Telecommunication 4Q CY23 soars above potentials
RESULTS from the 4Q CY23 reporting season mostly exceeded our expectations (4 out of 5), with the exception of MAXIS (OP; TP: RM5.30) which disappointed (due to accelerated depreciation). Aside from AXIATA (OP; TP: RM3.10), all telcos reported core net profit growth in FY23, mainly driven by service revenue expansion and absence of Cukai Makmur. In particular, for TM’s case, its earnings received a major boost from recognition of tax credits. On the flip side, all telcos were weighed by cost pressures that resulted in compressed or flattish EBIT margin. This mainly emanated from accelerated depreciation (for the local players) and heightened opex. In the case of AXIATA, depreciation costs surged in line with Link Net’s aggressive expansion of home passes.
FY23 service revenue growth (0.3-4.2%) for the domestic operators was mainly propelled by subscriber base expansion across the board. Fixed and mobile operators ended the year with an enlarged subscriber base in 4Q CY23, except for Celcom (4Q CY23: -1% YoY). The latter was attributed to a clean-up of its prepaid base in 4Q CY23 that led to the removal of non-revenue generating subscribers. Nevertheless, for the broader industry, total subscribers for the three major mobile operators expanded by a healthy 4% YoY to 32.9 million in 4Q CY23. This was mainly led by MAXIS’ subscriber net adds of 442k for prepaid and 361k for postpaid. In particular, the latter’s expansion was attributed to the introduction of postpaid plans with lower entry price points (starting from RM30 per month).
We maintain our OVERWEIGHT recommendation on the sector.