Period

4Q15/FY15

Actual vs. Expectations

FY15 core PATAMI of RM1.9b (+0.8YoY) came in within expectations and accounted for 104% of our and 105% of the street full-year estimates. FY15 core PATAMI was arrived after adding back the RM143m accelerated depreciation (FY14: RM185m of accelerated depreciation and reversal of contract obligations).

Dividends

Declared a single-tier tax-exempt dividend of 5.0 sen, (ex-date: 29th February), bringing its full-year DPS to 20.0 sen (vs. our estimate of 21.0 sen and 24.3 sen that of the consensus), implying a yield of 3.2% and 81% of payout ratio (or c.84% of FCF).

Key Results Highlights

YoY, revenue climbed by 2.5% to RM8.6b in FY15 due to higher services revenue (+3.8% to RM8.54b) but partially offset by lower non-services revenue. The higher services revenue was primarily fuelled by strong prepaid contribution (+6% on the back of rising data usage and bigger share in the migrant segment) and improving core postpaid (mainly underpinned by stronger MaxisONE subscription). Normalised EBITDA, meanwhile, was enhanced by 4.1% to RM4.4b (on the back of a better subscriber mix), with margin improving to 51.4% (vs. 50.7% in FY14).

QoQ, normalised EBITDA was marginally higher by 0.9% with margin remaining stable at 51.5% (vs. 51.3% in 3Q15). Its core PATAMI dipped by 7% to RM475m as a result of higher tax expenses.

Maxis recorded a total of 349k subscribers' net loss in 4Q15, narrowing its total subscriber base to 11.6m. The lower subscription base was mainly due to impact from high rotational churn of low ARPU subscribers and price-focused competition. ARPU-wise, prepaid remain flattish at RM39 while postpaid surged RM4 to RM102, thanks to continued strong MaxisONE Plan adoption, which have a larger subscriber base of 623k (vs. 514k in 3Q15) and stable ARPU of RM150/month (vs. mid- RM90 in the legacy plans).

LTE network population coverage has widened to 71% (vs. 55% in 3Q15) while its 2G & 3G modernisation plan has achieved 88% vs. 78% in end-FY14.

Outlook

Expecting FY16 service revenue, absolute normalised EBITDA and base capex to come in at similar levels to FY15. Note that, Maxis has recorded a 3.8% YoY, RM4.4b, and RM1.3b in the above financial parameters in FY15, respectively.

Change to Forecasts

Raised FY16 EBITDA by 4.0% after taking management’s latest guidance into the consideration but lowered the core NP to RM1.98b (-3%) to reflect the latest taxation run-rate (24% vs. 21% previously). Meanwhile, we also take this opportunity to introduce our FY17E numbers.

Rating

Maintain MARKET PERFORM

Valuation

Raise TP to RM6.48 (from RM6.31 previously) based on unchanged FY16E EV/fwd. EBITDA of 12.9x, representing a -0.5x std. dev. below the 4- year mean.

Risks to Our Call

Higher-than-expected margin pressure and subscribers churn.

Source: Kenanga Research - 5 Feb 2016