• Maxis continues to gain mobile market share. While the lower-priced products and expansion into the mass-market segments have diluted Maxis’ ARPU, the net impact to service revenue is still positive
• Revenue from the enterprise and home fibre segments are trending up well and Maxis remains steadfast on its MAX strategy. The group is, in our view, well positioned to adapt to the fast-changing telco market
• We forecast Maxis’ EPS to grow by 4-5% pa in 2021-23 driven by a gradual recovery in mobile service revenue and higher enterprise / home fibre contributions. At 24x 2022E PER, valuation looks fair to us. Maintain HOLD.

Competition in the Mobile Market Is Stiff, But Rational

Maxis in 2019 had overtaken Digi as the market leader by number of subscribers. Its Hotlink Postpaid products, Hotlink Prepaid Unlimited and an aggressive push into the previous underserved segments (B40, students, foreign workers) have lifted the number of subscribers. Some competitors have since launched their own prepaid unlimited packages. After assessing the offerings and packages in the markets, we believe that competition is stiff, but not irrational.

Enterprise and Home Fibre Businesses Continue to Grow

The enterprise segment contributed RM128-154m of revenue per quarter during 1Q20-1Q21, a notable increase from RM70m during 1Q18-2Q19. Management remains positive on the enterprise business outlook. While the competition is rising, Maxis believe its 3-year head-start and extensive product offerings give the group a strong competitive advantage over some peers. Elsewhere, the home fibre business and wireless broadband (WBB) is trending up positively, driven by robust underlying demand and modest competition.

Management Stick to the MAX Strategy, and We Maintain Our HOLD Rating

Amid the challenges and opportunities brought forth by a number of events (Covid- 19 pandemic, Jaringan PRIHTAIN programme, JENDELA, 5G SPV, potential Celcom-Digi merger), management remains steadfast on its MAX strategy. With a widened customer base and broadened product offerings, Maxis is well-positioned to adapt to changes. All in, we forecast Maxis to register 4-5% earnings growth in 2021-23 driven by a recovery in mobile service revenue and higher enterprise / home fibre revenue. At 24x 2022E PER, Maxis now trades below its 7-year average PER of 27x, which looks fair to us, considering the weak economic backdrop.

Source: Affin Hwang Research - 19 May 2021