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Company Update
Earnings & Valuation Summary
FYE 31 Dec 2019 2020 2021E 2022E 2023E Revenue (RMm) 9,313.0 8,965.0 9,329.9 9,588.7 9,881.3 EBITDA (RMm) 3,833.0 3,727.0 3,785.1 3,894.0 3,996.7 Pretax profit (RMm) 2,027.0 1,852.0 1,893.6 1,990.5 2,086.5 Net profit (RMm) 1,512.0 1,382.0 1,439.1 1,512.8 1,585.7 EPS (sen) 19.3 17.7 18.4 19.3 20.3 PER (x) 24.3 26.6 25.5 24.3 23.2 Core net profit (RMm) 1,493.0 1,378.0 1,439.1 1,512.8 1,585.7 Core EPS (sen) 19.1 17.6 18.4 19.3 20.3 Core EPS growth (%) (15.6) (7.7) 4.4 5.1 4.8 Core PER (x) 24.6 26.7 25.5 24.3 23.2 Net DPS (sen) 20.0 17.0 18.4 19.3 20.0 Dividend Yield (%) 4.3 3.6 3.9 4.1 4.3 EV/EBITDA 12.2 12.5 12.3 11.9 11.6 Chg in EPS (%) - - - Affin/Consensus (x) 1.0 1.0 0.9 Source: Company, Bloomberg, Affin Hwang forecasts
RM4.70 @ 18 May 2021
Share price performance
1M 3M 12M Absolute (%) 0.0 0.9 -11.1 Rel KLCI (%) 1.1 -0.1 -21.2
BUY HOLD SELL
Consensus 4 15 4 Source: Bloomberg
Stock Data
Sector Telecom
Issued shares (m) 7,823.2
Mkt cap (RMm)/(US$m) 36,769/8,915
Avg daily vol - 6mth (m) 1.8
52-wk range (RM) 4.45-5.59
Est free float 12.3%
Stock Beta 0.76
Net cash/(debt) (RMm) (9,127)
ROE (CY21E) 20.4%
Derivatives No
Shariah Compliant Yes
Key Shareholders
BGSM Equity 62.3%
EPF 12.0%
PNB 10.1% Source: Affin Hwang, Bloomberg
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(RM)
Isaac Chow
T (603) 2146 7536
Maxis Berhad (MAXIS MK)
HOLD (maintain) Price Target: RM5.00 Up/Downside: 6.4% Previous Target (Rating): RM5.00 (HOLD)
Holding up just fine
Maxis continues to gain mobile market share. While the lower-priced
products and expansion into the mass-market segments have diluted
Maxis’ ARPU, the net impact to service revenue is still positive
Revenue from the enterprise and home fibre segments are trending up well
and Maxis remains steadfast on its MAX strategy. The group is, in our view,
well positioned to adapt to the fast-changing telco market
We forecast Maxis’ EPS to grow by 4-5% pa in 2021-23 driven by a gradual
recovery in mobile service revenue and higher enterprise / home fibre
contributions. At 24x 2022E PER, valuation looks fair to us. Maintain HOLD.
Competition in the mobile market is stiff, but rational
Maxis in 2019 had overtaken Digi as the market leader by number of subscribers. Its
Hotlink Postpaid products, Hotlink Prepaid Unlimited and an aggressive push into the
previous underserved segments (B40, students, foreign workers) have lifted the
number of subscribers. Some competitors have since launched their own prepaid
unlimited packages. After assessing the offerings and packages in the markets, we
believe that competition is stiff, but not irrational.
Enterprise and home fibre businesses continue to grow
The enterprise segment contributed RM128-154m of revenue per quarter during
1Q20-1Q21, a notable increase from RM70m during 1Q18-2Q19. Management
remains positive on the enterprise business outlook. While the competition is rising,
Maxis believe its 3-year head-start and extensive product offerings give the group a
strong competitive advantage over some peers. Elsewhere, the home fibre business
and wireless broadband (WBB) is trending up positively, driven by robust underlying
demand and modest competition.
Management stick to the MAX strategy, and we maintain our HOLD rating
Amid the challenges and opportunities brought forth by a number of events (Covid-
19 pandemic, Jaringan PRIHTAIN programme, JENDELA, 5G SPV, potential
Celcom-Digi merger), management remains steadfast on its MAX strategy. With a
widened customer base and broadened product offerings, Maxis is well-positioned
to adapt to changes. All in, we forecast Maxis to register 4-5% earnings growth in
2021-23 driven by a recovery in mobile service revenue and higher enterprise / home
fibre revenue. At 24x 2022E PER, Maxis now trades below its 7-year average PER
of 27x, which looks fair to us, considering the weak economic backdrop.
19 May 2021
“With a broadened customer base and an exciting product offering, Maxis is well positioned to adapt to changes in the telco market”
2
Maxis has recorded continuous growth in the number of postpaid subs, partly attributable to good take-up for the Hotlink Postpaid Flex
Under the leadership of new senior management, Maxis has placed a greater emphasis on the previously underserved market segments (ie, B40 group, students, foreign
workers)
Competition in the mobile segment is stiff but rational
In 2019, Maxis passed Digi to become the largest mobile player by no of subs
Maxis had in 2019 overtaken Digi as Malaysia’s mobile market leader by number of
subscribers with a market share of 28% (Fig 11). Today, Maxis commands the largest
market share in the postpaid segment and has the 2nd highest share in the prepaid
market, where Digi remains the market leader.
In the postpaid segment, Maxis has been continuously growing the no of subs
Capitalizing on the prepaid-to-postpaid migration trend, Maxis has recorded
continuous growth in the number of postpaid subscribers since 4Q16 (Fig 1, except
2Q20). The group has been able to strengthen its position as the market leader in
the postpaid segment by offering various competitive packages such as the entry-
level Hotlink Postpaid Flex (launched in Feb 2018) while maintaining good network
quality and customer service. Elsewhere, the increase in number of corporate clients
due to Maxis’ strong push into the enterprise segment has also contributed to the
growth in number of postpaid subscribers.
In the prepaid segment, Maxis has pushed into the previously underserved
market segments
Broadly, the three top mobile operators have all reported declining numbers of
prepaid subscribers in the recent years due to the migration to the postpaid segment,
as well as the decrease in number of foreign workers. The prepaid-to-postpaid
migration was attributable to strong demand for data, subsidized smartphones with
low upfront fees, as well as the introduction of entry-level postpaid packages.
Maxis has fared relatively well vis-à-vis its competitors during the recent quarters
(2018-to-present) due to management’s strategy to push into the previously
underserved market segments. Under the leadership of new senior management
(Mr. Gokhan Ogut was appointed as Maxis COO effective September 2018 before
his promotion to CEO in May 2019; Mr. Norman Wayne Treeby was appointed as
Maxis CFO in May 2018), Maxis has put a stronger focus on the mass market (B40
group, students, foreign workers) which they previously underserved.
Maxis has expanded its marketing efforts, distribution channels and product offerings
to target these segments and as a result, the group has gained some prepaid market
shares from its competitors. Importantly, management believe that these segments
will generate positive cash flow without jeopardizing its service quality and brand
imagine.
Fig 1: Maxis has recorded continuous growth in postpaid subs,
except 2Q20 due to a stringent lockdown
Fig 2: Maxis has fared relatively well vis-à-vis its competitors
during the recent quarters
Source: Company data, Affin Hwang Source: Company data, Affin Hwang
We do not expect significant down trading, but the Hotlink Postpaid entry level
packages should continue to dilute the postpaid ARPU
Maxis’ postpaid ARPU has declined noticeably during the recent years (Fig 3) due to
the adoption of MFRS15 effective 2018, lower wholesale revenue following the
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In the prepaid segment, Maxis and some of its competitors have launched their respective unlimited data plans. The low speed should prevent these plans from cannibalizing their higher-priced prepaid plans with faster speed
Looking ahead, we anticipate Maxis’ postpaid APRU to decline at a slower pace
Under the Jaringan Prihatin programme, the eligible recipients (c.8.4m) can choose to receive a monthly rebate of RM15 for prepaid and postpaid plans (for up to 1 year) or RM300 device subsidy to purchase mobile smartphone devices
termination of its 3G network sharing agreement with U-Mobile in Dec-2018 (the
agreement contributed to c.RM100m per quarter during 2018), cut in Mobile
Termination Rate, decline in roaming revenue during the recent lockdowns and
dilution from the Hotlink Postpaid entry-level packages. Looking ahead, we anticipate
Maxis’ postpaid ARPU to decline at a slower pace due to the dilution of Hotlink
Postpaid plans (RM40/month for 16GB or RM60/month for 30GB with device), to be
cushioned by higher roaming revenue when the borders reopen in 2022.
Fig 3: Maxis’ postpaid ARPU has declined over the years due to
adoption of MFRS15, lower wholesale revenue from U-Mobile and
dilution from its Hotlink Postpaid entry level packages
Fig 4: Maxis’ mobile service revenue has been slipping during
2020-1Q21 due to lower roaming revenue and decline in MTR;
looking ahead, we expect its revenue to recover gradually
Source: Company Data, Affin Hwang Source: Company Data, Affin Hwang
Competition in the mobile segment is stiff, but not irrational
Assessing the various offerings and packages in the markets, we view the
competition as stiff, but not irrational. There are many niche products targeting
different market segments while the core postpaid packages are largely comparable.
For example, U-Mobile had in February 2020 launched the lowest priced postpaid
plan with unlimited data (Giler Unlimited GX68) with a promotional price of RM58.
However, the limitation of 5GB data for hotspots had decreased its allure. The ticket
price for U-Mobile’s other postpaid plans are largely comparable to the offerings from
the other three telcos. In the prepaid segments, Maxis and its competitors (ie, U-
Mobile and Celcom) have launched their respective unlimited data plans; however,
the low speed (3Mbps or 6Mbps) should prevent these plans from cannibalizing the
higher-priced prepaid plans with greater speed.
Maxis’ mobile service revenue has held up well during this difficult period; we
anticipate its revenue to recover gradually in the coming quarters
Maxis reported RM1.66-1.67bn of mobile service revenue in 4Q20 and 1Q21, c.6%
decline from the RM1.77bn in 3Q-4Q19 before the onset of Covid-19 pandemic due
to lower roaming revenue, cut in MTR and weakened domestic economy.
Considering the difficult market conditions and weakened domestic economy, Maxis’
performance is commendable. Overall, we believe Maxis’ mobile service revenue
has found a bottom, as the impact of the lockdown and slower economic growth are
largely reflected in the recent quarters. Looking ahead, we anticipate the
Government’s Jaringan PRIHATIN subsidies and special offers to support the near-
term service revenue growth while the gradual reopening of Malaysia’s borders in
2022 should lift is roaming revenue.
To recap, the RM3.5bn Jaringan Prihatin programme is aimed to assist in the
subscriptions of broadband internet plans and purchases of mobile smartphone
devices. Of the RM3.5bn, the government will spend RM2bn while 12 telcos and
service providers will work together to provide additional contribution amounting to
RM1.5bn, mainly in the form of free data. Approximately 8.4m Malaysians who have
qualified for Bantuan Prihatin Rakyat are eligible and they can choose to receive a
monthly rebate of RM15 for prepaid and postpaid plans (totaling RM180 for up to 1
year) or RM300 device subsidy for eligible households with children to equip their
children with a 4G smartphone or tablet.
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ARPUs
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Mobile Service Revenue
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RMm
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The enterprise revenue has slipped in 1Q21 due to lower mobilization charges and a lower number of completion / milestones hit during the MCO 2.0
Strong underlying demand fueled the increase in Maxis and TM Unifi’s broadband subs and supported their ARPUs
Enterprise and home fibre segments continue to grow
Covid-19 pandemic hit business confidence and affected enterprise segment
during 1H20; the business momentum has since picked-up
In 2018, Maxis laid out an ambitious strategy to become Malaysia’s leading ICT
converged solution providers. In 2019, the group began partnerships with Amazon
Web Services (AWS) and Cisco, whereby Maxis became part of Amazon’s Partner
Network to offer public cloud solutions and also, offering a range of Cisco’s managed
Software-Defined Wide Area Network (WAN) solutions. In 2020, Maxis added three
other players to its fold: Apple, Google and Microsoft. In the SME segment, Maxis
had formed a partnership with AmBank and launched the joint SME-in-a-Box offering,
which combines innovative digital and communication services together with a range
of flexible financial products and services in one-stop package for SME customers.
Maxis has reported growing revenue from the enterprise services (Fig 5), where
revenue now ranges between RM128m-154m per quarter between 1Q20-1Q21, a
notable increase from RM70m during 1Q18-2Q19. In 1H20, the Covid-19 pandemic
has affected the enterprise and SMEs’ business confidence, which led to a pause /
stop in making new investment. However, the business has since picked up starting
in 3Q20. Looking ahead, management remains positive on the enterprise segment’s
business outlook and expecting growth in the quarters ahead.
We are seeing higher competition ahead
Moving forward, we expect Maxis to see higher competition in the enterprise / SME
segments from the incumbent TM and Digi, who plan to expand their offerings.
Nevertheless, Maxis’ management believes their 3 years of head start and broad
product offerings give them a good competitive advantage over some competitors.
Also, Maxis may work together with some peers (ie, TM) who has a larger
infrastructure footprint but faces some challenges in other areas (ie, mobile solutions,
range of product offerings). A collaboration, if one materializes, will likely be positive
for these companies.
Fig 5: Revenue from the enterprise services has increased
notably from the 2018-1H19 level
Fig 6: Revenue from the home fibre segments continue to grow,
driven by an increase in no of subs and stable ARPU
* The disclosed amount is a subset of total enterprise contribution. The Enterprise, Maxis Business have a large number of postpaid subs and their revenue contributions are not reflected in this chart Source: Company data, Affin Hwang
Source: Company data, Affin Hwang
Maxis continues to grow the home fibre subs, but lagged TM Unifi
The positive underlying demand for fixed broadband continues to drive Maxis and
TM Unifi’s subscriber growth (Fig 7). Also, the strong demand for higher-speed
packages has led to a slight uptick in the industry’s ARPU during the recent quarters
(Fig 8) after many quarters of decline. Overall, both TM Unifi and Maxis’ fixed
broadband businesses are growing, but TM Unifi has outperformed Maxis in the
recent quarters due to its effective advertising and marketing campaigns and
attractive product offerings (ie, Unifi bundle with devices such as Unifi Plus Box or
Mesh Wi-Fi). Riding on the strong demand for home broadband, Maxis has also
pushed its wireless broadband (WBB) products to the areas without fibre coverage –
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the product is well received and the WBB subscribers grew strongly from 94k in 1Q20
to 138k in 1Q21 while ARPU remained stable at RM108 per month.
Looking ahead, we expect the fixed broadband market and its growth trajectory to
remain status quo, where underlying demand is firm, competition (including new
entrants) will remain rational and TM to maintain its leadership position due to its
extensive (and expanding) fibre infrastructure and effective marketing campaigns /
attractive product offerings.
Fig 7: Maxis and TM continues to add subs. That said, TM is
growing faster due to attractive offerings and good marketing
Fig 8: Maxis and TM Unifi have reported a slight uptick in the ARPUs
due to higher take-up for the higher-speed packages
Source: Company data, Affin Hwang Source: Company data, Affin Hwang
Sticking to the MAX strategy amid market changes
2021 has been a very eventful year for the telco sector
2021 is shaping up to be an eventful year for the telco sector: (i) the Covid-19
pandemic and lockdowns continue to affect consumer and business sentiments; (ii)
Malaysian Government’s RM2bn contribution to the Jaringan Prihatin programme is
one of the largest direct subsidies that targets the telecommunication segment; (iii)
the plan to roll out Malaysia’s 5G network under the government SPV, Digital
Nasional Berhad, will change the medium and long-term business outlook for the
industry; (iv) the proposed merger of Celcom and Digi, if materialized, will have an
impact on the sector; and (v) the ongoing JENDELA project and the implementation
MyDIGITAL Initiatives should lift the long-term demand for telco related services.
Maxis is sticking to the MAX strategy
Amid these changes, Maxis continues to implement its MAX strategy (Fig 9) whereby
the group envisages to become Malaysia’s leading converged communication and
digital services company for individuals, homes and businesses. To achieve the
aspiration, the group has allocated additional growth capex of RM1bn to be deployed
during 2019-2021 and scaled up its enterprise team that now employs more than 100
individuals to support its enterprise business.
Fig 9: Maxis’ MAX strategy
Source: Company Presentation Slide
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Maxis is unperturbed by the proposed Celcom-Digi merger and is continuing with its MAX
strategy
We believe most of the negative impact from Covid-19 and lockdown are now reflected in Maxis’ quarterly revenue. We anticipate the rollout of the Jaringan PRIHATIN programme to support its upcoming quarterly revenue
Maxis can participate in some of the JENDELA project tenders (ie, mobile infrastructures) where the contract winner will be compensated to carry out the project and assume ownership of the infrastructure after the
O&M period
From the cashflow perspective, the 5G SPV plan is positive for Maxis’s short-to-medium term outlook as the group can now save on 5G spectrum and infrastructure expenses
If it ain’t broke, don’t fix it
During the recent results briefing, management was asked about the implications of
a possible Celcom-Digi merger and whether Maxis will change its business strategy
in response to the merger (if materialized). To which, management shared that the
MAX strategy, implemented starting 2019, can fit into any major shift in the
telecommunication industry. Management has been expecting consolidation in the
domestic telecommunication sector and planned the MAX strategy accordingly.
Overall, Maxis is unperturbed by the proposed Celcom-Digi merger, and is continuing
with its strategy to become a leading converged solution provider in Malaysia, and is
not actively looking for M&A opportunities.
We concur; we believe Maxis is well-positioned to adapt to changes
We are positive on Maxis’ MAX strategy. With an expanded customer base
comprising individuals, homes and businesses (enterprises and SME) and larger
product offerings (mobile plans, fixed broadband and business solutions), we believe
Maxis is well-positioned to adapt to the changes. Whilst there are risks, we also see
opportunities in the new developments:
Covid-19 pandemic, the economic impact and government subsidy: The
Covid-19 pandemic and lockdowns have weakened consumer spending (mass
market) and business confidence. These have negatively affected Maxis’ mobile
service revenue in the recent quarters (Fig 4). On the flip side, the pandemic has
also accelerated the growth in digitization in the businesses and government
sectors, and increased the demand for fixed broadband and smart devices.
On balance, we believe most of the negatives (dismay roaming revenue, lower
number of foreign workers, cautious consumer spending in the mass markets)
are now reflected in Maxis’ quarterly revenue. Looking ahead, we anticipate the
rollout of the Jaringan PRIHATIN Programme in May 2021 will provide an
immediate lift to Maxis’ (and the sector’s) service revenue while the reopening
of Malaysia’s border and gradual economic recovery to support future service
revenue. Overall, the pace of the telco sector’s revenue improvement will hinge
on the severity of the Covid-19 pandemic and the pace of Malaysia’s economic
recovery;
JENDELA project: Broadly, Maxis and its peers are indirect beneficiaries of the
JENDELA project. Under the JENDELA project, 40% of the RM21bn budgeted
cost will be derived from MCMC’s Universal Service Provision (USP) funds with
the remaining 60% to be funded by industry players. As a NFP and NSP licenses
holder, Maxis can participate in some of the JENDELA project tenders (ie,
mobile infrastructure), where the contract winner will be compensated to carry
out the project and assume the ownership of the infrastructure after the
stipulated operation & maintenance period.
Elsewhere, an improved coverage of mobile and fixed broadband services in
suburban / rural areas and East Malaysia under a shared network should
improve user experience and provide positive (though marginal) revenue benefit
to the telco operators.
Digital Nasional Berhad, the 5G SPV: Details on Digital Nasional Berhad’s 5G
SPV plan (ie, funding mechanism, network architecture, wholesale prices,
coverage requirements, etc) are still scarce. As such, it is difficult to forecast the
financial impact on Maxis.
The government targets to launch 5G services in late-2021 and Maxis is eager
to be one of the earlier promotors. Taking a cue from the sequence of 4G LTE
launches back in 2013 (Maxis was the first launch on 1st January 2013, followed
by Celcom in April 2013, Digi in July 2013 and U Mobile in December 2013) and
management’s eagerness, we expect Maxis to be lead the pack again in the 5G
7
As Celcom and Digi are working on a possible merger, we expect Maxis to turn to other players such as TM and Time.COM to explore collaborative opportunities in the telecommunication industry
offerings. However, it is difficult to forecast the financial implications due to lack
of information. Back in 2013, Maxis had achieved 1.3% revenue growth (yoy)
and 2.3% growth in core net profit.
From a cash flow perspective, the 5G SPV plan is positive for Maxis’ short-to-
medium term outlook as the group can now save on spectrum fees and
infrastructure expenses. Additionally, Maxis may even benefit from possible
leasing of infrastructure to the 5G SPV.
In the long term, however, the sharing of a common 5G infrastructure may
reduce the existing telcos’ competitive edges (ownership of own spectrum and
investment in infrastructure), thereby increases the price competition between
the telcos and MNVOs.
Celcom-Digi merger: The proposed Celcom-Digi merger, if materialized, will
have a mixed impact on Maxis, in our opinion. On a brighter note, we expect the
merger to result in healthier price competition in the mobile market that should
benefit Maxis; on the flip side, the merged entity may have higher market share
(Fig 11), more spectrum (Fig 10) and larger financial muscle to strengthen their
mobile network and coverage, which may in turn affect Maxis’ competitive edge.
Notwithstanding the possible merger, we expect the three parties (Maxis, Digi
and Celcom) to proceed with their collaboration (signed in March 2021) to jointly
develop and share fibre infrastructure, allowing for faster and more efficient
deployment of fibre backhaul to base station. That said, we believe these parties
are unlikely to form further partnerships in the near term (when the merger
negotiations are ongoing) and Maxis may instead turn to other players such as
TM and Time.COM to explore other collaborative opportunities in telco industry.
Fig 10: Spectrum holdings by operators Fig 11: Mobile cellular subs market share by service providers
Source: MCMC, Affin Hwang Source: MCMC, Affin Hwang
Fig 12: The spike in Maxis’ net debt to EBITDA ratio during 2019
was partly due to the adoption of MFRS16
Fig 13: We forecast Maxis to incur higher capex in 2021-22 due
to some back-loaded / deferred spending of their growth capex
Source: Company data, Affin Hwang estimates Source: Company data, Affin Hwang estimates
1.71.9
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(x) Maxis' net debt to EBITDA
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1.60 1.601.50
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Tracking a higher earnings and taking into consideration a lower long-term capex requirement, we forecast Maxis to declare higher DPS of 19.3 sen and 20 sen in 2022-23E, translating to a yield of
4.1-4.3%
Earnings outlook, valuation and recommendation
We forecast 4-5% profit growth in 2021-23 on higher contribution from
enterprise and home fibre segments and stable mobile service revenue
Maxis reported RM334m of core net profit in 1Q21 (+4.7% qoq / -7.0% yoy),
representing 23% of our full-year earnings forecasts. We anticipate the group’s
earnings to improve in the coming quarters, driven by a gradual recovery in mobile
service revenue (supported by the Government’s Jaringan PRIHATIN programme)
and continuous growth in the enterprise and home fibre segments.
Looking into 2022-23, we forecast Maxis’ core net profit to grow by 4-5% per annum
(Fig 16), driven by higher enterprise and home fibre revenue (Fig 14), mild recovery
in mobile service revenue (in tandem with economic recovery) and stable EBIT
margin of 25-26% (Fig 15). Tracking higher earnings and taking into consideration a
lower long-term capex requirement, we expect Maxis to declare higher dividend per
share of 19.3 sen and 20.0 sen in 2022E and 2023E respectively, translating to
dividend yield of 4.1-4.3%.
Fig 14: We forecast mobile service revenue to stabilize while
enterprise and home fibre segments to drive revenue growth
Fig 15: We expect Maxis’ EBIT margin to hover between 25-26%
throughout 2021-23E
Source: Company data, Affin Hwang estimates Source: Company data, Affin Hwang estimates
Maintain HOLD with an unchanged price target of RM5.00
We maintain our HOLD rating on Maxis with an unchanged DCF-derived 12-month
price target of RM5.00. While we like Maxis for its superior network infrastructure,
positive 2021-23E earnings outlook and first-mover advantage in developing
converged solutions, these positive are offset by the uncertainties brought forth from
the 5G SPV, Celcom-Digi merger and the still-weak economic conditions. At 24x
2022E PER, Maxis’ valuation is a tad below its 7-year average PER of 27x, looks fair
to us, considering the weak economy backdrop and competitive mobile market.
Fig 16: We forecast Maxis’ core net profit to bottom in 2020 and
grow by 4-5% pa during 2021-23E
Fig 17: At 24x 2022E PER, Maxis’ valuation is a tad below its 7-
year average PER of 27x, which looks fair to us, considering the
competitive market condition
Source: Company data, Affin Hwang estimates Source: Bloomberg, Company data, Affin Hwang estimates
0
2,000
4,000
6,000
8,000
10,000
12,000
2017
2018
2019
2020
2021E
2022E
2023E
(RMm)Maxis' revenue breakdown
Mobile Enterprise Home Fibre Device and others
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
0
500
1,000
1,500
2,000
2,500
3,000
3,5002016
2017
2018
2019
2020
2021E
2022E
2023E
(RMm) Maxis' EBIT and EBIT margin
EBIT EBIT margin (RHS)
1.96
2.07
1.77
1.491.38 1.44 1.51 1.59
0.00
0.50
1.00
1.50
2.00
2.50
2016
2017
2018
2019
2020
2021E
2022E
2023E
(RMbn) Maxis' core net profit
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Ja
n-1
4
Ju
l-1
4
Ja
n-1
5
Ju
l-1
5
Ja
n-1
6
Ju
l-1
6
Ja
n-1
7
Ju
l-1
7
Ja
n-1
8
Ju
l-1
8
Ja
n-1
9
Ju
l-1
9
Ja
n-2
0
Ju
l-2
0
Ja
n-2
1
(x) Maxis' 1-year forward PER
+1 SD = 30.7x
Avg = 27.0x
-1 SD = 23.2x
9
Fig 18: Peer comparison
Closing prices as at 18th May 2021
Source: Bloomberg, Affin Hwang estimates
Key risks to our view
Upside risks are stronger-than-expected revenue / earnings growth, increase in
dividend payout, value-accretive M&As and establishment of strategic business
collaboration with other telcos. Downside risks are earnings disappointments and
negative regulatory changes.
Company BBG
Ticker
Rating Share
Price
TP Mkt
Cap
Year
End
EV/EBITDA
(x)
P/BV
(x)
(RM) (RM) (RMm) CY21E CY22E CY21E CY22E CY21E CY20 CY21E CY22E CY21E CY22E
Axiata AXIATA MK HOLD 3.72 4.00 34,109 Dec 33.6 30.2 288.9 11.1 5.7 1.9 6.4 7.0 2.5 2.8
Digi DIGI MK BUY 4.30 4.60 33,433 Dec 29.4 28.1 (7.0) 4.7 13.2 53.8 187.5 196.4 3.4 3.6
Maxis MAXIS MK HOLD 4.70 5.00 36,756 Dec 25.5 24.3 4.4 5.1 12.3 5.2 20.4 21.5 3.9 4.1
TM T MK BUY 5.88 7.20 22,143 Dec 20.7 19.4 7.5 6.6 6.7 3.1 14.4 14.3 2.4 2.6
Average 27.3 25.5 73.5 6.9 9.5 16.0 57.2 59.8 3.1 3.3
DY (%)Core PER
(x)
Core EPS growth
(%)
ROE (%)
10
Financial Summary – Maxis Berhad
Source: Company, Affin Hwang estimates
Profit & Loss Statement Key Financial Ratios and Margins
FYE Dec (RMm) 2019 2020 2021E 2022E 2023E FYE Dec (RMm) 2019 2020 2021E 2022E 2023E
Total revenue 9,313 8,965 9,330 9,589 9,881 Growth
Operating expenses (5,480) (5,238) (5,545) (5,695) (5,885) Revenue (%) 1.3 (3.7) 4.1 2.8 3.1
EBITDA 3,833 3,727 3,785 3,894 3,997 EBITDA (%) 1.8 (2.8) 1.6 2.9 2.6
Depreciation (1,379) (1,475) (1,457) (1,468) (1,476) Core net profit (%) (15.5) (7.7) 4.4 5.1 4.8
Amortisation - - - - -
EBIT 2,454 2,252 2,328 2,426 2,521 Profitability
Net interest income/(expense) (452) (405) (434) (435) (434) EBITDA margin (%) 41.2 41.6 40.6 40.6 40.4
Associates' contribution - - - - - PBT margin (%) 21.5 20.6 20.3 20.8 21.1
Others - - - - - Net profit margin (%) 16.0 15.4 15.4 15.8 16.0
Pretax profit 2,002 1,847 1,894 1,991 2,086 Effective tax rate (%) 25.7 25.4 24.0 24.0 24.0
Tax (515) (470) (454) (478) (501) ROA (%) 19.1 17.8 17.9 18.5 19.0
Minority interest - - - - - Core ROE (%) 21.1 19.6 20.4 21.5 22.5
Net profit 1,487 1,377 1,439 1,513 1,586 ROCE (%) 15.5 13.3 13.8 14.4 15.0
Dividend payout ratio (%) 103.4 100.0 100.0 100.0 98.6
Balance Sheet Statement
FYE Dec (RMm) 2019 2020 2021E 2022E 2023E Liquidity
Fixed assets 4,922 4,931 5,074 5,206 5,230 Current ratio (x) 0.5 0.6 0.6 0.6 0.6
Other long term assets 14,415 14,179 14,179 14,179 14,179 Op. cash f low (RMm) 3,511 3,639 3,588 3,506 3,611
Total non-current assets 19,337 19,110 19,253 19,385 19,409 Free cashflow (RMm) 2,140 2,243 1,988 1,906 2,111
Cash and equivalents 582 735 806 731 808 FCF/share (sen) 27 29 25 24 27
Stocks 3 3 3 3 3
Debtors 2,390 2,073 2,157 2,217 2,285 Asset management
Other current assets 11 11 11 11 11 Debtors turnover (days) 94 84 84 84 84
Total current assets 2,986 2,822 2,978 2,962 3,107 Stock turnover (days) 0 0 0 0 0
Creditors 4,323 3,997 4,303 4,420 4,567 Creditors turnover (days) 293 283 283 283 283
Short term borrow ings 1,181 272 272 272 272
Other current liabilities 256 192 192 192 192 Capital structure
Total current liabilities 5,760 4,461 4,767 4,884 5,031 Net Gearing (%) 133.8 128.4 127.2 128.3 126.8
Long term borrow ings 8,768 9,508 9,500 9,500 9,500 Interest Cover (x) 7.3 7.6 8.1 8.3 8.5
Other long term liabilities 794 913 913 913 913
Total long term liabilities 9,562 10,421 10,413 10,413 10,413
Quarterly Profit & Loss
Shareholders' Funds 7,001 7,050 7,050 7,050 7,072 FYE 31 Dec (RMm) 1Q20 2Q20 3Q20 4Q20 1Q21
Revenue 2,341 2,151 2,213 2,261 2,228
Cash Flow Statement Operating expenses (1,397) (1,224) (1,270) (1,348) (1,280)
FYE Dec (RMm) 2019 2020 2021E 2022E 2023E EBITDA 944 927 943 913 948
Net Profit 1,487 1,377 1,439 1,513 1,586 Depreciation (365) (374) (355) (381) (386)
Depreciation & amortisation 1,379 1,475 1,457 1,468 1,476 EBIT 579 553 588 532 562
Working capital changes (84) (207) 222 56 80 Net int income/(expense) (102) (103) (99) (101) (109)
Cash tax paid (547) (355) (454) (478) (501) Associates' contribution - - - - -
Others 1,276 1,349 924 947 970 Exceptional Items (3) 7 1 - -
Cashflow from operations 3,511 3,639 3,588 3,506 3,611 Pretax profit 474 457 490 431 453
Capex (1,371) (1,396) (1,600) (1,600) (1,500) Tax (117) (115) (126) (112) (119)
Disposal/(purchases) - - - - - Minority interest - - - - -
Others (5) (17) - - - Net profit 357 342 364 319 334
Cash flow from investing (1,376) (1,413) (1,600) (1,600) (1,500) Core net profit 359 337 363 319 334
Debt raised/(repaid) (233) (241) (8) - -
Equity raised/(repaid) - - - - - Margins (%)
Net inct income/(expense) - - - - - EBITDA 40.3 43.1 42.6 40.4 42.5
Dividends paid (1,564) (1,330) (1,439) (1,513) (1,564) PBT 20.2 21.2 22.1 19.1 20.3
Others (322) (502) (469) (469) (469) Net profit 15.2 15.9 16.4 14.1 15.0
Cash flow from financing (2,119) (2,073) (1,917) (1,982) (2,033)
Free Cash Flow 2,140 2,243 1,988 1,906 2,111
11
Important Disclosures and Disclaimer
Equity Rating Structure and Definitions
BUY Total return is expected to exceed +10% over a 12-month period
HOLD Total return is expected to be between -5% and +10% over a 12-month period
SELL Total return is expected to be below -5% over a 12-month period
NOT RATED Affin Hwang Investment Bank Berhad does not provide research coverage or rating for this company. Report is intended as information only and not as a recommendation
The total expected return is defined as the percentage upside/downside to our target price plus the net dividend yield over the next 12 months.
OVERWEIGHT Industry, as defined by the analyst’s coverage universe, is expected to outperform the KLCI benchmark over the next 12 months
NEUTRAL Industry, as defined by the analyst’s coverage universe, is expected to perform inline with the KLCI benchmark over the next 12 months
UNDERWEIGHT Industry, as defined by the analyst’s coverage universe is expected to under-perform the KLCI benchmark over the next 12 months
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