Maxis Bhd (Maxis) posted a 10.3% YoY increase in 1QFY24 net profit to RM353m, mainly driven by higher revenue, particularly postpaid and home fibre. Results were in line with expectations, accounting for 25% and 26% of our and consensus full-year FY24F estimates. The increase in revenue was owing to higher postpaid subscriber base, which rose by about 8% YoY. Our earnings forecasts remain unchanged. Maintain Neutral on Maxis with an unchanged TP of RM3.90. A first interim dividend of 4.0sen per share was declared (1QFY23: 4.0sen per share).

• 1QFY24 revenue improved by 3% YoY due to a 5.4% increase in postpaid revenue, mainly driven by a 7.5% jump in subscriber base, though ARPU was down 4.2%. This was supported by an effective execution of prepaid-to-postpaid migration strategy with the offering of a wide range of plans from RM30 to RM199 per user per month. Overall data consumption continued to rise, reaching almost 30G per month (+17.1% YoY). Meanwhile, prepaid revenue dropped by 1.8% YoY with ARPU falling 3.1% YoY. Fibre continued to chalk above-average growth of 12.5% YoY but it only accounted for 8.3% of total revenue. Enterprise business posted a 6% revenue growth, mainly coming from fixed and solution services while mobile services remained flat.

• 1QFY24 net profit increased by 10.3% YoY. EBITDA improved by 7.4% as operation and maintenance cost dropped by 3.8% YoY while government grants and other income increased from RM46m to RM61m. As such, EBITDA margin improved from 38.5% to 40.1%. However, depreciation cost rose 5.2% YoY. On QoQ basis, depreciation fell 23.5% as 4QFY23 had accounted for accelerated depreciation and asset writeoff.

• Outlook. Although Maxis’ home fibre has been delivering double-digit subscriber as well as revenue growth, its contribution to Group revenue is still relatively small at less than 10%. Given the intense competition in the home broadband space, we reckon profitability will remain low at this juncture. Meanwhile, enterprise business is also seen as a next growth area but for 2024, we believe the adoption rate of digitalisation among the small to medium-sized enterprises is not likely to be encouraging, particularly in 1H24 as the optimism in the domestic economy as well as business confidence is not considered full-blown yet. Given the lack of growth catalyst, we are projecting an earnings growth of 4% in FY24F.

Source: PublicInvest Research - 20 May 2024