Period  4Q12/FY12

Actual vs. Expectations  Maxis' FY12 core NP of RM2.0b came in largely in line with expectations and accounted for 95.8%% and 95.5% of ours and the consensus full-year forecasts due mainly to: 1) a sluggish revenue growth; 2) a lower EBITDA margin impacted by higher device sales; 3) an accelerated depreciation number of its network modernisation (RM125m) and 4) a one-off asset write-off of RM133m as well as the cost of set-top box arrangement to Astro.

Dividends  A total of 16.0 sen in single-tier dividends (a fourth interim dividend of 8.0 sen and a final dividend of 8.0 sen) has been declared as expected. The fourth interim dividend ex-date has been set for 15 March 2013 while the final dividend ex-date will be determined post the company's AGM.

Key Result Highlights  YoY, the revenue rose 2% to RM9.0b, driven by higher contributions from all the business segments namely mobile services, enterprise fixed services, international gateway and home business. Maxis' EBITDA, however, was lower by 1.0% to RM4.3b while the margin fell to 48.6% (vs. 50.3% in FY11) as a result of the higher device, hubbing, IDD and network costs. The core NP was lower by 6% to RM2.0b due to a one-off asset write-off of RM133m on certain network assets and a RM125m in accelerated depreciation for its network modernisation.

 QoQ, the turnover was up by 4.0% to RM2.3b while the core NP was down by 15.0% due mainly to a lower EBITDA margin of 46.2% (vs. 47.6% previously) as a result of higher direct expenses incurred.

 There was a total of 101k net adds in subscribers in 4Q12 comprising of 67k in prepaid and 34k from the postpaid segment. Prepaid APRU was flat at RM37 while Postpaid ARPU improved to RM108 (vs. RM106 in 3Q12). Meanwhile, there was a total of 25.7k (vs. 19.4k in 3Q12) FTTH subscribers as of 4Q12.

Outlook  The FY13 earnings guidance includes 1) a mid- single digit growth in revenue; and 2) an EBITDA margin of 48%-48.5%.

Change to Forecasts We have trimmed our FY13-FY14 core NPs by 13.0%-10.6%% after imputing in: 1) a lower sales assumption, 2) a higher direct cost, and 3) a higher interest cost.

Rating   Maintain OUTPERFORM.

Valuation  In view of the intensify competition in the group's voice segment, we have cut our Maxis TP to RM6.92 (from RM7.20 previously) based on a lower targeted +1.5x standard deviation, which implied a FY13 EV/forward EBITDA of 13.0x.

Risks  Higher than expected margin pressure.

Source: Kenanga