KEY INVESTMENT HIGHLIGHTS

• Maintain BUY with an unchanged target price of RM4.47 post the announcement on 3QFY24 results
• Commendable 3QFY24 led to 9MFY24 earnings of RM1.1b, well within our expectations
• Better performance across both mobile and enterprise segments, with an anticipated marginal decline in prepaid segment
• Traditional mobile business will continue to provide a solid earnings base while future growth will stem from the enterprise segments

Commendable growth across consumer and enterprise segments. We are keeping our BUY recommendation on Maxis with an unchanged target price of RM4.47 post the 3QFY24 results announcement. The group continues to show commendable earnings performance despite the rather saturated market view competitive price, quota and speed offerings. In particular, the postpaid segment remains the group's best performance segment in absolute terms. Nevertheless, the home connectivity and fixed and solutions segments continue to show favourable progress. We expect the positive momentum, especially the latter, to persist as the group expand its offering such as providing fixed connectivity service for data centre and GPUaaS. The group's cash flow position is also much stronger due to the efficient capital working management. This can be seen from the careful spending in capex.

Steady growth in service revenue. 3QFY24 earnings came in at RM366m, an increase of +28%yoy. The improvement in earnings performance was led by better service revenue (+3.2%yoy). Performance from the postpaid segments outshine the rest in absolute value terms. The above led to 9MFY24 earnings of RM1,075m (+15%yoy). This came in within our expectations, making up 73.5% of our full year FY24 earnings estimates.

Prudent capital spending. 3QFY24 capex reduced by -34.9%yoy to RM140m as the group continues to be prudent in its investment. This led to a -29.2%yoy reduction in 9MFY24 capex to RM362m. Given the run rate, full year FY24 capex may come in below FY23 level, excluding any potential impact on 5G.

Conservative dividend payout. 3QFY24 dividend remains consistent at 4sen per share which has been the run-rate since FY23. While the operating cash flow has improved considerably, we view that the group takes a conservative approach in its dividend payout to prepare for any eventual increase in capex in view of 5G. Notwithstanding this, we view that at this juncture, the group already has the capability to revert to its original quarterly dividend payout of 5sen per share.
 

Source: MIDF Research - 11 Nov 2024