Maxis said the spectrum was offered by the Malaysian Communications and Multimedia Commission for a lump sump full settlement fee of RM816.75mil.
KUALA LUMPUR: AmInvestment Research is maintaining its Hold recommendation on Maxis with unchanged forecasts and a discounted cashflow (DCF) derived fair value of RM6.22 a share.
It said on Wednesday this implied an FY17F enterprise value/ earnings before interest, tax, depreciation and amortisation (EV/Ebitda) of 12 times at parity to its three-year average.
Maxis has completed the private placement of 300 million new shares at the price of RM5.52 a share, representing a 9% to the weighted average of the past of five market days and a 6% discount to the closing price last Friday.
“As we have highlighted yesterday, the RM1.7bil placement, conducted via book-building exercise by CIMB and Credit Suisse, will not have a significant impact to Maxis’ EPS as the interest cost savings at an average rate of 5% from the proceeds would mostly offset the dilution arising from the 4% expansion of Maxis’ share base,” it said.
AmInvest Research said the main reason for the exercise was to de-gear, as the group’s FY17F net debt/EBITDA has improved from 1.8 times to 1.5 times.
This provides the sufficient leverage to fund improvements to its service quality and prepare for future spectrum assignment fees, mainly the much sought-after 700MHz band and subsequently, the re-farming of the 2600MHz band.
“As highlighted in the past, we continue to caution that Maxis may also opt to reduce its dividend payout, which declined to 75% in 1QFY17 and FY16 from 86% in FY15,” it said.
Recall earlier this year, Axiata, which had a net debt/EBITDA of two times, cut its dividend payout from 85% to 50% for the next two years.
“For now, we maintain our DPS assumptions, based on 65% of Maxis’ free cash flows, which translate to a reasonable yield of 3%. Nevertheless, there is a risk that prospective dividend payouts may be lowered on higher-than-expected capex or spectrum fees,” it said.
AmInvest Research said the revenue trajectory for Maxis remains unexciting given the continued price wars being waged by its peers.
Against the backdrop of high rotational churn and price-focused competition, management maintains its guidance for a FY17F flat normalised Ebitda.
Since 2Q2015, Maxis’ prepaid subscriber base has fallen by 1.2 million or 12% with no end in sight yet for the haemorrhage.
“In mitigation, we note that even with Maxis’ higher priced packages vs. its peers, the group still managed to add postpaid customers by 22,000 to three million with its best-of-class customer experience and service connectivity.
“The stock’s FY17F EV/Ebitda of 11 times is almost at parity to its three-year average, while dividend yields are decent at 3%,” it said.
Limited time offer:
Just RM5 per month.
