Maxis Bhd - Rooms for yield compression?

Period  2Q12/1H12

Actual vs.Expectations

The 1H12 core NP of RM1.04b came in below expectations and accounted for 43.1% and 44.1% of ours and the street’s full year forecasts.

Dividends           A 8.0 sen interim single-tier dividend was declared, as expected, with an ex-date scheduled on 12 September 2012. We expect Maxis to declare a total dividend of 40.0 sen in FY12.

Key Result Highlights    YoY, the revenue rose 4% to RM4.4b, driven by higher contributions from all the business segments namely mobile services (+3% to RM4.2b); Enterprise fixed services (+4% to RM95m); international gateway (+35% to RM105m) and home business (+133% to RM21m). Maxis’ EBITDA grew 2% to RM2.2b with an EBITDA margin of 50.4% (vs. 51.2% previously). Core NP, however, was lower by 5% to RM1.04b due mainly to a one-off asset write- off of RM125m on certain network assets.

QoQ, the turnover and core NP were down by 1% each, as a result of lower mobile revenue and broadband tax incentive (RM10m vs. RM16m in 1Q12).

There were total 51k net adds in subscribers in 2Q12 comprising of 91k in prepaid users which were partially offset by 40k in the postpaid segment. Prepaid APRU was flat at RM37 while postpaid ARPU was down by RM1 to RM106.

On the Home Services segment front, 57k users are already on board. Out of which, 9.4k are Home Fibre Internet users (vs. 5.2k in 1Q12). The segment generated RM13m turnover but suffered a RM21m-loss at the EBITDA level.

Outlook               No change in its FY12 headline KPI targets (Revenue +5% YoY, EBITDA margin <50% and capex guidance of slightly less than RM1.0b).

Change to Forecasts       Lowered our FY12 core NP by 2.6% to RM2.34b due to the one-off asset write-off but our FY13-FY14 PAT has been raised by 1.6% as a result of a higher turnover assumption after re-imputing the international gateway segment contribution.

Rating   Maintain MARKET PERFORM

Valuation            We are raising Maxis’ TP to RM7.35 (from RM6.76 previously), based on a higher targeted FY13 EV/forward EBITDA of 13x (+3SD).

Risks      Higher than expected margin pressure.

Source: Kenanga