KUALA LUMPUR: CIMB Equities Research is maintaining its Neutral sector rating and Hold rating on all Maxis Bhd
, Digi.com Bhd, Axiata Group Bhd’s unit Celcom and Telekom Malaysia Bhd (TM).
It said on Wednesday while competition has started to stabilise/ease in postpaid/prepaid, it believes the market is still over-crowded. This will cap any major recovery in industry revenue growth in 2H16 and 2017.
“There are also regulatory uncertainties on the 700MHz spectrum reallocation by year-end. In addition, the sector is now trading at a 37% premium over the Asean average FY17F EV/OpFCF (enterprise value/operating free cashflow) of 14.3 times, though yields are decent at 3.3%,” it said.
CIMB Research said after a weak 1Q16, industry mobile service revenue fell by a further 2.4% on-quarter in 2Q16, largely due to continued intense competition which resulted in weaker data monetisation.
On-year, the mobile industry recorded its biggest ever drop in service revenue, down 5.9%.
In contrast, the fixed business performed well, with TM posting a 7.4% on-year growth ex- Webe (including Webe, +7.2%), driven by higher revenue across its Data (B2B), Others (Managed Account, ICT projects, USP) and Internet businesses.
DiGi held its mobile service revenue steady on-quarter (-2.0% on-year) in 2Q16, while Maxis saw the biggest decline, down 4.2% on-quarter (-4.3% on-year), mainly due to lower subs.
Celcom’s revenue fell 2.3% on-quarter (-11.5% on-year) due to the residual effects from its VAS platform migration.
DiGi’s revenue market share (RMS) rose a further 0.7% pts on-quarter to 31.9%, cementing its spot as Malaysia’s second largest mobile operator.
Meanwhile, Celcom’s RMS inched up 0.1% pt to 30.4%, while Maxis’s fell 0.7% pt to 37.8%.
After three weak quarters, DiGi’s EBITDA jumped 4.5% on-quarter (-6.6% on-year) in 2Q16 as margin rose 1.8% pts on-quarter to 44.4%.
Celcom’s and Maxis’s EBITDA fell by 5.3% on-quarter (-14.4% on-year) and 13.0% on-quarter (-9.4% on-year), respectively. Besides weaker revenue,
Celcom’s margin slipped 2.6% pts to 38.2%, while Maxis’s margin slumped 6.2% pts to 47.9% on-quarter.
DiGi’s EBITDA market share rose 3.1% pts to a record high of 30.9%, while Celcom’s improved 0.2% pts to 26.9% and Maxis’s was down 3.3% pts to 42.2%.
After competition spiked in 2Q16, the postpaid market has stabilised so far into 3Q16, with few new promos launched.
However, all previous offers are still valid and there have been no big price increases. In prepaid, telcos have taken further steps to improve monetisation for recent new plans launched.
Maxis has also turned less aggressive in the migrant worker market, raising tariffs in four out of the five key IDD call destinations.
“These prepaid developments suggest an incrementally better revenue outlook for 2H16,” CIMB Research said.
Limited time offer:
Just RM5 per month.
