top-line and bottom-line increased by 5.0% YoY and 7.4% YoY respectively, as service revenue grew by 4.0% fuelled by the overall growth in consumer business revenue but slightly by a dip in enterprise business revenue (-5.9% YoY). It is worth to note that pospaid business revenue that was up by 10.1% YoY was attributed to growth in Maxis Postpaid and Hotlink Postpaid. This was supported by the group’s effective pre-to-post migration strategy, increasing overall Postpaid subscriptions.
- Outlook. In regards to Maxis’s 5G development, the group guided that they are very interested in signing up once they get fair agreements in terms of access, shares and audit agreements that will benefit both Maxis and Digital Nasional Berhad (DNB) side. Maxis has been observing its growth rates and the group guided that its lack of 5G network access does not have any impact in its earnings growth though we differ on this. We foresee a flattish earnings growth and remains concern on Maxis near term outlook on the back of challenging financial performance and uncertainties over 5G resolution. Note that the management guided the group FY23 service revenue growth to be in the range of flat to low single digit and EBITDA & Capex similar to FY22.
- Our call. Maintain a HOLD call with a TP of RM3.95. Our valuation is derived based on DCF valuation with a WACC of 8.0% and a long-term growth of 1.0%. Maxis inability to resolve their interest on 5G network accessibility could dampen interest over its share price and hence, a likely discount on our DCF-driven FV. This will be re-visited soon, at the latest in 3Q.
Source: BIMB Securities Research - 22 May 2023