Period  3Q13/9M13

Actual vs. Expectations Maxis’ 9M13 core NP of RM1.63b came in within the street but slightly above our expectations, at 76% and 79% of full-year forecasts, respectively.

Dividends  As expected, a single-tier tax-exempt dividend of 8.0 sen was declared with the ex-date set at 27 Nov. For the full financial year, we expect a total dividend of 40.0 sen, similar to FY12.

Key Result Highlights YoY, revenue for 9M13 went up by 3% to RM6.9b, driven by higher contributions from all the business segments namely mobile services, enterprise fixed services, international gateway and home business. Normalised EBITDA improved by 4% to RM3.4b while the margin increased to 50.2% (vs. 49.5% a year ago) as a result of better cost efficiency, thus leading the group’s core NP to improve by 4% to RM1.6b.

 QoQ, 3Q13 turnover slid 2% to RM2.2b while the reported EBITDA was lowered by 10% to RM1.0b

with thinner margin of 47.0% (vs. 50.8% in 2Q13) due mainly to the one-time Career Transition Scheme costs of RM102m. Stripping-off the onetime cost impact, its normalised EBITDA was merely down marginally by 0.9% to RM1.15b while the margin grew 0.7pp to 51.5%, marking the second consecutive quarter that recorded margin above the 50% mark.

 Maxis recorded a total of 660k negative subscribers net adds in 3Q13, leading its total subscriber base to reduce to 13.2m. The higher subscribers churn was mainly led by its prepaid segment (-652k) as a result of the SIM expiration from the Hotlink Youth Club & legacy plans, which generally are non-active non-revenue generating SIMs. Prepaid ARPU, however, improved marginally to RM33 from RM31 in 2Q13 while postpaid ARPU contracted RM3 to RM100.

 Non-voice continued to be primary revenue contributor and accounted for 46.9% of the group’s 9M13 mobile revenue of RM6.4b (YTD12: 45.4%).

Outlook  Lowered revenue guidance to 2%-3% (from a midsingle digit growth previously) but maintained its EBITDA margin target at c.48%.

Change to Forecasts Raised core NP to RM2.17b (+2.7%) and RM2.28b (+1.9%) in FY13 and FY14, respectively after lowering our direct cost assumption (to 33.5% from 34.5% previously) and fine-tuning.

Rating Maintain MARKET PERFORM.

Valuation  Raised our Maxis target price marginally to RM7.34 (from RM7.32 previously) based on an unchanged targeted FY14 EV/forward EBITDA of 13.4x (+1.5x SD).

Risks to Our Call Higher than expected margin pressure.

Source: Kenanga