Maxis’ results fell short of street estimates although in line with ours. The key highlights were: (i) extended EBITDA margin contraction as the group upheld device subsidies, and (ii) voice revenue bounced back after several quarters of contraction as the telco’s re-pricing efforts paid off. Management’s guidance for 2% revenue growth and EBITDA margin of 48%-49% is consistent with our 2012 forecast. We are retaining our FY12/FY13 numbers and RM6.50 FV, based on 8%WACC. Maintain NEUTRAL, supported by a 6% dividend yield.
A weaker tune. Maxis reported a core profit of RM462m for 3QFY12 (-16% q-o-q, -16% y-o-y) and RM1.57bn YTD (-14% y-o-y), excluding the broadband tax incentive and write-down of network assets totalling RM20m for 3Q12 and RM88m for 9MFY12. The cumulative earnings were 4% short of our forecasts when annualized, and 7% below consensus estimates, mainly due to weaker EBITDA, a higher effective tax rate and depreciation during the quarter. The group has declared an expected third interim DPS of 8 sen, bringing its YTD payout to 24 sen/share, payable on 28 Dec 2012.
1-month contribution from roaming pact in 3Q12. Excluding U Mobile’s roaming contribution of RM4m in 3Q12, Maxis’ mobile revenue would have ticked up q-o-q after three successive quarters of decline. Management has reaffirmed its guidance for a RM1bn target revenue from U Mobile in five years.
Focus on acquisition/retention will continue to hurt margins. Maxis’ EBITDA dipped 5% q-o-q in the steepest sequential decline since 1QFY11, as it maintained strong subscriber acquisition and retention momentum to claw back lost revenue share. More specifically, the telco dangled generous device subsidies while starting to reap the rewards from its earlier re-pricing exercise. Handset revenue almost doubled q-o-q, reflecting the brisk sales of the Samsung SIII. We expect margins to remain under pressure over the next two quarters on seasonality, the introduction of iPhone5, as well as strong reception to the Samsung Galaxy Note II, for which stocks are fast depleting.
To unveil IPTV fiber plans. Maxis will soft launch its IPTV service on 29 Nov with full commercial rollout in 1Q2013. It expects to close 2012 with some 25k home fiber customers, up from 19k in 3Q12, which doubled q-o-q. This is only 5% of what TM (its access provider) hopes to achieve by year-end for the Unifi service, for which over 1.2m premises have since been passed. We expect Maxis to offer good cross-bundling incentives for existing Maxis customers and to capture a bigger slice of the home fiber market, where the overall take-up stands at some 40%.
A weaker tune. Maxis reported a core profit of RM462m for 3QFY12 (-16% q-o-q, -16% y-o-y) and RM1.57bn YTD (-14% y-o-y), excluding the broadband tax incentive and write-down of network assets totalling RM20m for 3Q12 and RM88m for 9MFY12. The cumulative earnings were 4% short of our forecasts when annualized, and 7% below consensus estimates, mainly due to weaker EBITDA, a higher effective tax rate and depreciation during the quarter. The group has declared an expected third interim DPS of 8 sen, bringing its YTD payout to 24 sen/share, payable on 28 Dec 2012.
1-month contribution from roaming pact in 3Q12. Excluding U Mobile’s roaming contribution of RM4m in 3Q12, Maxis’ mobile revenue would have ticked up q-o-q after three successive quarters of decline. Management has reaffirmed its guidance for a RM1bn target revenue from U Mobile in five years.
Focus on acquisition/retention will continue to hurt margins. Maxis’ EBITDA dipped 5% q-o-q in the steepest sequential decline since 1QFY11, as it maintained strong subscriber acquisition and retention momentum to claw back lost revenue share. More specifically, the telco dangled generous device subsidies while starting to reap the rewards from its earlier re-pricing exercise. Handset revenue almost doubled q-o-q, reflecting the brisk sales of the Samsung SIII. We expect margins to remain under pressure over the next two quarters on seasonality, the introduction of iPhone5, as well as strong reception to the Samsung Galaxy Note II, for which stocks are fast depleting.
To unveil IPTV fiber plans. Maxis will soft launch its IPTV service on 29 Nov with full commercial rollout in 1Q2013. It expects to close 2012 with some 25k home fiber customers, up from 19k in 3Q12, which doubled q-o-q. This is only 5% of what TM (its access provider) hopes to achieve by year-end for the Unifi service, for which over 1.2m premises have since been passed. We expect Maxis to offer good cross-bundling incentives for existing Maxis customers and to capture a bigger slice of the home fiber market, where the overall take-up stands at some 40%.
OTHER HIGHLIGHTS
Ownership of IPTV subscribers. While Maxis did not reveal the mechanics of its tie-up with its sister company, Astro to offer IPTV, management highlighted that the collaboration is not a ‘wholesale- type model’ and subscribers are owned by the group.
Capex to settle below RM1bn for 2012/2013. Maxis spent RM707m in capex YTD with full year spending expected to come in 10-15% below the previous guidance of RM1bn due to procurement savings and some planned deferment of capex into FY13. While it did not provide an outright guidance for FY13, Maxis believes spending will come in under RM1bn which includes the investment on LTE and the upgrade of its IT infrastructure.
Ownership of IPTV subscribers. While Maxis did not reveal the mechanics of its tie-up with its sister company, Astro to offer IPTV, management highlighted that the collaboration is not a ‘wholesale- type model’ and subscribers are owned by the group.
Capex to settle below RM1bn for 2012/2013. Maxis spent RM707m in capex YTD with full year spending expected to come in 10-15% below the previous guidance of RM1bn due to procurement savings and some planned deferment of capex into FY13. While it did not provide an outright guidance for FY13, Maxis believes spending will come in under RM1bn which includes the investment on LTE and the upgrade of its IT infrastructure.
Source: OSK
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