Maxis 9MFY17 earnings surpasses expectations on strong results

KUCHING: Maxis Bhd’s (Maxis) first nine months of financial year 2017 ( 9MFY17) earnings have either surpassed or met analysts expectations, on stronger-than-expected results.

As per the group’s filing on Bursa Malaysia, Maxis’ normalised profit for year to date (YTD) 2017 amounted to RM1.56 billion, up nine per cent from the corresponding period of the previous year.

Maxis’ 9MFY17 normalised net profit thus came in above AmInvestment Bank Bhd’s ( AmInvestment Bank) expectations, accounting for 83 per cent of the research firm’s earlier FY17F earnings and 80 per cent of consensus.

“The stronger-than-expected results is partly due to the absence of any impact from the expected loss of data roaming revenues due to the termination of Maxis’ 3G radio access network arrangement with U Mobile Sdn Bhd in stages over an 18-month period ending on December 27, 2018.

“Management now indicates that the impact will only be felt in FY18F,” AmInvestment Bank said.

As for the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the group’s financial performance was inline with its and consensus’ expectations, accounting for 79 per cent and 80 per cent of FY17 full year earnings estimates respectively.

On dividends, AmInvestment Bank’s noted that Maxis’ 9MFY17 dividend of 15sen per share was within market expectations and management’s payout policy of 75 per cent.

It also came in within MIDF Research’s and consensus expectations, accounting for both 75 per cent of FY17 full year dividend of 20sen per share.

A m I nve s t m e n t Bank highlighted that management maintained its guidance for a FY17F flat service revenue and normalised earnings before interest, tax, depreciation and amortisation (EBITDA).

With a flat capital expenditure ( capex) guidance as well, the research firm retained its capex assumption of 14 per cent of service revenue, even though Maxis’ 9MFY17 capital expenditure of RM647 million (10 per cent of service revenue) was lower by 13 per cent year on year (y-o-y), on expectations of higher rollouts towards the year-end.

On a more specific note, MIDF Research expected the prepaid subscriber base to decline at a slower pace following the reinvigoration of the mobile internet passes towards the end of the third quarter of 2017 (3Q17).

MIDF Researsch noted that the revamped MaxisONE plan, which offer better value proposition, has continues to show good traction as the postpaid subscriber base continues to increase steadily.

This, however, negatively impact the postpaid average revenue per user (ARPU) as the research arm viewed that the postpaid subscribers will be inclined to sign-up the entry level postpaid plan.

“On the contrary, prepaid ARPU continue to grow at a steady pace as Hotlink Fast subscribers increase their data usage.

“Nonetheless, due to intense competition, the prepaid subscriber base continues to dwindle,” it said.

In the second half of FY17 (2HFY17), MIDF Research viewed that it would be difficult for Maxis to grow the prepaid revenue as the research arm expected Webe to disrupt the prepaid market.

Meanwhile, the research arm expected Maxis’ dividend yield to remain below four per cent to meet the group’s capital commitment and prepare for the upcoming spectrum reallocation exercise.