CGS International reiterates its Add call on Maxis with a higher GGM-derived price target of RM3.93 on the back of tweaks to forecasts after looking at the telco’s share performance over the 10 years.
Maxis’ share price has declined 55.8% (vs. FBMKLCI’s -15.9%) over the last 10 years, it is now trading at -2 s.d. of its post-2009 P/E trading range. The house sees clarity on the way forward for its 5G network rollout as the key re-rating catalyst for its shares. While this could take up to 18 months, an FY25F dividend yield of 5.6% provides a healthy return in the meantime.
However, key downside risks, would be an expensive acquisition, which could negatively impact its earnings and dividend
payments, and a step up in competitive pressure in the telecoms market.
Revenue and earnings to continue upward trajectory
Post its 4Q24 results, reported on 18 Feb 2025, CGS adjusts upwards its FY25F/FY26F core net profit estimates for Maxis by 6.3%/5.4% as it tweaks upwards the service revenue estimates. Post these revisions, the house estimates that Maxis will deliver an FY24-27F service revenue CAGR of 2.0%, which will, in turn, support a 3.4% core net profit CAGR over the same period.
CGS has pushed out its capex estimates as it believes that until a clear trajectory for the way forward for its 5G network plans is established, its capex is likely to be muted – consistent with Maxis “less than RM1bn” FY25F capex guidance.
5G – the options
With U Mobile picked to lead the rollout of Malaysia’s second 5G network, Maxis, has the following options, stay as a joint
shareholder with CelcomDigi in the first network under Digital Nasional Bhd (DNB), 2) work with U Mobile in the second network, 3) chose to stay as a mobile virtual network operator for 5G services by renting capacity from both or either of the 5G networks, or 4) merge with U Mobile to operate the second network.
It’s off, but WHAT IF it does merge, a merger could make sense, but it would depend on pricing, shareholding structure, and post-merger dividends, amongst others. The current model assumes that Maxis will rent 5G capacity for at least two years and expand capital on building out its own 5G capacity from FY26F, but CGS makes no added assumptions on its equity investments in a new network
