Maxis Bhd (Nov 16, RM5.34)
Maintain neutral at RM5.32 with target price of RM5.50: Maxis is expected to release its 3QFY11 results around Nov 30. We expect its 9MFY11 net profit to register circa 73% to 75% of our full-year estimate. This translates into a growth of between 2.4% and 5.2% y-o-y or RM1.7 billion to RM1.8 billion. We believe earnings growth will be supported by a rebound in overall revenue, higher non-voice revenue contribution and improvement in earnings before interest, tax, depreciation and amortisation (Ebitda).
We expect Maxis to register a 9MFY11 revenue of RM6.7 billion which translates into a rebound of 1.5% y-o-y from the 1.2% y-o-y decline in 1H11. We opine that the revenue rebound will be due to higher usage due to the festive season seen in 3QFY11.
From recent trends, we anticipate non-voice revenue will continue to increase its contribution to circa 44% of total revenue. In 9MFY10, non-voice revenue contribution to total revenue was 36.5% while it was 42.4% in 1H11. The growth in non-voice mobile revenue is expected to be due to advanced data service and wireless broadband. Wireless broadband subscribers are expected to increase by circa 5.0% quarter-on-quarter to register 656,000 subscribers.
We are expecting an Ebitda improvement of 3% y-o-y to RM3.3 billion in 9MFY11 on the back of lower direct expenses and lower operating expenses due to efficient cost control. This means Ebitda margin maintains at around the 50% level.
We like the fact that there was average revenue per user (ARPU) improvement across all of the segments in the last quarter, where postpaid, prepaid and wireless broadband ARPU improved by 2.9% q-o-q, 5.9% q-o-q and 3.3% q-o-q to RM108, RM36 and RM63 respectively. For 3QFY11, we are expecting ARPU to continue improving due possibly to higher minutes of use from the festivities.
With new entrants beginning to make a presence felt in an already saturated market, we expect Maxis will face challenges to maintain its position as market leader. Although it is expected to register a good performance in 3QFY11, this will be in line with the overall industry trend. Maxis has seen its market share among the top three (Maxis, Celcom Bhd and DiGi.Com Bhd) declining in recent quarters, excluding the market share of the others such as mobile virtual network operators. However, we believe that data revenue will increase in contribution, moderating any pressure.
With the 3QFY11 results pending, we are maintaining our FY11 forecast and our “neutral” recommendation on Maxis. Judging by recent trends, we are not discounting another interim dividend of eight sen for 3QFY11, with total dividend for FY11 to yield 7.5%. Our target price of RM5.50 is based on dividend discount model, with a weighted average cost of capital of 8%. — MIDF Research
This article appeared in The Edge Financial Daily, November 17, 2011.
Maintain neutral at RM5.32 with target price of RM5.50: Maxis is expected to release its 3QFY11 results around Nov 30. We expect its 9MFY11 net profit to register circa 73% to 75% of our full-year estimate. This translates into a growth of between 2.4% and 5.2% y-o-y or RM1.7 billion to RM1.8 billion. We believe earnings growth will be supported by a rebound in overall revenue, higher non-voice revenue contribution and improvement in earnings before interest, tax, depreciation and amortisation (Ebitda).
We expect Maxis to register a 9MFY11 revenue of RM6.7 billion which translates into a rebound of 1.5% y-o-y from the 1.2% y-o-y decline in 1H11. We opine that the revenue rebound will be due to higher usage due to the festive season seen in 3QFY11.
From recent trends, we anticipate non-voice revenue will continue to increase its contribution to circa 44% of total revenue. In 9MFY10, non-voice revenue contribution to total revenue was 36.5% while it was 42.4% in 1H11. The growth in non-voice mobile revenue is expected to be due to advanced data service and wireless broadband. Wireless broadband subscribers are expected to increase by circa 5.0% quarter-on-quarter to register 656,000 subscribers.
We are expecting an Ebitda improvement of 3% y-o-y to RM3.3 billion in 9MFY11 on the back of lower direct expenses and lower operating expenses due to efficient cost control. This means Ebitda margin maintains at around the 50% level.
We like the fact that there was average revenue per user (ARPU) improvement across all of the segments in the last quarter, where postpaid, prepaid and wireless broadband ARPU improved by 2.9% q-o-q, 5.9% q-o-q and 3.3% q-o-q to RM108, RM36 and RM63 respectively. For 3QFY11, we are expecting ARPU to continue improving due possibly to higher minutes of use from the festivities.
With new entrants beginning to make a presence felt in an already saturated market, we expect Maxis will face challenges to maintain its position as market leader. Although it is expected to register a good performance in 3QFY11, this will be in line with the overall industry trend. Maxis has seen its market share among the top three (Maxis, Celcom Bhd and DiGi.Com Bhd) declining in recent quarters, excluding the market share of the others such as mobile virtual network operators. However, we believe that data revenue will increase in contribution, moderating any pressure.
With the 3QFY11 results pending, we are maintaining our FY11 forecast and our “neutral” recommendation on Maxis. Judging by recent trends, we are not discounting another interim dividend of eight sen for 3QFY11, with total dividend for FY11 to yield 7.5%. Our target price of RM5.50 is based on dividend discount model, with a weighted average cost of capital of 8%. — MIDF Research
This article appeared in The Edge Financial Daily, November 17, 2011.
