KEY INVESTMENT HIGHLIGHTS

• Maintain BUY with a higher target price of RM4.47 post meeting with the management
• Mobile segment remains Maxis' core business, providing the group with the necessary funding for investment and dividend payout
• Revamped enterprise segment will serve as the impetus for future earnings growth
• The group is the frontrunner for the second 5G network, in our view

Maxis is our top pick for the sector. We are keeping our BUY recommendation on Maxis with an upward revision in target price to RM4.37 (previously RM4.17) post our meeting with the management. The mobile segment will remain the group's main cash generator, supported by the strong postpaid proposition targeting both the premium and value-seeking segments.

Meanwhile, we anticipate the future growth stemming from the enterprise segment to be promising as it focusses on the Mid-market and the Micro, Small and Medium Enterprises (MSME) customers. Moreover, given its favourable balance sheet position and technological readiness, we view that Maxis stands a better chance as compared to its peers in leading the second 5G network.

Postpaid segment remains the group's stronghold. To recap, 1HFY24 mobile service revenue improved by +3.5%yoy to RM3.7b from RM3.6b a year ago, mainly led by the postpaid segment. This constitutes more than 80% of the total revenue. Moving forward, we expect the mobile revenue will remain the group's main cash generating business that will engender the necessary funding for investments as well as a stable dividend payout.

Our positivity on the mobile segment is mainly predicated on strong postpaid proposition targeting both premium (Maxis Postpaid) and value-seeking segments (Hotlink Postpaid). This clear demarcation, especially on the latter, has led to pre-to-post migration which led to a more sustainable and predictable revenue base.

In addition, the pairing with its fiber proposition and/or product bundling, has also led to lower churn rate as well as revenue uplift. We view that the critical success factor lies in the group's ability to promote "positive discounting" which avoids price erosion by limited discounts to additional services purchases by the customer and the same time provide more value.

Source: MIDF Research - 18 Sep 2024