Maxis’ 4QFY22 normalised earnings slipped – 24.1%qoq and -17.3%yoy to RM239m mainly due to a one-off increase in the corporate tax rate to 33% as a result of the prosperity tax. Meanwhile, the 4QFY22 topline came in at RM2.6b, representing an increase of +6.2%qoq and +4.0%yoy. Overall, Maxis normalized earnings came in slightly below ours and consensus expectations, accounting for 92% and 93% of full-year FY22 earnings estimates respectively. The negative deviation was primarily due to lower-than-expected growth in service revenue.
The better performance in 4QFY22’s revenue by +6.2%qoq was ascribed to growth in service revenue. Improvement in service revenue by +0.3%qoq and +4.9%yoy to RM2.1b was on the back of healthy contribution from consumer business that rose +1.7%qoq and +8.2%yoy. Consumer business growth was mostly influenced by more subscribers across postpaid, prepaid, and home connectivity alongside growth in prepaid ARPU. Meanwhile, enterprise business sales declined by -5.9%qoq and -8.8%yoy as a result of the shift to review fixed and solutions product offerings that focus on higher margin products.
On a cumulative basis, Maxis recorded RM9.8b revenue in FY22 (+5.9%yoy) owing to higher service revenue which rose by 4.0% on the back of steady performance from both consumer sales and enterprise revenue. Consumer sales increased by 4.8%yoy to RM6.8b due to steady growth in postpaid and fibre. Meanwhile, enterprise revenue climbed +0.5%yoy to RM1.5b. However, bottom line fell by -9.7%yoy to RM1.2b because of the higher one-off prosperity tax for the year (33%m on chargeable income exceeding RM100m).
Capex expenditure (CAPEX). Maxis reported capex of RM430m in 4QFY22, an increase of +58.1%qoq and -28.0%yoy. The bulk of the capex was allocated towards the implementation of the fiber build strategy. Nonetheless, no capex guidance was provided from the management as they are still waiting for a more definitive plan for the rollout of 5G
Since earnings missed expectations, MIDF is lowering its estimates in FY23 by -8.0% and derived a lower target price of RM3.60 (previously RM3.78). This is premised on revised FY23 EPS of 16.6sen against the historical average PER of 21.6x for two years. For 2024, the house opines that management guidance of a flat to low single-digit growth for service revenue in FY23 suggests softer performance in the upcoming quarters. Despite that, it believes once the 5G network implementation policy is finalised, Maxis will join the other five mobile network operators (MNOs) to implement the 5G access agreement to stay committed to providing 5G services.
