Review

• Maxis’s 9MFY24 core profit of RM1,075mn came in within expectations, accounting for 72.3% and 77.0% of our and consensus full-year estimates.

• A third interim dividend of 4.0sen/share was declared, bringing the YTD dividend to 12.0sen/share. (9MFY23: 12.0sen/share)

• YoY, 9MFY24’s service revenue increased by 3.9% to RM6,620mn, mainly driven by consumer (+3.3%) and enterprise (+7.0%) businesses. The growth in consumer business was primarily attributed to the postpaid and home connectivity segments. The service revenue in the postpaid segment grew by 5.2% to RM2,752mn, as the group continued to push for pre-to-post migration to increase revenue with high-quality subscribers.

• Meanwhile, home connectivity also registered a 9.4% jump in service revenue to RM746mn, mainly driven by the group’s ongoing focus on enhancing its value proposition for customers.

• On the other hand, the service revenue for enterprise businesses surged 7.0% YoY to RM1,184.0mn, primarily from the 2G and 4G wholesale arrangements, as well as higher mobile revenue from an increase in corporate mobile subscriptions.

• EBITDA rose 8.1% to RM3,138mn, mainly driven by higher service revenue and stricter cost management. Meanwhile, core profit increased 8.1% to RM1,075mn.

• QoQ, 3QFY24 service revenue dropped slightly by 0.1% to RM2,213mn, while EBITDA increased by 0.2% to RM1,048mn. The total consumer subscriptions expanded further to 10,346k (+29k QoQ), underpinned by net adds from postpaid 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.

• Pertaining to the outcome of Malaysia’s second 5G network, management revealed that the group is currently evaluating several viable options. At this juncture, Maxis will continue offering 5G services via an access agreement with Digital Nasional Berhad.

Impact

• Maintain our FY24 to FY26 earnings forecasts.

Valuation & Recommendation

• No change to our target price of RM3.80, based on DCF valuation with a WACC of 8.3% and LT growth rate of 1.0%. Maintain a Hold call on the stock.

Source: TA Research - 11 Nov 2024