Affin Hwang maintains ‘netural’ on telcos, Maxis is top pick

KUALA LUMPUR: Maxis’ performance is expected to outpace that of its peers in 2020, despite performing the worst financially in 2019 with a 15% decline in net profit, says Affin Hwang Capital research.

The research house has a neutral outlook on the sector while Maxis is now its preferred pick.

According to the research house, the telcos’ fortunes are expected to turn when Maxis’ service revenue outpaces its cost increases even as Digi and TM see earnings dips due to declining service revenue.

In the final quarter of 2019, Maxis grew its cellular subs by 3.2% year-on-year while Celcom’s cellular subs dropped 7.8% y-o-y and Digi’s was 3.3% lower.

“Maxis’ outperformance was, in our view, driven by its strong branding in the postpaid segment and its active marketing push for entry-level postpaid packages,” said Affin Hwang.

It added that maxis’ ex-wholesale service revenue posted three consecutive quarters of growth due to the increase in the number of subs, and despite declining postpaid average revenue per user.

In 2019, Maxis and Digi posted lower profits due to lower service revenue and higher operating/depreciation charges.

Maxis outperformed its peers in terms of revenue growth in Malaysian operations but underperformed on earnings realisation due to high upfront costs relating to its aggressive expansion plans.

Maxis has a positive earnings guidance, forecasting a flat to single-digit increase in its 2020 Ebitda while Digi expects 2020 Ebitda to be flat to a low single-digit decline.

Meanwhile, TM expects lower revenue and gave a cautious 2020 Ebit guidance of “over RM1bil” while Axiata remained positive and guided for 4% to 5.5% growth in 2020 Ebitda.

Source: TheStar