MAYBANK IB Research has maintained a hold recommendation on Maxis Bhd with an unchanged discounted cash flow (DCF)-based target price of RM5.20.
“FY19 net profit was in line with our consensus forecasts, with management delivering on its guidance. Quarterly trends were less encouraging as earnings before interest, tax, depreciation and amortisation (EBITDA) contracted sequentially on cost escalations. Risk-reward appears balanced presently, with slight mobile softness being offset by expectation of possible enterprise accretion,” said Maybank IB Research analyst Tan Chi Wei.
In 4Q19, service revenue grew 2.6% quarter-on-quarter (qoq), driven primarily by a 32% qoq increase in fixed-related revenue (fixed enterprise and home fibre).
Mobile service revenue was stable qoq, with prepaid decline (lower subscriber numbers, stable average revenue per user (ARPU)) being offset by postpaid growth (higher subscribers, lower ARPU).
Costs trended higher sequentially, mainly from a spike in direct expenses likely from higher device volume. Consequently, 4Q19 normalised EBITDA margin declined by 6.2ppt qoq in 4Q19 to 34.9%.
The research house revised its FY20/21 net profit forecasts by 0%/-7% to reflect a more tepid run-rate. For 2020, management is guiding for flat to low single-digit growth for both service revenue and EBITDA.
The counter closed one sen higher at RM5.40 at midday break. – Feb 25, 2020
