Review

• Maxis’s 1HFY24 core profit of RM709mn came in within expectations, accounting for 47.7% and 50.2% of our and consensus full-year estimates.

• A second interim dividend of 4.0sen/share was declared, bringing the YTD dividend to 8.0sen/share. (1HFY23: 8.0sen/share)

• YoY, 1HFY24’s service revenue grew by 4.3% to RM4,407mn, mainly driven by consumer (+3.5%) and enterprise (+8.4%) businesses. Consumer business growth was primarily attributed to postpaid and home connectivity segments. The service revenue in the postpaid segment jumped by 5.3% to RM1,827mn, as the group managed to roll out a broader range of postpaid plans to cater for a wider target market.

• Meanwhile, the home connectivity also recorded a 9.8% jump in service revenue to RM495mn, thanks to its strong fibre network and partnerships that enabled the group to offer more attractive broadband and mobile bundles. On the other hand, the service revenue for enterprise business surged 8.4% YoY to RM788.0mn, backed by decent growth across all segments, which included public sector, corporate, small medium business and wholesale.

• EBITDA rose 5.9% to RM2,090mn, mainly driven by higher service revenue and stricter cost management. Meanwhile, core profit increased 9.1% to RM709mn.

• QoQ, 2QFY24 service revenue improved slightly by 1.1% to RM2,216mn, while EBITDA remained at RM1,046mn. The total consumer subscriptions expanded further to 10,317k (+130k QoQ), underpinned by net adds across all segments including postpaid, prepaid, and home connectivity. Nevertheless, the group saw a slight ARPU dilution across all segments.

Outlook

• Management’s guidance for FY24 was largely unchanged, with service revenue and EBITDA to grow by a low single digit. Meanwhile, the CAPEX is expected to be less than RM1.0bn.

• Management believes the enterprise business could see more excitement over the long run, thanks to the booming demand for fixed connectivity services from data centres. The group is currently providing links to multiple data centres nationwide.

• The group has recently submitted a proposal to deploy Malaysia’s second 5G network to the Malaysian Communications and Multimedia Commission. Based on management’s guidance, the outcome is likely to be announced by the end of 3Q2024.

Impact

• Maintain our FY24 to FY26 earnings forecasts.

Valuation & Recommendation

• After incorporating the ESG premium/discount based on our latest internal guidelines, we revised the target price from RM3.70 to RM3.80, based on DCF valuation with a WACC of 8.3% and LT growth rate of 1.0%. Upgrade the stock from Sell to Hold.

• Key risks include unfavourable terms for 5G commercialisation, heightened price competition, and regulatory changes.

Source: TA Research - 22 Aug 2024