It aims to be the leader in enterprise fixed connectivity, managed services, cloud services and IoT solutions.
KUALA LUMPUR: CIMB Equities Research is maintaining its Reduce call for Maxis Bhd
and unchanged target price at RM5.10.
It said on Monday it cut the telco’s FY19/20F earnings before interest, tax, depreciation and amortisation (Ebitda) by 1.5%/2.0% and a larger 8.2%/11.1% for core EPS, mainly due to higher depreciation.
“A key de-rating catalyst is declining FY19F earnings. Maxis’s FY19F enterprise vale/operating free cash flow (EV/OpFCF) of 23.6 times is at a 67% premium over the Asean telco average. Upside risks: improved sales growth, less intense competition and cost control,” it said.
CIMB Research said Maxis’ 4Q18 Ebitda fell a substantial 26.6% on-quarter (-26.6% on-year) due to a spike in opex.
Higher depreciation and effective tax rate further dragged core EPS, which plunged by 50.0% on-quarter (-50.1% on-year).
“FY18 core EPS was below expectations, forming only 90%/91% (Ebitda: 96%/95%) of our/Bloomberg consensus FY18 forecasts,” it said.
Maxis’s FY19 guidance is for service revenue/Ebitda to fall by low/mid single-digit, mainly due to the termination of the U Mobile 3G RAN sharing deal and for base/growth capex of RM1bil/RM1bil (over three years).
Its 4Q18 mobile service revenue inched up 1.2% on-quarter (+0.1% on-year), better than Digi’s +0.5% on-quarter.
Postpaid revenue grew a healthy 2.7% on-quarter (+5.9% on-year), driven by strong subs growth (+2.6% on-quarter), while average revenue per user (ARPU) was also up 1.1% on-quarter (- 2.1% on-year).
Meanwhile, prepaid revenue further declined, albeit moderately by -0.7% on-quarter (-6.4% on-year), as subs fell 0.4% on-quarter owing to SIM consolidation and pre-to-postpaid migration. Prepaid ARPU was constant on-quarter at RM42 (+2.4% on-year).
Ebitda margin (on service revenue) was down 14.2% pts on-quarter (-13.9% pts on-year) in 4Q18 to 37.5%.
Maxis reported that it incurred RM250m in one-off operational cost for a) investment in the launch of Fibrenation (including for retention initiatives), b) mobilisation of enterprise business growth opportunities, c) network improvement/optimisation, and d) increased O&M expenses from investment for productivity programmes.
“At its 4Q18 conference call, Maxis presented its new strategy, i.e. to transform from a consumer and mobile-centric telco into a leading converged communications and digital services company.
“It aims to be the leader in enterprise fixed connectivity, managed services, cloud services and IoT solutions, which has an addressable market size of RM20bil to RM25bil. At the same time, it targets to attain RM1bil in cost savings over three years,” it said.
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