Review

• Maxis’s 1QFY24 core profit of RM353mn came in within expectations, accounting for 23.7% and 26.3% of our and consensus full-year estimates.

• A 1st interim dividend of 4.0sen/share was declared, maintaining the same amount declared in the corresponding period last year.

• YoY, 1QFY24’s service revenue grew by 3.7% to RM2,191mn, mainly driven by consumer (+3.3% YoY) and enterprise (+6.0% YoY) businesses. The growth of consumer business was underpinned by postpaid and home connectivity segments. The postpaid revenue jumped by 5.4% to RM911mn, thanks to higher subscriptions after introducing a broader range of postpaid plans to cater to a wider target market. Meanwhile, the home connectivity also saw the revenue jump 9.9% to RM244mn, driven by increased home connection customers with a higher blended ARPU of RM110.4 (+1.0% QoQ, +1.8% YoY).

• As for the enterprise business, the revenue grew 6.0% to RM387mn, mainly on the back of 2G and 4G wholesale arrangements.

• EBITDA jumped 7.4% to RM1,044mn, primarily driven by higher revenue and stricter cost management. Meanwhile, core profit increased 10.3% to RM353mn.

• QoQ, 1QFY24 service revenue fell by 0.5% to RM2,191mn, while EBITDA dropped by 1.2% to RM1,044mn. The slowdown was partly due to seasonality.

Outlook

• For FY24, management maintains the guidance for service revenue to grow by low single digits. Meanwhile, the CAPEX is expected to be less than RM1.0bn.

• Overall, we expect the management to remain prudent on the dividend prospects, given that the uncertainties remain on the mechanics of the transition from Single Wholesale Network to Dual Wholesale Network.

Impact

• Maintain our FY24 to FY26 earnings forecasts.

Valuation & Recommendation

• No change to our target price of RM3.70, based on DCF valuation with a WACC of 8.3% and LT growth rate of 1.0%. Maintain a Sell call on the stock.

Source: TA Research - 20 May 2024