Maxis Bhd’s (Maxis) 1QFY23 net profit grew by 7.4% YoY to RM320m, mainly driven by lower tax cost given the absence of Cukai makmur. Operationally, the  increase in revenue was offset by higher costs namely direct cost, amortization charges and interest expense. The results were in line with expectations,  accounting for 23% and 24% of consensus and our full-year estimates,  respectively. We tweak our FY23-25F earnings forecasts higher by 2%-3%  mainly due to housekeeping changes. Maintain Neutral on Maxis. A first interim  dividend of 4 sen per share was declared, lower than 1QFY22 of 5 sen per  share.

• 1QFY23 revenue improved by 5% YoY due to higher contribution from postpaid, home fibre and mobile enterprise business. Postpaid revenue increased by 7.9% YoY due to higher customer base (+7.8% YoY) on a  lower ARPU (-1.7% YoY). Home fibre continued to deliver impressive growth of 17.8% YoY as the number of connections increased by 18%  YoY while ARPU was relatively flat. Home fibre currently accounted for  7.6% of total revenue, against a 6.8% share in 1QFY22. Meanwhile,  mobile enterprise revenue improved by 8.1% and this segment made up  8% of total revenue, no change compared to the previous year’s  corresponding period.

• 1QFY23 net profit increased by 7.4% YoY on lower tax cost. Despite  the increase in revenue, operating cost has also increased, leading to a  flattish pretax profit of RM429m (1QFY22 was RM432m). Device cost increased by 10% YoY while operation and maintenance cost jumped  21.8% YoY. In addition, amortization cost rose 22.4% YoY. However, the discontinuation of Cukai Makmur has resulted in an 18.7% YoY drop in  tax cost.

• Supportive of 5G dual network model. The recent announcement of a  transition to 5G dual network by the government should be well-received  by Maxis, being the only telco that has yet to sign any access agreement with Digital Nasional Bhd (DNB). However, it remains unclear whether it  will be able to offer 5G services to its customers anytime soon.  Nevertheless, we see minimal impact arising from this as the take-up rate for 5G remains slow. Furthermore, we believe Maxis would be able to  maintain a stable churn rate and retain customers with the offering of  attractive broadband bundles.

Source: PublicInvest Research - 22 May 2023