Maxis’ 9M22 core net profit of RM1,052m (+3% YoY) matched our expectation. Declared third interim DPS of 5.0 sen. Postpaid sub base grew along with stable ARPU development thanks to increased international outbound roaming. Home connectivity was the silver lining with connections up 15% YoY. Home saw an extra 14k connections in 3Q22 with gradual decline in WBB as Malaysian employees return to office. Reiterate HOLD on the back of unchanged DCF derived TP of RM3.51.

Within expectation. 3Q22 core net profit of RM353m (-6% QoQ, +9% YoY) brought 9M22’s to RM1,052m (+3%), accounted for 75% and 82% of HLIB and consensus full year forecasts, respectively. We deem this to be in line as the Prosperity Tax is considered as one off. We computed 9M22 core earnings figure after adjusting for prosperity tax which is estimated to be RM110m.

Dividend. Declared third interim single-tier tax-exempt dividend of 5.0 sen (3Q21: 4.0 sen) per share, representing 125% payout ratio and going ex on 29 Nov. 9M22 DPS amounted to 15 sen vs 9M21’s 12 sen.

QoQ. Top line lost 1% as the expansion in service revenue (+1%) was entirely wiped out by the decline in device sales (-13%). Within service revenue, consumer business strengthened by 1% to RM1.7bn while enterprise business was rather flat at RM387m. However, core net profit fell by 6% to RM353m attributable to higher D&A (+4%).

YoY. Revenue increased 6% thanks to higher contributions from both service and non service revenues. Service revenue increased by 4% supported by the growths in Postpaid (+6%) and Home Fibre (+22%). In turn, bottom line was lifted by 9%.

YTD. Although turnover was higher by 7%, core earnings only grew by 3% as EBITDA margin shrunk by 2.3ppt mainly due to higher device costs (+29%). Within service revenue, consumer business strengthened by 4% to RM5bn while enterprise business was also gained 4% to RM1.2bn.

Postpaid. Subscriber base added by 26k (or +1%) QoQ to 3.3m in 3Q22 supported by both primary and shared lines, as well as Hotlink Postpaid. ARPU was flat QoQ at RM79 attributable to increased international outbound roaming.

Prepaid. Experienced subscriber addition of 17k QoQ to a base of 5.8m while ARPU inched lower (-RM0.5 QoQ) to RM38.60. Take-up of Hotlink Prepaid Unlimited was resilient while Hotlink Prepaid Pantas adoption was growing from new segments and returning migrants compensating pre-to-post migration.

Home connectivity. Recorded strong numbers with connections up 15% YoY and an increase in service revenue by 16% to RM215m. Home saw an extra 14k connections in 3Q22 with gradual decline in WBB as Malaysian employees return to office, in line with Maxis’ expectation.

FY22 guidance. (i) Service revenue: low to mid-single digit increase; and (ii) EBITDA: flat to low single digit increase.

Forecast. Unchanged.

Reiterate HOLD with unchanged DCF-derived TP of RM3.51, with WACC of 7.0% and TG of 1.0% (previously 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 government’s decision on national 5G infrastructure plan pose near term uncertainty.

Source: Hong Leong Investment Bank Research - 7 Nov 2022