Highlights

In its exchange filing, Maxis announced the appointment of Morten Lundal as its new CEO effective 1st Oct, succeeding Sandip Das who left in April and after the relinquishment of previously appointed CEO, Johan Dennelind.

Morten will be reporting to the Chairman of the Board and be appointed to the Board as an Executive Director.

Morten joined Vodafone Group in 2008 as Regional CEO responsible for 8 operating companies in Central Europe and Africa. Currently, Morten serves as Group Commercial Officer, a member of the Executive Committee responsible for commercial activities at the group level.

Prior to that, he was appointed as DiGi’s CEO in 2004, where he was instrumental in instituting various changes crucial to DiGi’s transformation and growth. Under his leadership, DiGi’s mobile revenue market share, earnings and share price improved significantly.

Morten joined Telenor in 1997 and held several CEO positions including for the Internet Division and Business Solutions. He was also the EVP of Corporate Strategy.

He has a Master in Business and Economics from the Norwegian School of Management and an MBA from IMD, Switzerland.

Comments

We welcome this development sanguinely and confident that Morten’s transformational and charismatic leadership styles will bring positive changes to Maxis.

Besides his vast international experiences with global telcos, Morten’s previous exposure through DiGi provides him an edge and in-depth understanding of the Malaysian market.

His know-hows would complement Maxis’ weakness in addressing the lucrative migrant market segment.

Maxis profitability may surprise on the upside boosted by higher contribution from U Mobile’s domestic roaming fees, which are earnings accretive with negligible OPEX.

We believe that Maxis will sustain the dividend distribution of 40 sen per share (RM3.0bn) for FY13, rewarding investors with the highest yield amongst Malaysian telcos at 5.88%.

Catalysts

Higher smartphone penetration boosting data ARPU, synergistic product bundling with Astro, network infrastructure outsourcing and workforce rationalization.

Stronger than expected home fibre internet take up rate.

Risks

Government / regulatory risks, execution risks, competitive risks, OTT threats (voice and messaging substitution).

Forecasts

Maintained.

Rating

BUY, TP: RM7.29

Positives - New business potential in converged services, strong postpaid ARPUs (despite recent contraction, still the highest in the industry) and smartphone penetration.

Negatives - Initially low margin fibre services would depress profitability, weak ARPUs.

Valuation

Reiterate BUY call on the stock with unchanged DDMderived TP of RM7.29 based on WACC of 6.3% and unchanged TG of 1%.

Source: Hong Leong Investment Bank Research - 17 Jul 2013