News Maxis has introduced its 4G LTE service in
selected parts of the Klang Valley including Taman Tun Dr Ismail, Damansara
Utama, Desa Sri Hartamas, Bandar Puchong Jaya, Bandar Sunway and Cyberjaya on 1
January 2013. Other areas that have the partial 4G coverage are SS2, Taman
Paramount, Section 17 and 19 in Petaling Jaya, Plaza Damansara, Bandar Kinrara
and Taman Wawasan in Puchong.
Maxis customers can
now enjoy speeds of up to 75Mbps, with typical average speeds of 10 to 30Mbps on
the 4G LTE network, by subscribing to the monthly wireless broadband packages
starting from RM88 and the LTE modem at only RM400.
The group indicated
that its 4G LTE service operates at download speeds of 5-10 times faster than
3G and will enable and sustain a seamless experience of rich content across its
high-speed fixed and wireless network platform across the country.
Maxis’ 4G LTE
service, however, is only available for wireless broadband at this juncture
while its use for other devices such as smart phones and tablets will only come
in at a later stage.
Comments We
understand that the current Maxis wireless broadband plans (which charge from
RM88 onwards) are bundled with a 12-month contract period and various tiers of
internet quota that segregate by peak and non-peak hours. Furthermore, upon
finishing the allocated monthly quota, the broadband speed will be throttled to
128 kpbs.
Moving forward, we
believe that there are ample rooms for Maxis to increase its 4G LTE speed given
that the current speed of up to 75Mbps is only half of the broadband speed that
is being offered through the combined Maxis-REDtone spectrum.
Outlook Maxis remains as a solid high yield stock play
given its firm 40.0 sen DPS in the next 1-2 years.
However, potential
margin erosions are expected as a result of the aggressive rollout of its Home
Fibre plan and handset subsidy.
Forecast There are no changes in our FY12-FY14 earnings
forecasts.
Rating Maintain MARKET PERFORM
The company’s current
strategy of focusing on customer retention instead of maintaining its margin may
add pressure to its near term financial performance.
Valuation We are
maintaining our Target Price at RM7.00 based on a targeted FY13 EV/Forward
EBITDA of 13.1x (+2SD).
Risks Higher
than expected margin pressure.
Continued losses in
market share to its peers.
Source: Kenanga
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