News

Yesterday, Maxis proposed to implement an internal reorganisation plan, which will result in the consolidation and integration of the business and undertakings of its wholly-owned operating subsidiaries under Maxis broadband Sdn Bhd (“MBSB”).

In order effect the proposed internal reorganisation, MBSB has entered into separate sale and purchase agreements with Maxis Collections S/B, Maxis International S/B, Maxis Mobile S/B and Maxis Mobile Services S/B to purchase their businesses and undertakings, including relevant assets and liabilities.

The proposed internal reorganisation is not expected to have any material impact to its 2015 earnings but is expected to contribute positively to the group moving forward.

The proposed internal reorganisation is expected to be completed within the 1H16, barring any unforeseen circumstances.

Comments

We are positive to the group’s intentions given the proposed internal reorganisation plan is set to enhance its efficiencies and competencies over the mid-to-long-term.

While the details have yet to be unveiled, we suspect it could mainly involve in its direct cost structure (low 30%s (as a percentage to sales) vs. the mid-to-high 20%s on peers) rather than OPEX (high double-digit vs. mid-to-high 20%s on peers).

No financial numbers/targets were provided by the management given the proposed internal reorganisation plan is still in the preliminary stage.

Outlook

Competition is expected to remain intensifying in view of one of the key industry players is willing to scarify some margins to re-gain subscriber market share in the coming quarters.

Forecast

We leave our FY15/16E earnings unchanged for now pending on more details being unveiled on the proposed internal reorganisation plan.

Rating

Maintained MARKET PERFORM

Valuation

Maintained TP at RM6.48, based on an unchanged targeted FY16 EV/fwd EBITDA of 13.4x, representing a 0.5x standard deviation above the 4- year mean.

Risks to Our Call

Competitions intensify and subscribers churn.

Source: Kenanga Research - 3 Dec 2015