MAXIS (6012) - Maxis Berhad - Gaining operational traction
Target RM6.90 (Stock Rating: HOLD)
Maxis’s 4QFY14 core net profit fell 9.1% qoq (-10.1% yoy). FY14 net profit was below our forecast (at 94%) due to higher-than-expected depreciation and tax but in line with consensus (99%). Our FY14 EBITDA forecast was spot on. As expected, an interim and final DPS of 16 sen was declared, bringing FY14 DPS to 40 sen (payout: 175%). We raise FY15/16 EBITDA by 2.2%/2.1% and core net profit by 3.2%/2.9% to factor in stronger prepaid net adds. We upgrade Maxis from Reduce to Hold and raise our DCF-based target price by 6.2% to RM6.90 (WACC: 7.0%). We believe that Maxis has stemmed the decline in its prepaid market share, while yields remain decent at 4.8-5.4%. In the ASEAN telco sector, we prefer Telkom Indonesia, SingTel and Thaicom.
Maxis has stemmed decline in prepaid business
In 4QFY14, prepaid revenue rose 1.5% qoq (flat yoy), the third consecutive quarter of qoq growth. This was driven by the stronger-than-expected net adds of 543k, the highest in the last seven years. Maxis attributed this to the popularity of #Hotlink and its rising traction in underserved segments. We turn positive on Maxis, as we believe that it has finally halted the decline in its prepaid business. However, the intense competition in the low-to mid-ARPU segments is likely to limit its growth potential. Postpaid revenue recovered 2.4% qoq (-3.1% yoy) in 4QFY14. 4QFY14 net adds of 9k were the lowest since 3QFY12. ARPU rose 3.2% qoq (-4.0% yoy) on seasonally higher roaming revenue and greater take-up of MaxisOne plans. In our view, significant ARPU uplift is unlikely in the short term, as it will be difficult for Maxis to compel the wider postpaid subscriber base to move to the RM128-158 plans.
Two steps forward, one step back
Despite revenue growth, EBITDA fell 2.5% qoq (-7.5% yoy) in 4QFY14. EBITDA margin dropped 2.6% pts qoq (-1.5% pts yoy) to 47.1% due to higher traffic, administrative and marketing costs. This suggests that Maxis’s efforts to raise revenue growth come at the expense of higher opex, which may limit the scope of short-term earnings growth.
FY15 management guidance
Maxis guides for low-single-digit service revenue growth, steady EBITDA (ex-GST impact) and capex (RM1.1bn). We believe that these targets are realistic but forecast stronger FY15 EBITDA growth of 5.9% yoy, after factoring in GST. Maxis also guides for at least 75% dividend payout ratio in FY15.
Source: CIMB Daybreak - 09 February 2015
Target RM6.90 (Stock Rating: HOLD)
Maxis’s 4QFY14 core net profit fell 9.1% qoq (-10.1% yoy). FY14 net profit was below our forecast (at 94%) due to higher-than-expected depreciation and tax but in line with consensus (99%). Our FY14 EBITDA forecast was spot on. As expected, an interim and final DPS of 16 sen was declared, bringing FY14 DPS to 40 sen (payout: 175%). We raise FY15/16 EBITDA by 2.2%/2.1% and core net profit by 3.2%/2.9% to factor in stronger prepaid net adds. We upgrade Maxis from Reduce to Hold and raise our DCF-based target price by 6.2% to RM6.90 (WACC: 7.0%). We believe that Maxis has stemmed the decline in its prepaid market share, while yields remain decent at 4.8-5.4%. In the ASEAN telco sector, we prefer Telkom Indonesia, SingTel and Thaicom.
Maxis has stemmed decline in prepaid business
In 4QFY14, prepaid revenue rose 1.5% qoq (flat yoy), the third consecutive quarter of qoq growth. This was driven by the stronger-than-expected net adds of 543k, the highest in the last seven years. Maxis attributed this to the popularity of #Hotlink and its rising traction in underserved segments. We turn positive on Maxis, as we believe that it has finally halted the decline in its prepaid business. However, the intense competition in the low-to mid-ARPU segments is likely to limit its growth potential. Postpaid revenue recovered 2.4% qoq (-3.1% yoy) in 4QFY14. 4QFY14 net adds of 9k were the lowest since 3QFY12. ARPU rose 3.2% qoq (-4.0% yoy) on seasonally higher roaming revenue and greater take-up of MaxisOne plans. In our view, significant ARPU uplift is unlikely in the short term, as it will be difficult for Maxis to compel the wider postpaid subscriber base to move to the RM128-158 plans.
Two steps forward, one step back
Despite revenue growth, EBITDA fell 2.5% qoq (-7.5% yoy) in 4QFY14. EBITDA margin dropped 2.6% pts qoq (-1.5% pts yoy) to 47.1% due to higher traffic, administrative and marketing costs. This suggests that Maxis’s efforts to raise revenue growth come at the expense of higher opex, which may limit the scope of short-term earnings growth.
FY15 management guidance
Maxis guides for low-single-digit service revenue growth, steady EBITDA (ex-GST impact) and capex (RM1.1bn). We believe that these targets are realistic but forecast stronger FY15 EBITDA growth of 5.9% yoy, after factoring in GST. Maxis also guides for at least 75% dividend payout ratio in FY15.
Source: CIMB Daybreak - 09 February 2015
