Review

• Stripping out the accelerated depreciation and assets write off amounting to RM231.0mn and other non-core items, Maxis’s FY23 core profit of RM1,353mn came in within expectations, accounting for 104.9% and 104.2% of our and consensus full-year estimates.

• A 4th interim dividend of 4.0sen/share was declared, bringing the YTD dividend to 16.0sen/share. (FY22: 20.0sen)

• YoY, FY23’s service revenue grew by 4.2% to RM8,572mn, mainly driven by both the consumer (+3.7% YoY) and enterprise (+6.4% YoY) businesses. The growth in consumer business was mainly driven by postpaid segment, following the introduction of a wider range of postpaid plans to cater for a wider target market. As for the enterprise business, growth was lifted by enhanced ICT solutions offerings as businesses embrace digital transformation. Meanwhile, EBITDA was relatively flat at RM3,960mn. Coupled with the absence of Cukai Makmur, core profit increased 3.0% to RM1,353mn.

• QoQ, 4QFY23 service revenue grew by 2.7% to RM2,202mn thanks to higher contributions across all the business areas. Meanwhile, EBITDA also increased by 13.8% to RM1,057mn.

Outlook

• For FY24, management guided that i) service revenue should increase by a low single-digit growth rate, ii) EBITDA should be similar to 2023, and iii) CAPEX should remain less than RM1.0bn.

Impact

• Maintain our FY24 and FY25 earnings forecasts. Meanwhile, we introduce the FY26 earnings forecast of RM1,792mn, representing an earnings growth of 6.1%.

Valuation & Recommendation

• We reiterate our Sell recommendation on Maxis with an unchanged TP of RM3.70 based on DCF valuation with a WACC of 8.3% and LT growth rate of 1.0%.

• In our view, Maxis’ risk reward potential remains unfavourable with its near term 5G CAPEX/OPEX trajectory still fluid pending further clarity on the transition from the existing SWN to DWN. Against this backdrop, we expect the group to remain prudent on dividends in the interim.

Source: TA Research - 23 Feb 2024