• Maintain HOLD (TP: RM3.95). Maxis’s 9MFY23 net profit of RM936mn (+1.8% YoY) was in line with ours but slightly below consensus expectations, accounting for 72.5% and 69.2% respectively. The group declared a third interim dividend of 4.0 sen per ordinary share, bringing cumulative 9MFY23 DPS to 12.0 sen (15.0sen in 9MFY22). We maintain our FY23F DPS at 16sen, translating into 4.0% DY. Maxis’s 3QFY23, revenue grew by +1.5% YoY attributed to higher service revenue. However, the group’s net profit declined by -6.8% YoY on the back of cost rationalisation. Moving forward, we anticipate relatively stagnant earnings growth and remain concerned about Maxis's near-term outlook due to its challenging financial performance. 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%.

• Key highlights. In 3QFY23, Maxis’s revenue grew by +1.5% YoY, attributed to higher service revenue, which increased by 1.8% YoY. However, the group’s net profit declined by -6.8% YoY due to the effects of cost rationalization exercise and lower government grant. Postpaid revenue rose by 6.3% YoY as Maxis is currently expanding into broader Postpaid segments to foster growth, serving both premium and value-conscious customers. On QoQ basis, net profit declined further by -12.8% QoQ due to lower sale of devices.

• Earnings Revision. No change to our forecast.

• Outlook. Looking ahead, we anticipate a rise in capital expenditure due to investments in 5G infrastructure and related products. As for Maxis’s home fibre business, we expect stagnant earnings contribution, as the decrease in ARPU in the home fiber unit will be offset by lower network charges. Aside to that, we are concern on the dividend outlook, as Maxis's dividends in the first three quarters are lower than its historical rate of 5 sen. Nevertheless, considering the potential obligations associated with investments in fiber-optic infrastructure, we believe that the current quarter's DPS rate is fair.

Source: BIMB Securities Research - 13 Nov 2023