Maxis’ FY20 core net profit of RM1.4bn (-8% YoY) was within expectations, at 98% of HLIB and 95% of consensus. Declared forth interim dividend of 5.0 sen per share. Postpaid acquisition momentum was sustained (+57k QoQ) at the expense of ARPU erosion while prepaid continued to experience 1% sub attrition. Home fibre was the silver lining with good traction on sub acquisition. Reiterate HOLD on the back of lower DC-derived TP of RM4.88.

Within expectations. 4Q20 core net profit of RM319m (-12% QoQ, -7% YoY) brought FY20’s to RM1.4bn (-8% YoY) which matched expectations, accounting for 98% and 95% of HLIB and consensus full year forecasts, respectively. One-off items include forex gain and its tax effect totalling -RM4m.

Dividend. Declared forth interim tax exempt (single-tier) dividend of 5.0 (4Q19: 5.0) sen per share, representing 122% payout ratio. Ex-date on 12 Mar. YTD dividend amounted to 17 sen (FY19: 20 sen) per share.

QoQ. Top line notched up 2% driven by both device (+19%) while service revenues was flat. Within service revenue, enterprise services and home fibre added 6% and +5%), respectively while mobile eased 1%. However, core net profit weakened 12% to RM319m impacted by higher D&A (+13%)

YoY. Revenue dipped 13% to RM2.3bn as the growths in enterprise services (+34%) and home fibre (+22%) were unable to offset the contractions in mobile (-6%) and device (-48%). Despite the higher D&A (+15%), bottom line fell by a smaller quantum of 7% thanks to improved cost efficiency.

YTD. Top line moderated 4% to RM9bn as the higher contributions from enterprise services (+71%) and home fibre (+30%) were negated by mobile (-6%) and device (- 19%). Core earnings fell by 8% to RM1.4bn on the back of higher D&A (+7%) as a result of past core and growth capex.

Postpaid. Subscriber base added by 57k QoQ to 3.5m in 4Q20 thanks to strong pre to-post momentum with value accretive Hotlink Postpaid. Meanwhile, ARPU eroded by RM1 QoQ to RM83 due to (i) decline in MTR; (ii) lack of roaming revenue as a result of travel curtailment; and (iii) dilution from entry point Hotlink Postpaid. Mobile internet usage per sub has increased by 15% QoQ to 23.3GB per month.

Prepaid. Maxis added 43k (or +1%) subs QoQ to a base of 6.0m while ARPU was eroded by RM1 QoQ to RM39. Hotlink Prepaid Unlimited continues to have strong adoption. Mobile internet usage per sub gained 1% QoQ to 19.3GB per month.

Fibre and WBB. Added 20k QoQ in 4Q20 to top a total base of 444k which can be broken down into 402k and 42k of residential and business users, respectively. There is a strong adoption of MaxisONE Prime converged packages while continue to upsell higher speed packages (300Mbps, 500Mbps and 800Mbps). WBB subs gained 16k (or +15%) QoQ to a base of 126k supported by sustainable APRU of RM104. This is in line with Maxis strategy to address non-fibre homes.

Forecast. Updated model based on latest operating data points. As a result, FY21-22 earnings projections are tweaked by +2% and -1%, respectively. Reiterate HOLD with lower DCF-derived TP of RM4.88 (from RM5.17), with WACC of 6.1% (previously 6%) and TG of 0.5%. Maxis is still the largest telco in terms of revenue market share with quality of service as differentiation to drive leadership in data adoption, but Covid-19 headwinds pose near term uncertainty.

Source: Hong Leong Investment Bank Research - 8 Mar 2021