PETALING JAYA: Unperturbed by consolidation within the industry, Maxis Bhd says it will continue to look at inorganic expansion, especially in the enterprise segment which is key to its convergence strategy.
The mobile telecommunications services provider reckons while the proposed merger of its peers, namely Digi.com Bhd and Celcom Axiata Bhd, could affect its network standing and commercial execution, its overall convergence strategy, which has already factored in an industry consolidation, remains intact.
In a recent conference call with analysts, Maxis’ management said the group remained confident that it could maintain its competitive edge as the leading convergence player in the market.
The group said it would continue to focus on good customer experience and innovative products to differentiate itself from its peers.
According to UOB Kay Hian Research, Maxis was open to mergers and acquisitions (M&A) as part of its long-term strategy.
“It is receptive to any strategic M&A opportunities in the future. This is in line with its long-term growth strategy, ” the brokerage said, noting the Digi-Celcom merger would have minimal impact on the 20-year agreement (to jointly develop and share fibre infrastructure in Malaysia) signed between the Big 3 telcos.
Maxis noted home broadband services would be its key growth engine.
The group, which had rolled out fibre to about 100,000 homes, had targeted to add another 200,000 fibre homes pass by end-2022 under the National Digital and Infrastructure Plan (Jendela). This would form part of the 2.5 million fibre premises targeted under Phase 1 of Jendela which would raise the total number of fibre premises to 7.5 million by end-2022.
Meanwhile, Maxis guided that its full-year 2021 capital expenditure would be similar to the 2020 level at RM1.25bil, given its on-going investment in network optimisation and enterprise business segment growth.
UOB Kay Hian Research maintained its “hold” call on Maxis, with an unchanged target price of RM5.25, based on discounted cash flow (DCF) valuation.
“Near-term earnings will remain resilient given its superior network offering. In addition, the merger of Digi-Celcom may provide a near-term advantage to Maxis, ” the brokerage said in its report yesterday.
“We believe the biggest threat to Maxis is a single 5G special purpose vehicle and lease model. This may see Maxis losing its competitive edge in providing superior network coverage, ” it added.
RHB Research was also “neutral” on Maxis, with an unchanged target price of RM5.
“While core earnings should see a rebound in financial year ending Dec 31,2021 (FY21), the earnings before interest, tax, depreciation and amortisation (ebitda) margin should be crimped by lower wholesale revenue, tight competition, and enterprise investments, while partly offset by cost savings, ” RHB Research said.
“We believe a wholesale 5G model and the merger of its rivals would mar the group’s enterprise and convergence ambitions, ” it added.
Maxis’ net profit slipped 6.4% year-on-year (y-o-y) to RM334mil for the first quarter ended March 31,2021, as revenue declined 4.8% y-o-y to RM2.23bil.
CGS-CIMB Research maintained a “hold” call on Maxis, with a lower target price of RM4.80, compared with RM4.90 previously. This followed the brokerage’s move to reduce its FY21-FY23 earnings forecast for the company.
Similarly, TA Research also cut its DCF-based target price for Maxis to RM5.05 from RM5.12 previously, following a reduction in its earnings forecasts for the company.
However, the brokerage maintained a “buy” on Maxis.
“We remain positive for a recovery in overall service revenue, underpinned by less restrictive movement control order, and continued growth from the fixed broadband and enterprise segments alongside accelerating digitalisation, ” TA Research said.