Period  4Q14/FY14 

Actual vs.  Expectations   FY14 core PATAMI of RM1.9b (-9% YoY) came in within  expectation and accounted for 104% of ours as well as  100% of the street full year estimate. 

Dividends  A total 16.0 sen DPS (which included a fourth interim  dividend of 8.0 sen and a final dividend of 8.0 sen) was  declared as expected. The fourth interim dividend exdate  has been set for 25-Feb while the final dividend exdate  will be determined post the company’s AGM. 

Key Results  Highlights   YoY, FY14 revenue declined by 8% to RM8.4b as a  result of lower services revenue (-3% to RM8.3b) and  non-services revenue (i.e. device and hubbing business,  -72% to RM160m). The lower services revenue was  primarily due to lower voice (-4%) and SMS (-32% to  RM783m) earnings contributions. Mobile internet  revenue, however, improved by 16% to RM2.3b partially  mitigating the lower voice & SMS usage. Normalised  EBITDA, meanwhile, declined by 7% to RM4.2b while  margin improved to 50.1% (vs. 49.8% a year ago) as a  result of lower traffic, device-related expenses, and staff  costs. 

 QoQ, 4Q14 turnover climbed 3% to RM2.1b, thanks to  the higher service revenue (2%) that was mainly driven  by higher voice and data segment. The former was  mainly fuelled by higher customer traction gained in its  Hotlink and MaxisONE Plan while the latter was driven by  its ‘worry free’ plans. On a normalised basis, EBITDA  dropped by 7% to RM1.0b with a margin of 47.1% (vs.  51.8% in 3Q14) as a result of the higher operating cost  and the reversal of staff cost (RM44m) in 3Q14.   Maxis recorded a total of 498k subscribers’ net adds in  4Q14, bringing its total subscriber base to 12.9m. The  higher subscriber adds was mainly led by the prepaid  segment (543k, as a result of higher traction gained by  #Hotlink) while the postpaid segment continued to suffer  with a 45k loss in subscribers due to the re-pricing  impact. ARPU-wise, the prepaid stayed at RM35 while  postpaid improved RM3 to RM97 due to seasonality  factor. Having said that, its MaxisONE Plan continued to  gain traction with subscriber base now at more than 250k  and generating ARPU of c.RM150.   Its blended smartphone penetration rate improved to  57% (+3ppt QoQ; mainly boosted by strong prepaid uptake)  with 67% recorded in the postpaid segment and  54% in the prepaid. 

Outlook  Expecting low single digit service revenue growth in  FY15 and an absolute EBITDA similar to FY14 level. Its  capex, meanwhile, is expected to stay at RM1.1b with  dividend policy unchanged (target payout ratio of not less  than 75% of consolidated PAT). 

Change to  Forecasts   Reduced FY15 core NP to RM1.96b (-4.4%) after taking  management’s latest guidance into the consideration.  Meanwhile, we introduce our FY16E numbers; we expect  Maxis core NP to hit RM2.1b (9% YoY) on the back of  higher revenue growth and operational efficiency. 

Rating Maintain MARKET PERFORM  Valuation  Maintained TP at RM7.16 based on a higher targeted  FY15E EV/fwd EBITDA of 14.0x (vs. 13.7x previously),  representing a 1.0x std deviation above the 4-year mean. 

Risks to Our  Call   Higher-than-expected margin pressure and subscribers  churn.

Source: Kenanga