Maxis - MARKET PERFORM - 28 June 2012

News   Maxis is teaming up with 14 content providers to provide content for its IPTV services. The content partnership will enable Maxis to deliver on-demand movies and series, including high definition and 3Dcontent as well as seven FTA channels, to its customers anytime and anywhere. 

 The content providers are LI TV Int’ Ltd, Red Bull GmBH, Classic Media Distribution, The Wiggles International, Five Star Production, Asa’ad Entertainment Network, Five Star Trading, Trace TV S.A., RTM, Media Prima, Brilliant Pictures, Vision Plus Entertainment S/B, Travel Channel International Ltdand All Asia Multimedia Networks FZ-LLC 

 Maxis is expected to include the IPTV services to its Home Fibre Internet package from July onwards with a monthly subscription fee that less than RM200. 

 Some of the channels Maxis will offer to include drama series, lifestyle and travel, kids, action sports and music. 

Comments   The partnership with content providers is a natural move by Maxis, which has been promoting its home fibre internet products that without IPTV services aggressively since May. The partnership is to fulfil the missing puzzle which allows Maxis to provide similar FTTH products that could enhance its competitiveness vis-à-vis its competitors.  

 We also understand that Maxis is eying to team up with FetchTV, an Australian company, and leverage on the latter’s multi-screen platform.  

 Maxis has 41k home service customers, including 5.2k home fibre internet subscribers as of 1Q12. The service has generated RM8m in turnover but suffered RM22m losses at EBITDA level.  

Outlook   It remains one of a solid pick as a high-yield play given its firm 40.0 sen DPS in the next 1-2 years.

 However, the ability in maintain its market share remain doubtful at this juncture, in our view. 

 Potential erosion in its EBITDA margin as a result of an aggressive rollout in its FTTH plan.  

  

Forecast  No change in our FY12-FY14 earnings forecast. 

Rating   Maintain MARKET PERFORM

 The company’s current strategy in focusing on customer retention instead of maintaining its margin may add pressures to its near term financial performance. 

Valuation   Maintaining Target Price at RM6.76, based on targeted FY13 EV/forward EBITDA of 11.4x. 

Risks   Higher than expected margin pressure. 

 Continue to loss market share to its peers.

Source: Kenanga