Maxis’ FY11 results were in line with our/street
expectations. The key highlights were (i) the guidance of weaker EBITDA margin
for 2012 as it intends to be more aggressive in the market and (ii) management
has no plans for stronger dividends beyond the quarterly payout quantum, which
is disappointing as the group recently geared up its balance sheet and is
expected to see peaking capex. Following the results, our FY12/13 forecast has
been adjusted by -2.4% to 0.8%. We
maintain our NEUTRAL call with its
share price supported by the 7% dividend yield. Our FV is raised to RM5.50 (WACC: 9%, TG:1.5%) from RM5.10 after
rolling over to FY13.
In line. At 96%
and our/consensus core earnings (excluding the broadband tax incentive of
RM322m), Maxis FY11 results were in line. As expected, the higher opex from the
rollout of its Home service contributed to the 1.3%-pts erosion in EBITDA
margin q-o-q to 48.7% (FY11: 50.3%). Maxis’ mobile revenue grew a pedestrian
0.3% q-o-q, significantly below Celcom and Digi’s +2-4% as we estimate its
voice revenue fell 2% qo-q. Maxis continued to see prepaid revenue erosion and
has been slow to respond to competitor’s aggression on voice tariffs. Non-voice
revenue remained the silver lining for the group, up an estimated 3% q-o-q
(+10% y-o-y) thanks to robust growth in non-sms data revenue of 5% q-o-q (+18%
y-o-y). We gather from management, that some 31% of its subs base are on
smartphones, above the average for the industry of 27-28%.
To go more aggressive.
Maxis said it has been been avoiding the competitive pressure on pricing but
now see this as inevitable to protect its share of the market. It plans to be more
aggressive this year with margins expected to suffer in the medium-term. Management
has reaffirmed the guidance of mid single digit growth for 2012.
Home service in full
swing by mid-2012. Maxis said it is targeting subscribers ‘in the tens of
thousands’ for its home service but did reveal the subscribers it now has. Its expects
the service to go full swing by mid-2012 with more bundled offers including the
introduction of mult-screen products. We continue to believe the delay in the
rollout of its home service (18 months after TM’s Unifi) has cost the telco
valuable subs given that most has been locked in by TM’s service which
continued to enjoy strong demand. Its addressable market for the home service
comprised 900k households (under TM’s HSBB) and about 100k households living in
multi-dwelling units where its own fiber currently runs.
Capex peaking but no
sign of special dividend. Maxis foresees capex to come down to RM600-700m
in FY13 from under RM1bn in FY11 excluding investments in LTE. Disappointingly,
there was no indication of potentially higher dividends even with the capex
leveling off. The net DPS of 40sen/share for FY11 works out to a 119% payout.
Source: OSK188
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