Period     1Q13/FY13

Actual vs.Expectations    Maxis’ 1Q13 core NP of RM521m came in within expectations and accounted for 25.4% and 24.2% of ours and the consensus full-year forecasts.

Dividends     As expected, Maxis has declared a single-tier tax-exempt dividend of 8.0 sen, of which the ex-date has been set as 29 May. For the full financial year, we expect the group to declare a total of 40.0 sen dividend, a similar quantum as for FY12.

Key Result Highlights     YoY, the revenue rose 4% to RM2.3b, 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 RM1.1b while the margin fell to 48.2% (vs. 50.8% in 1Q12) as a result of higher marketing costs, staff-related costs and other operating expenses. The core NP was lower by 6.5% to RM521m due to the higher finance cost and effective tax rate (28.5% vs.25.3%).

QoQ, the turnover was up by 1% to RM2.3b while the core NP grew by 10% as a result of a higher EBITDA margin (48.2% vs. 46.2%) that was mainly pushed up by lower direct expenses and sales & marketing costs.

The group recorded a total of 144k net adds in subscribers in 1Q13, bringing its total subscriber number to 13.0m, comprising of 99k in prepaid and 45k from the postpaid segment. Prepaid APRU was lower by RM2 to RM35 while Postpaid ARPU contracted to RM103 (vs. RM108 in 4Q12).

Meanwhile, there was a total of 30.7k (vs. 25.7k in 4Q12) FTTH subscribers as of 1Q13.

Maxis recorded 8.5m active mobile internet users as of 1Q13 with 39% (or 3.3m) of the subscribers using smartphone devices.

Its non-voice revenue of RM1.0b accounted for about 47.8% (4Q12: 46.2%) of the group’s mobile revenue in 1Q13.

Outlook    There is no change in management’s earnings guidance where the group is targeting to achieve: 1) a mid-single digit growth in revenue and 2) an EBITDA margin of 48%.

Change to Forecasts     We have raised our Maxis’ FY13 core net profit to RM2.1b (+1.8%) and RM2.2b (+2.1%) in FY14 after lowering the direct cost and fine-tuning our estimates.

Rating     Maintain OUTPERFORM.

Valuation     We have raised our Maxis target price to RM7.17 (from RM7.05 previously) based on an unchanged targeted FY14 EV/forward EBITDA of 13.0x (+1.5x SD).

Risks     Higher than expected margin pressure.

Source: Kenanga