KUALA LUMPUR: CIMB Research has trimmed Maxis Bhd
’s FY17/18 earnings before interest, tax, depreciation and amortisation (EBITDA) by 5.5%/5.0% respectively and cut its target price by 6.3% to RM6.
“Maxis’s weak operational performance in the first quarter 2016 indicates potential revenue pressure in the future. Although its revised MaxisOne plans (launched today) could help it to manage churn better, we believe revenues may be diluted by subs downtrading upon contract renewals.
“We keep our FY16 EBITDA and core net profit largely unchanged but cut FY17/18 EBITDA by 5.5%/5.0% respectively, largely due to lower mobile revenues,” CIMB said in a report.
In the first quarter ended March 31, Maxis’s earnings rose 26.3% to RM518mil from RM410mil a year ago. Normalised EBITDA grew 6.7% to RM1.156bil from RM1.083bil, excluding unrealised foreign exchange (forex) impact.
CIMB said Maxis first quarter 2016 EBITDA was up 3.1% quarter-on-quarter due to higher margin. Its core net profit was up a milder 1.5% quarter-on-quarter due to higher normalised depreciation and interest cost.
“This was in line with expectations, with first quarter EBITDA/core net profit at 26%/25% of our FY16 estimates (consensus: 26%/25%). As expected, a 5 sen interim dividend per share was declared,” it added.
The research house said Maxis continued to accelerate its 4G rollout, with 74% coverage in first quarter. With its rivals pushing hard to narrow the 3G/4G network gap, CIMB expects Maxis to sustain high capex of RM1.3bil/RM1.2bil in FY16/17 to stay ahead.
“Post-earnings revision, we cut our discounted cashflow-based target price by 6.3% to RM6 and maintain a ‘hold’ rating on Maxis. Due to intense market competition, we see EBITDA and core earnings per share declining at a three-year CAGR of 0.9% and 2.6%, respectively.
“Dividend yields are decent but not outstanding at 3.4% per annum. We prefer Axiata among Malaysian telcos,” CIMB said.
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