INVESTMENT HIGHLIGHTS

• Cost optimisation initiatives defended Maxis’ 1Q18 normalised earnings at RM510m
• Growth in1Q18 postpaid revenue driven by innovative device and share line propositions
• Double digit decline in 1Q18 prepaid revenue due to shrinking prepaid subscriber base
• Maintain NEUTRAL with a revised target price of RM6.16

1Q18 normalised earnings within expectation. Maxis’ 1Q18 normalised earnings remain firm at RM510m despite a -5.8%yoy contraction in revenue. The group’s 1Q18 revenue was negatively impacted by the decline in prepaid revenue, which offset the growth in postpaid. Fortunately, the continued cost optimisation has led to improvement in profit margin. All in, the group’s 1Q18 financial performance came in within our and consensus expectations, accounting for 25.3% and 25.6% of FY18 full year earnings estimates respectively.

Steady rise in postpaid subscriber base. The postpaid service revenue for 1Q18 grew by +5.2%yoy to RM985m. This was driven by the group’s innovative device and share line propositions. As a result, the postpaid mobile subscription swelled by +5.6%yoy to approximately 3.0m subscribers. However, the growth in postpaid revenue was partially subdued by lower ARPU of RM92/mth as compared to RM96/mth recorded in 1Q17.

Prepaid subscriber base continues to dwindle. 1Q18 prepaid revenue declined by -15.5%yoy to RM849m. This was mainly impacted by price-focused competition, SIM consolidation and migration to postpaid. The prepaid subscriber base has declined by -12.5%yoy to 6.8m. Nonetheless, the prepaid ARPU remained resilient at RM41/mth. To curb the reduction in prepaid revenue, the group has launched Hotlink Red which shows encouraging traction.

Capital expenditure (capex). Maxis’ 1Q18 capex came in at RM107m, a decrease of -34.0%yoy. The reduction in capex was mainly attributable to lower spending in network capacity. At present, the 4G LTE population coverage has reached 92%. For full year FY18, management guided that base capex to be approximately RM1.0b.

Source: MIDF Research - 20 Apr 2018