Maxis’ FY22 core net profit of RM1,358m (+4% YoY) matched our expectation. Declared forth 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 13% YoY. Fibre saw an extra 22k connections in 4Q22 supported by gradual conversion from WBB. FY23 service revenue is guided to be flat to low single digit increase. Reiterate HOLD on the back of higher DCF-derived TP of RM3.97.

Within expectation. 4Q22 core net profit of RM307m (-13% QoQ, +6% YoY) brought FY22’s to RM1,358m (+4%), accounted for 97% and 107% 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 FY22 core earnings figure after adjusting for prosperity tax which is estimated to be RM177m.

Dividend. Declared forth interim single-tier tax-exempt dividend of 5.0 sen (4Q21: 5.0 sen) per share, representing 161% payout ratio and going ex on 9 Mar. FY22 DPS amounted to 20 sen vs FY21’s 17 sen.

QoQ. Top line gained 6% mainly driven by device sales (+48%) while service revenue was rather flat (+0.3%). Within service revenue, consumer business strengthened by 2% to RM1.75bn while enterprise business fell 6% to RM364m. However, core net profit fell by 13% to RM307m attributable to higher D&A (+9%).

YoY. Revenue increased 4% thanks to higher contribution from service revenue while device sale was flat. Service revenue increased by 5% supported by the growths in Postpaid (+8%), Prepaid (+4%), Home Fibre (+19%) and network income (+13%) which more than sufficient to offset the decline in enterprise (-32%). In turn, bottom line was lifted by 6% on the back of higher EBITDA margin by 1.0ppt.

YTD. Although turnover was higher by 6%, core earnings only grew by 4% as EBITDA margin shrunk by 1.5ppt mainly due to higher device costs (+29%). Within service revenue, consumer business strengthened by 4% to RM6.8bn while enterprise business also gained 1% to RM1.5bn.

Mobile. Postpaid base added by 72k (or +2%) QoQ to 3.3m in 4Q22 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 churn of 43k QoQ to a base of 5.8m while ARPU was higher (+RM0.80 QoQ) to RM39.40 through HotlinkMu personalized promotions and introduction of new packages.

Home connectivity. 4Q22 recorded strong numbers with connections up 13% YoY and an increase in revenue by 12% to RM219m. Fibre saw an extra 22k connections in 4Q22 supported by gradual conversion from WBB.

FY23 guidance. Service revenue expected to be flat to low single digit increase. Maxis has postponed the EGM until the 5G network implementation policy is finalised.

Forecast. After updating our model based on FY22 financial numbers, FY23-24 PATAMI projections are revised by -7% and -8%, respectively. Reiterate HOLD with a higher DCF-derived TP of RM3.97 (from RM3.51) as valuation is rolled forward with WACC of 6.9% and TG of 0.5% (previously 1.0%). 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 - 24 Feb 2023