Result

• 3Q17 normalised PAT rose 8% YoY to RM561m on the back of higher quarterly revenue which gained 2.8% YoY to RM2.2bn. EBITDA margin increased over 0.9 percentage points to 54.2% due to ongoing cost optimisation.

• Higher QoQ profit – Normalised PAT increased 16% QoQ while revenue grew 2.1% QoQ due to higher postpaid revenue, which was able to cushion the decline in prepaid revenue.

• Within forecast – Maxis’ 9M17 performance was within expectation as normalized net profit made up 76% of our full year forecast. Nine-month revenue slightly below forecast after accounting for 72% of our FY17 estimate.

• Steady ARPU despite losing subscribers – Overall, blended ARPU was slightly higher at RM59 (vs RM58 in 2Q17) with a bigger churn of 308k (vs 253k in 2Q17) as total subscribers declined to 10.1m from 10.4m in 2Q17 mainly due to prepaid.

• Prepaid churn continues – Prepaid revenue was 6.1% Yoy and 2.9% QoQ lower at RM955m as ARPU was unchanged at RM42 but Maxis lost 328k prepaid subscribers to 7.15m during the quarter.

• Postpaid growth continues – Postpaid revenue was 9.3% YoY and 5.7% QoQ higher at RM1.06m as ARPU was unchanged at RM102. During the quarter, Maxis added 47k postpaid subs (vs +14k in 2Q17) to 2.8m.

• Lower gearing – Net debt declined to RM7.1b from RM8.8b 2Q17 as cash improved to RM731m from RM475m in 2Q17. Net debt/Equity dropped to 1.04x from 1.32x in 2Q17 while net debt/EBITDA also declined to 1.51x from 1.89x. The improvement came following debt repayment after the recent private placement.

Earnings Outlook/Revision

• Forecast kept – Our FY17 and FY18 estimates are maintained. We expect growth will continue to be driven by its postpaid segment especially the premium Maxis One Plan.

• Potential special dividend? – Maxis declared its third interim dividend of 5 sen, taking total dividend this year to 15 sen. We expect full year dividend of 20 sen but do not rule out the possibility of special dividend in 4Q if earnings continue to improve.

Valuation & Recommendation

• Maintain HOLD with a higher target price of RM6.03 (previously RM5.33) based on DDM after we roll over to FY18 valuation.

Source: JF Apex Securities Research - 26 Oct 2017