PETALING JAYA: Maxis Bhd
’s shares extended their gain yesterday following its report of strong earnings growth for the first quarter ended March 31, 2024 (1Q24).
Rising for the third consecutive trading day, the telecommunications company’s counter closed seven sen higher at RM3.79 yesterday.
Maxis last Friday reported a 10% increase in net profit to RM353mil for 1Q24 from RM320mil in 1Q23 on higher service revenue and efficient cost management.
The company declared a first interim dividend of four sen per share for the quarter under review.
The results were largely in line with consensus estimates, with its net profit accounting for about 26.3% of Bloomberg medium full-year forecasts.
Some analysts are, however, not so bullish about Maxis’ prospects, citing the lack of growth catalysts, as reflected in the management’s guidance for a low single-digit increase in service revenue through 2024.
Public Investment Bank Research (PublicInvest), for instance, noted although Maxis’ home fibre has been delivering double-digit subscribers as well as revenue growth, its contribution to the group revenue was still relatively small at less than 10%.
“Given the intense competition in the home broadband space, we reckon profitability will remain low at this juncture,” the brokerage said.
“Enterprise business is also seen as a next growth area but for 2024, we believe the adoption rate of digitalisation among the small to medium enterprises is not likely to be encouraging, particularly in the first half of 2024 as the optimism in the domestic economy as well as business confidence is not considered full-blown yet,” it added.
Given the lack of growth catalyst, PublicInvest said it was projecting an earnings growth of 4% for Maxis 2024. It maintained its “neutral” stance on Maxis, with an unchanged target price of RM3.90.
Meanwhile, CGS International (CGSI) Research reiterated its “hold” call on Maxis, citing limited catalysts. It also lowered its target price for Maxis to RM3.84 from RM4 previously.
“With the 5G network ownership and structure issue yet to be concluded, mobile operators including Maxis are in a holding pattern. This means there will likely be less capital expenditure (capex) spend as well as slower product rollout until there is certainty on this matter,” the brokerage said.
CGSI Research said until the 5G network rollout was completed, Maxis would incur rentals to the first network for access to the 5G network.
“Delays in the conclusion of the 5G issue will result in longer rental period for Maxis, albeit at potentially lower rental costs versus our current assumptions, and a push out in its capex spend,” it said.
Also recommending “hold” on Maxis, Hong Leong Investment Bank (HLIB) Research said the company’s decision on 5G strategy, which could impact dividend, would pose a near-term uncertainty on its prospects.
HLIB Research reduced its target price for Maxis to RM3.93 from RM3.97 previously.
Maxis had maintained its guidance for service revenue to grow by low single digits, and capex this year at less than RM1bil.
TA Research kept its “sell” call on Maxis, with an unchanged target price of RM3.70.
“Overall, we expect the management to remain prudent on the dividend prospects, given that the uncertainties remain on the mechanics of the transition from single wholesale network to dual wholesale network,” the brokerage said.
