MAXIS’s 1HFY23 results met expectations. It reported positive subscriber growth in the mobile and home internet segments while ARPU was stable. It guided for a low single-digit growth for its services revenue and a lower 5G access cost for FY23. We tweak our FY23F earnings 3% higher but maintain our TP of RM5.30 on an unchanged 12x FY24 EV/BITDA and OUTPERFORM call.

MAXIS’s 1HFY23 core net profit met expectations at 48% and 47% of our full-year forecast and the full-year consensus estimate, respectively. It declared a dividend per share of 4.0 sen for 2Q23, cumulating in 8.0 sen for 1HFY23, on track to meet our full-year forecast of 16.0 sen.

Results highlights. YoY, its 1HFY23 revenue improved by 3% driven largely by service revenue (+5%) and B2B revenue (+4) as business continued to flourish given the full reopening of the economy. However, its EBIT fell slightly (-1%) weighed down by amortisation costs on spectrum and software. However, net profit grew at 3%, in the absence of Cukai Makmur.

YoY, its mobile subscriber growth moderated 1% as prepaid subscribers declined on migration to the postpaid service. Its postpaid subscribers grew 6% driven by its attractive device bundled plans, converged propositions for homes, entry-level plans and the migration of prepaid subscribers to the postpaid service. Both its prepaid and postpaid ARPUs remained stable.

Its home internet revenue jumped 17% underpinned by a 16% growth in subscribers and a stable ARPU of RM108. Its B2B revenue saw a 5% uptick underpinned by high-margin products and recurring services.

QoQ, its 2QFY23 revenue eased 2% due to a seasonally lower revenue from devices. However, its EBIT improved 5% on lower marketing cost and fewer device launches.

Its postpaid subscribers grew 2% but prepaid subscribers were flat due to migration to the prepaid segment, consistent with MAXIS’s focus on higher-margin products. Its home internet customers rose 4%.

The key takeaways from its results’ briefing are as follows:

1. MAXIS guided for a low single-digit growth (vs. flat-to-low) for its service revenue in FY23, but maintained its EBITDA and capex at levels similar to those of FY22 (excluding the impact from the rollout of the 5G service), i.e. RM4b and RM1.5b, respectively.

2. The launch of its 5G service is expected in August upon approvals from its shareholders at the EGM on 14 August 2023. The company guided for a lower access fee (

3. The access fee of RM288m will not be applicable once the second 5G network is launched in 2024. MAXIS reiterated that there is room to negotiate thus the fee may be lower. It reaffirmed that the whole industry is committed to the rollout of the second network in 2024.

4. The robust growth in its home internet segment is a boon for MAXIS as it lowers the churn rate of its mobile postpaid segment. The company is committed to raise its subscriber growth thanks to its fixed mobile convergence proposition.

5. Despite the random-access offer (RAO) already published by TM, negotiations on the new internet prices are still ongoing thus there is likely to be no change in MAXIS broadband prices anytime soon.

Forecasts. We tweak our FY23F earnings 3% higher on account of lower leasing cost. No change to our FY24F earnings as we maintain our assumption of RM288m leasing costs.

Our TP remains at RM5.30. Our valuation basis is unchanged at 12x FY24 EV/EBITDA, which is still at a discount to the sector’s historical average of 13x to reflect the risk of the government backpedalling on the dual wholesale network model for the 5G rollout. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 4).

Positive momentum to continue. We believe MAXIS’s positive earnings momentum will be sustained in FY23 underpinned by: (i) its expanded 4G coverage, (ii) its 5G rollout, and (iii) the full-year impact of the reopening of the economy, and iv) brand loyalty of its premium customers. Given the attractive bundling of its home internet and mobile services, we are positive on its home internet gaining momentum further. With the risks of higher inflation abating coupled with business activities gaining momentum, B2B revenue will continue to be resilient as both corporates and SMEs continue to intensify their digitalization efforts. Its margins are likely to improve on account of higher-end products and services being offered. Maintain OUTPERFORM.

Risks to our call include: (i) the government backpedalling on the dual wholesale network for the 5G rollout, (ii) lower B2B spending on a sharp slowdown in the economy, (iii) a prolonged gestation period for 5G services, and (iv) irrational competition among players.

Source: Kenanga Research - 10 Aug 2023