Maxis key strength lies in brand name


THE Maxis brand name is Maxis Communications Bhd’s biggest asset. You are bound to find this bright tangerine Hotlink banners or the ones in blue and green hanging on shop fronts on billboards along the busiest roads, painted on the exteriors of rail coaches, and even decorating car park barriers.  

A senior research analyst, who recently went around Peninsular Malaysia talking to vendors, was surprised that even people in the east coast, where Maxis coverage is not at its best, are chanting the Maxis brand name.  

“These vendors and consumers are willing to promote and take all the glitches and live with it. To them, the brand is so popular that they just do not want to be left out.''  

“This simply goes to show that branding is Maxis' key strength and that is the main reason why it keeps adding on customers,'' said an analyst who works for a foreign research house.  

Subscriber numbers are growing and skewed towards prepaid business although Maxis has a strong base in post-paid, too. 

Maxis added about 150,000 net subscribers for the three months ended March 31, 2003, bringing its total base to 3.25 million, of which 65% is prepaid, and 70% is the next target.  

With the integration of TimeCel, Maxis expects to add about 400,000 TimeCel subscribers and with its monthly additions, Maxis' subscriber base should exceed 4.2 million by year-end.  

Maxis thrives on not just a strong brand name but a solid management team, which is able to deliver the results that the market expects.  

The popularity of the Maxis brand name is much to the envy of its competitors who do acknowledge that its branding and marketing are good. Brand loyalty is there and churn rates are as per industry standards.  

The other reason why Maxis is preferred by many analysts and fund managers is its strong cashflow position and net profit.  

For the first quarter ended March 31, 2003, Maxis turned in RM289mil in net profit although slightly lower than the RM301mil reported a year ago.  

“You can have a growing cashflow and flat profits but I would not look at that negatively for more cashflow means likely dividends,'' said an analyst. 

According to a consensus of 19 analysts polled by a research company, Maxis is expected to post RM1.06bil in net profit for the FY2003 on the back of RM4.3bil turnover. Earnings per share is forecast at 43 sen.  

A research house made no qualm saying that Maxis was one of its top five picks on the KLSE, along the likes of Malayan Banking Bhd, Telekom Malaysia Bhd and Tenaga Nasional Bhd.  

Those who bought Maxis shares during the IPO are certainly happy with their stock choice. It closed at RM5.90 on Friday. The company had also paid 21 sen gross dividend last year.  

But what is considered the fair value of the stock at this juncture?  

An analyst said there was no price target if the overall market remained strong as there could be a run-up in share price.  

More so, Maxis is fundamentally a strong company.  

Another analyst felt that a 15% upside in the stock price could not be discounted, provided the market momentum continued.  

In comparison with regional peers, Maxis is considered not cheap, given that regional telcos are trading at 10-11 times price earnings (PE) ratio for 2003 while Maxis is about 13-14 times. 

Among local counterparts, it has attractive multiples: PE of 13-14 times for 2003 and 10-11 for 2004, while that of DiGi is at 22 and 19 times respectively, and Telekom in the high 20s. 

Maxis may be a good growth story but there certainly are concerns and challenges, too.  

For one, branding may not be seen as an issue by many, but to some analysts it is a concern. This is so since there is a lawsuit over the use of the “Maxis'' name.  

But it is reported that the company feels the “risk is quite manageable for it has spent so much in building up the Maxis brand.''  

Its chief executive Datuk Jamaludin Ibrahim is reported to have said: ''Maxis does not see any risk from the lawsuit being taken by little-known company Maxis Sdn Bhd over the use of Maxis name in the telecommunications group.”  

One other concern of the investment community is over the integration of Maxis and TimeCel. How fast can it be done and whether Maxis, while doing its own integration, can capitalise on the window of opportunity arising from the merger of Celcom and TM Cellular.  

The other challenge for Maxis is when subscriber growth begins to slow down and hits saturation in two years. 

“The challenge then would be how to increase the average revenue per user (arpus) and what innovative packages can be introduced for a larger share of the wallet,'' said an analyst.  

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