• 1Q21 core net profit grew by 5% qoq to RM334m on lower operating costs. The results were within market and our expectations
• Total mobile subs grew by 2.1% qoq to 11.37m on an increase in both prepaid (+172k) and postpaid (+67k) subs. However, blended ARPU slipped by RM1 to RM47 due to dilution from entry-level postpaid plans
• Maintain HOLD. Management had been expecting a sector consolidation and planned its strategy accordingly. As such, we do not expect Maxis to change its growth strategy in response to the proposed Celcom-Digi merger

1Q21 core net profit grew by 5% qoq on lower costs; within expectations

Notwithstanding a lower service revenue of RM1.96bn (-0.6% qoq), Maxis’ 1Q21 core net profit grew by 4.7% qoq to RM334m on lower operating expenses (traffic, network, and operation & maintenance). Against 1Q20, Maxis’ 1Q21 EBITDA was relatively unchanged at RM948m (+0.4% yoy) but its core profit slipped by 7% yoy due to higher depreciation costs. Overall the results were within market and our expectations – Maxis’ 1Q21 core net profit accounted for 23% of street and our fullyear earnings forecasts.

Maxis Gained Mobile Subs But APRU Has Slipped

Total mobile subs grew by 2.1% qoq to 11.37m on: (i) 172k increase in prepaid subs due to strong take-up for its Hotlink Prepaid Unlimited; and (ii) 67k growth in postpaid subs driven by prepaid-to-postpaid migration and good demand for its entry-level Hotlink Postpaid plan. However, the postpaid ARPU fell by RM1 to RM76 due to dilution from the entry-level package, resulting in a lower blended ARPU of RM47 (- RM1 qoq). Elsewhere, Maxis continued to grow its fibre businesses but the enterprise services reported lower 1Q21 revenue (-12% qoq) due to lower mobilization charges and a lower number of completion / milestones hit during the MCO 2.0.

Maintain HOLD With An Unchanged Price Target of RM5.00

Maxis has been expecting a consolidation in the domestic telco sector and had planned its growth strategy accordingly. As such, management is unperturbed by the proposed Celcom-Digi merger, and is continuing with its strategy to become a leading converged solution provider in Malaysia. We maintain our HOLD rating with an unchanged price target of RM5.00. At 25x 2021E PER, Maxis’ valuation is 0.5sd below its 7-year average PER of 27x, which looks fair to us, considering the competitive market conditions.

Source: Affin Hwang Research - 26 Apr 2021