Affin Hwang maintains sell on Maxis, raises TP to RM5.05

KUALA LUMPUR: Affin Hwang Capital research maintained its sell call on Maxis Bhd with a higher target price of RM5.05 from RM5 previously.

The research house said Maxis’ 1Q19 earnings results were broadly within its and consensus expectations, accounting for 24% of full-year earnings forecasts.

“Operationally, Maxis appears fine – subscriber base and ARPU were relatively unchanged yoy as an increased in postpaid subscribers (absolute and proportionate) had more than offset
decline in prepaid subscribers and slippage in postpaid ARPU,” it said.

In its recently announced 1Q19 earnings, Maxis’ core net profit fell 21% year-on-year (y-o-y) to RM409mil on lower service revenue ahd higher operating and depreciation costs.

“The decline in Maxis’ 1Q19 service revenue was largely due to lower wholesale revenue (-
RM49m yoy to RM71m) and lower Mobile Termination Rates (MTR), partly mitigated by higher numbers of postpaid subscribers (Fig 2).

“On the cost front, higher staff cost, operation & maintenance expenses, and rising depreciation, finance costs have weakened Maxis’ profitability. The increase in costs is partly
due to its ambitious business expansion plans,” said Affin Hwang.

On future plans, the research house noted that Maxis’ management has maintained its strategy to become the No.1 convergence player, and focus on growing its fixed broadband and enterprise businesses.

Maxis has added 31k fibre users in 1Q19, lifting its total subscribers to 280k.

Elsewhere, management maintained its 2019 guidance, expecting service revenue to fall by low single digit and EBITDA to decline by mid-single digit, the research house added.

Source : TheStar