Period    3Q12/9M12

Actual vs.  Expectations    The 9M12 core NP of RM1.57b came in below expectations and accounted for 65.0% and 64.4% of ours and consensus' full-year forecasts due mainly to 1) sluggish revenue growth; 2) lower EBITDA margin impacted by higher device sales; 3) accelerated depreciation for network modernisation (YTD RM35m) and 4) RM125m asset write-off in 2Q12. 

Dividends   A 8.0 sen interim single-tier dividend was declared, as expected, with an ex-date scheduled on 12 December 2012. We expect Maxis to declare a total dividend of 40.0 sen in FY12.  

Key Result Highlights    YoY, the revenue rose 2% to RM6.7b, driven by higher contributions from all the business segments namely mobile services (+1% to RM6.4b), Enterprise fixed services (+10% to RM148m), international gateway (+25% to RM139m) and home business (+54% to RM20m). Maxis' EBITDA, however, was lower by 1% to RM3.3b while the margin fell to 49.5% (vs. 50.8% previously) as a result of the higher device and hubbing expenses. The core NP was lower by 4% to RM1.57b due mainly to a one-off asset write-off of RM125m on certain network assets in 2Q12.  

 QoQ, the turnover was flat at RM2.2b while the NP was down by 5% due mainly to a lower EBITDA margin of 47.6% (vs 49.9%) that led by higher handset sales. Meanwhile, its effective tax rate also rose higher to 29.9% (vs. 26.0%). 

 There was a total of 79k net adds in subscribers in 3Q12 comprising of 51k in prepaid and 28k from the postpaid segment. Both the Prepaid and Postpaid APRU was flat at RM37 and RM106, respectively.     

 There are 19.4k (vs. 9.4k in 2Q12) FTTH subscribers as of 3Q12 with an ARPU of RM143. Management expects the segment to hit the level of 25k-26k subscribers by end-4QFY12. 

Outlook   Maxis reduced the targeted FY12 revenue YoY growth to 1.6%-1.8% and the capex to RM850m as compared to its earlier headline KPI targets (Revenue +5% YoY, EBITDA margin <50% and capex less than RM1.0b).  

Change to Forecasts       We have lowered our FY12-FY14 core NPs by 1.7%-9.3% after reducing our EBITDA margin assumptions and increase the effective tax rate.  

Rating     Maintain MARKET PERFORM

Valuation    We have cut our Maxis TP to RM7.00 (from RM7.35 previously) based on a lower targeted +2 standard deviation, which implied a FY13 EV/forward EBITDA of 13.1x.

 

Risks   Higher than expected margin pressure. 

Source: Kenanga