Maxis reported its Q3 results offering a steady revenue growth, however, MIDF noted that there were some concerns on the cost front, especially on depreciation and amortization as well as finance cost which put downward pressure on the pretax profit. Meanwhile, the quarterly dividend remains conservative at 4sen per share as operating cash flow was down on a year-to-date basis.
Home connectivity grew at the fastest pace. 3QFY23 earnings came in at RM330m, a decline of -7%yoy. While revenue was marginally higher (+2%yoy), the earnings performance was impacted by higher cost structure i.e. depreciation and amortization, staff and resource cost as well as higher finance cost. Predictably, higher revenue was seen across all segments except for consumer prepaid revenue because of continuous pre-to-post conversion
Cumulatively, 9MFY23 earnings amounted to RM937m (+1%yoy) premised on a lower effective tax rate due to the discontinuation of prosperity tax in 2023. All in, Maxis’ 9MFY23 financial performance came in within expectation, making up 75.4% of full-year FY23 earnings estimates said the investment house. Annual capex to fall below RM1b. 3QFY23 capex contracted by – 21%yoy to RM215m. This led to 9MFY23 capex of RM511m, a decline of -25%yoy from RM684m. There was prudent capex investment as network capacity requirement stabilises in FY23 as compared to FY22.
In addition, the slower capital spending also reflects the potentially 5 G-related capex. Management now guided that annual
FY23 capex to fall below RM1.0b. For context, FY22 capex came in at RM1.1b.
3QFY23 dividend remains conservative at 4sen per share. This represents the third consecutive quarter where dividends fall below 5sen as seen in FY22. We view that the pressure on the operating cash flow mainly led to the subdued dividend payment. Note that 9MFY23 operating free cash flow dipped by -6.2%yoy to RM2,188m.
The rise in staff and resource costs was mainly due to ongoing right-sizing exercises, especially for the enterprise business segment. Note that the headcount for the enterprise segment has been increasing in recent years since 2020 due to acquiring initiatives to grow the enterprise’s business capabilities. The right-sizing exercise is part of the group’s three-year cost rationalisation exercise to rebase their cost structure to be leaner. In view of this, MIDF said it should continue to see elevated staff costs in the medium term
