Results

Deviations

• Largely in line.

Dividend

• Declared 2nd interim single-tier tax-exempt dividend of 5.0 sen (2Q14: 8.0 sen) per share, ex-date on 26 Aug 2015. This represents 84.7% payout.

• YTD dividend amount to 10 sen per share (1H14: 16 sen).

Highlights

• Despite GST hiccups and heated up rivalry, Maxis continued to gain revenue generating subs (RGS) by 49k qoq to 12.2m but this was not sufficient to cease the sequential service revenue weakness of 1.6%.

• 2Q15 was impacted by GST freebies of circa RM50m, which the transition measure has ended early July. Adjusted for this, service revenue would have expanded by 0.8% qoq. 

• Prepaid: #Hotlink subs accounted for 56% of prepaid RGS. Mobile internet contributes 32% (vs. 24% in 1Q15) to prepaid revenue on the back of 7.3m (5.8m in 1Q14) users. It continued to gain traction in the migrant segment.

• Postpaid: MaxisONE Plan reduced impact of voice/SMS-todata substitution. 434k users (15.5% of postpaid base) under this plan contributing stable ARPU of RM150. Sharing feature getting good traction since April launch.

• U Mobile’s domestic roaming contribution surged by 18% yoy but rather flat qoq at RM59m.

• Maintain guidance of low single digit service revenue growth with flat EBITDA which will be boosted in 2H15 due to prepaid tax pass through via GST. May bring forward investment thus surpassing guided CAPEX of RM1.1bn.

Catalysts

• Higher smartphone penetration and LTE coverage boosting data ARPU, network infrastructure outsourcing.

• Continuous momentum of #Hotlink and MaxisOne Plan.

Risks

• Regulatory, competitive and execution risks.

Forecasts

• Maintained.

Rating

HOLD , TP: RM6.87

Positives

• Network sharing, prepaid tax pass through, strong postpaid ARPUs (still the highest in the industry) and smartphone penetration. 

Negatives

• Access pricing revision, 900MHz refarming and price war.

Valuation

Reiterate HOLD after lowering DCF-derived TP by 3.4% from RM7.11 to RM6.87 as we raised our WACC to 5.6% after adjusting beta, while TG remained unchanged with 0.5%.