The 1Q13 results reduced our concerns for now that margins may come under more pressure as cost discipline reduced overall expenses. As usage levels pick up from 2Q13 onwards, Maxis should be able to rely less on device sales to drive revenue growth. The recent launch of the Maxis-Astro fibre with IPTV service is positive but is unlikely to be material in FY13. Maintain Neutral with fair value of MYR6.90.

♦  Within expectations. Maxis’ 1Q core net profit of MYR521m (-14.7% y-o-y, +0.2% q-o-q) was largely within our and consensus expectations, accounting for 25% and 24% of full-year estimates respectively.  

♦  Non-voice drives q-o-q revenue growth.  Q-o-Q, revenue growth was flattish (+0.9%) despite seasonality. Non-voice revenue grew 3.5% driven mainly by significantly higher device sales (+61.5%) and mobile internet (+2.8%). This more than offset the 2.9% q-o-q decline in voice. 1Q EBITDA margin rebounded 2.0%-pts q-o-q to 48.2%, mainly due to lower sales & marketing spending and admin expenses. Core net profit rose 9.7% q-o-q due to a lower effective tax rate.   

♦  Briefing highlights. While Maxis achieved 1Q13 revenue growth of 4.4% y-o-y, we remain cautious on Maxis’ mid-single digit target as 
device sales appear to be at a record high and should taper off going forward. Management expects sustained growth when usage levels pick up from 2Q13 onwards. Management declined to offer specific targets for its Maxis-Astro fibre with IPTV service but has seen 10k bookings so far. While LTE coverage remains limited to certain areas in the Klang Valley for now, management intends to roll out LTE coverage in Penang and Johor Baru from 2Q onwards. This we believe will help to stimulate growth in the wireless broadband segment again, albeit gradually.

♦  Dividends. Maxis declared a 1st interim net DPS of 8.0 sen (translating to 1Q EPS payout ratio of 127%). For FY13, we estimate DPS of 40 sen.

♦  Forecasts. Maintained.

Source: RHB