Result

• 4Q17 normalised PAT declined 2% YoY to RM537m on the back of lower quarterly revenue which decreased 2.9% YoY to RM2.15bn. EBITDA margin increased over 0.8 percentage points to 54.4% due to ongoing cost optimisation.

• Lower QoQ profit – 4Q17 normalised PAT dropped 4.4% QoQ on while revenue for the quarter slid 3% QoQ as decline in prepaid revenue overshadowed growth in postpaid revenue and lower device sales.

• Within forecast – Maxis’ FY17 performance was within expectation as normalized net profit of RM2.1b met our full year forecast of RM2.05b. Twelve months’ revenue was slightly below forecast after accounting for 95% of our FY17 estimate.

• Steady ARPU despite losing subscribers – Overall, blended ARPU was unchanged at RM59 with a lower net churn of 110k (vs 308k in 3Q17) as total subscribers declined to 10m from 10.1m in 3Q17 mainly due to prepaid.

• Slower prepaid churn – Prepaid revenue was 11% Yoy and 5% QoQ lower at RM904m as ARPU was slightly lower at RM41 (vs RM42 in 3Q17) but Maxis lost 157k prepaid subscribers (vs 328k in 3Q17) to 7m during the quarter. Maxis will continue focusing on quality prepaid subscribers

• Postpaid growth continues – Postpaid revenue was 6.5% YoY and 2% QoQ higher at RM1.08b as ARPU was slightly higher at RM103 (vs RM201 in 3Q17). During the quarter, Maxis added 48k postpaid subs (vs +47k in 3Q17) to 2.8m.

• Stable gearing – Net debt/EBITDA was flat at 1.50x as net debt declined to RM7.0b from RM7.1b 2Q17 while cash positive decreased to RM602m from RM731m in 3Q17.

Earnings Outlook/Revision

• Forecast kept – Our FY18 and FY19 estimates are maintained. We expect growth will continue to be driven by its postpaid segment especially the premium Maxis One Plan.

• Dividend – Maxis declared its fourth interim dividend of 5 sen, taking total dividend this year to 20 sen, meeting our expectation and translating into a low yield of 3.3%.

• Management guided FY18 service revenue to decline in low single digit (due to termination of network sharing deal with U Mobile), EBITDA to drop in mid-single digit (due to 700Mhz and 2100Mhz spectrum fees), capex budget of RM1b and free cash flow (excluding upfront spectrum fees) to be similar to FY17.

Valuation & Recommendation

• Maintain HOLD with an unchanged target price of RM6.03 based on DDM.

Source: JF Apex Securities Research - 9 Feb 2018