Journey to Wealth
Maxis Berhad - In strategic partnership with Astro
News Maxis and Astro have jointly announced that they are entering into a 10-year partnership with exclusivity given to Astro to be the IPTV content service provider for three years.
Both companies are expected to jointly develop as well as co-market the consumer packages, targeted to be launched to the market by year-end, in phases.
Via the partnership, Maxis has been appointed the fibre broadband service provider for Astro's B.yond IPTV to expand the current service footprint. Astro meanwhile, will be the IPTV service provider for all Maxis' fixed and wireless platforms.
On top of that, both companies have also tied up a co-marketing mobile partnership for Astro On-The-Go services to Maxis customers. Currently, this service is available to all existing Astro customers and will be available to non-Astro customers by year-end.
Comments While we believe the landmark strategic partnership will enable both companies to leverage on the synergies of each party's strengths and experiences, the ultimate package prices and contents will likely be the two key factors to determine the joint package take-up rate going forward.
We understand that as of 2Q12, Maxis Home had a total of over 57k customers on board, 9.35k on Home Fibre Internet and over 27k as its Home Wireless Internet subscribers with the balance being ADSL and POTs subscribers. The segment has generated RM13m in turnover but suffered a loss of RM21m at the EBITDA level. In view of the current sluggish performance of this segment, we have not imputed any contribution here yet into our financial model.
Outlook Maxis remains as a solid high yield play given its firm 40.0 sen DPS in the next 1-2 years.
However, potential margin erosions are expected as a result of the aggressive rollout of its Home Fibre plan.
Forecast No changes in our FY12-FY14 earnings forecasts.
Rating Maintain MARKET PERFORM
The company's current strategy is focusing on customer retention instead of maintaining its margin may add pressure to its near term financial performance.
Valuation Maintaining our Target Price at RM7.35 based on a targeted FY13 EV/forward EBITDA of 13.0x (+3SD).
Source: Kenanga
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