Research houses seem to have split views on Maxis Berhad’s outlook and earnings as the group has retrenched around 10% of its staffs and is still waiting with bated breath on the development of 5G.
Kenanga Research said the group’s 9MFY23 core net profit met its expectation with 71% of its full-year forecast but disappointed the market at 69% of the full-year consensus estimate.
Maxis declared DPS of 4 sen in 3QFY23, which brings cumulative 9MFY23 DPS to 12 sen, on track to meet its full-year forecast of 17 sen.
“Healthy service revenue’s growth more than offset drag from staff compensation under its new cost optimization exercises. Sustained traction in Maxis’ convergence and up-selling strategy led to strong subscriber net adds in the postpaid and home connectivity segments,” it said in its Results Note today (Nov 14).
Thus, Kenanga maintains it forecasts, and OUTPERFORM call, with TP of RM5.30 based on 12 times FY24 EV/EBITDA and no adjustment to its TP based on 3-star ESG rating.
“It implies a discount to the sector’s historical average of 13x to reflect regulatory uncertainty surrounding the implementation of the new Dual Wholesale Network (DWN) model.”
Post-briefing, Kenanga noted that Maxis maintained its FY23 guidance of low single-digit service revenue growth (YTD: +4.2%) and flat EBITDA (YTD: -1.6%).
“However, the group lowered its capex (YTD: RM511 million) guidance to slightly less than RM1 billion (from RM1.1 billion).
“This is on the back of stabilized network requirements post-completion of the 3G sunset exercise in early CY22, and Maxis opting to be conservative in light of upcoming regulatory changes in the 5G space,” it said.
As mentioned, Maxis targets to trim its manpower resources by 10% under its newly introduced cost optimization exercise, Kenanga noted.
“50% of total workforce that were released in 3QFY23 comprised of staff at the enterprise segment. Moving forward, over the next two years, lumpy staff compensation will likely recur on annual basis.
“Nevertheless, Maxis does not expect to incur this cost for the remainder of the year in 4QFY23,” it said.
The research house noted after staff “right-sizing” is harvested, Maxis plans to adopt increased automation and digitalization to achieve further cost savings.
“Maxis has recognized marginal operating expenses from procurement of wholesale 5G capacity of less than RM10 million thus far. It is reviewing a fresh invoice it had recently received from Digital Nasional Berhad (DNB).
Meanwhile, Maybank Investment Bank (Maybank IB) is more pessimistic on Maxis outlook and earnings, due to conservative dividend and 5G uncertainty.
“Maxis’ 9M23 results were below our consensus forecasts due to an increase in staff cost, manpower optimisation exercise.
“We view risk-reward as being balanced presently, with Maxis’ generally stable earnings delivery being offset by a conservative dividend outlook and overall 5G uncertainty,” it said in its note today.
Maybank IB maintains its HOLD call, with an unchanged DCF-based TP of RM4 (assuming 7.7% WACC and 2% LT growth) is unchanged on lower FY23E capex following our earnings revisions.
Management has maintained FY23 EBITDA guidance (similar level to FY22), while lowering FY23 capex guidance (c.RM1 billion from c.RM1.1 billion previously).
“We lower our FY23/24/25 net profit forecasts by 6%/3%/3% respectively having incorporated latest run rates,” he said.
