Maxis Berhad Conserves Cash For Investments: CGSCIMB

Maxis Berhads’ 1Q23 results were in line with expectations – net profit of RM320m came in at 23%/24% of our and Bloomberg consensus FY23F estimates.

CGSCIMB, in its flash note today (May 22), said 1Q23 DPS of 4 sen was down 20% yoy and CGSCIMB expects 4Q23 DPS to be adjusted for any excess cash based on previous dividend trends.

Details on the 5G network rollout remain scarce and they maintain their view of a dual network rollout with Maxis and CelcomDigi the network owners. Conserving cash is seen as the big shift

Management’s comments on the 1Q23 call explaining that the 20% yoy reduction in 1Q23 dividends to 4 sen was to conserve cash for opportunistic investments were, in CGSCIMB’s view, the biggest item coming from the call. CGSCIMB’s understanding is that this is less a war chest for large acquisitions and more a buffer for Maxis to invest in and enhance its network and business.

Too premature for 5G details: While participants on the call were hoping for details on the way forward for 5G rollouts to be made clear, management reiterated that discussions with all stakeholders were ongoing, and it was premature to provide details. The view is that Malaysia will move to a two network model, with Maxis and CelcomDigi owning one, and providing 5G access to all access seekers.

1Q23 results were in line: Other than the DPS cut, 1Q23 results were within our and Bloomberg consensus estimates. Home fibre remained the key driver of service revenues, although the low base of 1Q22 helped to shore up mobile revenues on a yoy basis (see Fig 1).

Reiterate Hold: CelcomDigi is then CGSCIMB’s preferred mobile pick

The firm reiterates its Hold call on Maxis with a RM4.60 target price based on 10.8x FY24F adj. EV/EBITDA, representing -1 s.d. of Maxis’s EV/EBITDA since 2010.

They see the current valuations as fully reflecting Maxis’s current fundamentals. Key upside risk would be an acceleration in revenue and earnings growth, while regulatory risks would be the key downside risk for Maxis and the sector.

For exposure to the Malaysian telecoms sector, the top pick remains Telekom Malaysia, while CelcomDigi is the firms top pick in the Malaysian mobile segment.

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