• 4Q20 core net profit slipped by 12% qoq to RM319m on higher costs; 2020 core net profit was below consensus but within our expectation
• In 2020, Maxis’ mobile service revenue fell by 5.8% to RM6.69bn due to lower MTR and weaker economic activity; the group’s revenue was partly supported by growth in enterprise and home broadband segments
• Maintain HOLD with a lower PT of RM5.00 after incorporating a higher WACC due to higher regulatory/policy risks

4Q20 core net profit slipped by 12% qoq on higher costs; 2020 core net profit was below consensus but within our expectation

Maxis’ 4Q20 core net profit fell by 12% qoq (-7% yoy) to RM319m due to higher expenses across several major cost components (traffic, device, network, operation & maintenance), partly mitigated by lower marketing expenses and a decline in provision for doubtful debts. Cumulatively, 2020 core net profit of RM1.38bn (-8% yoy) was within our expectation but below the street estimates. Maxis declared a 4 sen interim dividend and 1 sen special dividend for 4Q20, translating to a full year payout of 17 sen (2019: 20 sen).

Lower mobile service revenue in 2020 but enterprise and home broadband segments grew

Maxis’ total mobile subs was unchanged yoy at 11.13m as the increase in postpaid subs (+184k yoy) was offset by a decline in prepaid subs (-182k). However, the blended mobile ARPU has declined by 5.4% in 2020 due to lower MTR (mobile termination rate), decline in international roaming revenue and weaker domestic economy, leading to a lower mobile service revenue of RM6.69bn (-5.8%). On the other hand, the enterprise services and home fibre segments performed well in 2020, contributing to higher revenue of RM558m (+71% YoY) and RM473m (+30% YoY) respectively.

Maintain HOLD With a Lower Price Target of RM5.00

We tweak our 2021-22E EPS forecasts by 0.2-1.5% after incorporating Maxis’ fullyear statement with minor tweaks in our assumptions. Elsewhere, we have raised our WACC to 5.9% (from 5.7%) due to higher risks arising from regulatory uncertainties. Maintain HOLD with a lower price target of RM5.00 (from RM5.35). Key upside risks to our call are strong earnings and value-accretive M&As. Downside risks are earnings disappointments and negative regulatory changes.

Source: Affin Hwang Research - 1 Mar 2021