Period  4Q13/FY13

Actual vs. Expectations Maxis’ FY13 core net profit of RM2.1b came in within the street and our expectations, at 100.2% and 97.2% of full-year forecasts, respectively.

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) were declared as expected. The fourth interim dividend ex-date has been set for 7 March 2014 while the final dividend ex-date will be determined post the company’s AGM.

Key Result Highlights YoY, FY13 revenue inched up 1% to RM9.1b, driven by higher contributions from all business segments except mobile services (-3% to RM8.2b) and international gateway (-80% to RM30m).

Normalised EBITDA improved 4% to RM4.5b while the margin improved to 49.8% (vs. 48.6% a year ago) as a result of better cost efficiency resulting in a 2% increase in the group’s core net profit to RM2.1b.

 QoQ, 4Q13 turnover slid 1% to RM2.2b while the reported EBITDA was lower by 8% to RM1.0b on thinner margin of 43.7% (vs. 47.0% in 3Q13) due mainly to the Career Transition Scheme costs of RM41m and RM65m home services’ assets impairment cost. Excluding these costs, the normalised EBITDA decreased by 6% to RM1.1b while the margin slid 2.9ppt to 48.6%.

 Maxis recorded a total of 320k negative subscriber's net adds in 4Q13, reducing its total subscriber base to 12.9m. The higher subscribers churn was mainly led by its prepaid segment (-320k) as a result of SIM expirations from the Hotlink Youth Club & legacy plans, which are generally non-active and non-revenue generating SIMs.

Postpaid base excluding WBB, however, grew by 37k QoQ. Prepaid ARPU, meanwhile, was maintained at RM33 in 4Q13 while postpaid ARPU improved RM1 to RM101.

 Non-voice segment continued to be a primary revenue contributor which accounted for 44.6% of the group’s FY13 mobile revenue of RM8.2b (YTD13: 43.8%).

Outlook  Expecting low single digit service revenue growth in FY14 (vs. ~5% growth in the industry) and an absolute normalised EBITDA similar to FY13 level.

Change to Forecasts Reduced core NP to RM2.09b (-8.5%) and RM2.14b (-8.5%) in FY14 and FY15, respectively after taking management’s latest guidance into the consideration.

Rating Maintain MARKET PERFORM.

Valuation  Lowered our Maxis target price to RM7.10 (from RM7.34 previously) based on a targeted FY14 EV/forward EBITDA of 12.9x (+1.0x SD) from 13.4x (+1.5x SD) previously.

Risks  Higher than expected margin pressure.

Source: Kenanga