Maxis Berhad’s move to introduce a competitive pricing for its broadband has marginally impact its valuations, with no acceleration in the telco’s revenue and earnings growth.
CGS-CIMB, in its Company Note, said that the new broadband prices are neutral to the research house’s estimates and market structure.
“Without an acceleration in earnings, we see Maxis’ 10.5 times adjusted FY24F EV/EBITDA providing limited upside. Meanwhile, a 4.4% FY23-24F dividend yield provides downside support,” it said.
Thus, CGS-CIMB reiterates its HOLD call on Maxis with a reduced target price of RM4.26, based on 10.8 times FY24F EV/EBITDA, (-1 s.d. post-2010 range), following a reduction in its core net profit and DPS estimates.
“We reduce our FY23F/24F/25F core net profit forecasts by 5.5%, 4.9%, 3.2% respectively. Our reduced DPS estimates are to reflect management’s guidance post-1Q23 results for lower dividends in FY23F of 4 sen DPS per quarter in 1H23 from 5 sen DPS per quarter in FY22 for tactical spending on investments,” it said.
The risks to its call include an acceleration in revenue and earnings growth, while slower earnings and a reduction in dividends would be key downside risks.
However, the research house noted that Maxis’ fibre broadband pricing announcement on Oct 27 bringing to a close the uncertainty around the fibre broadband market.
“With price points similar to Telekom Malaysia’s pricing, we believe fears of an increase in broadband pricing competition has also eased. Against this backdrop, we maintain our forecasts for Maxis’ broadband revenues, with a 14% FY22-25F CAGR,” he said.
It also maintains its view that Maxis will operate second 5G network, pending conclusion of the ownership structures for Digital Nasional Berhad (DNB).
