‘Maxis likely to post weaker results in H2’
KUALA LUMPUR: Maxis Bhd may post weaker results in its second half (H2) on the back of the termination of its 3G radio access network (RAN) sharing alliance agreement with U Mobile by the end of this year, says a research firm.
Maxis is due to release its third quarter (Q3) of financial year 2018 (FY18) results next Thursday.
TA Securities Holdings Bhd, in a report, said this year has been a challenging year for Maxis.
In the first half (H1) of FY18, Maxis was the only telecommunications company among incumbents that posted a decline in service revenue, with 3.7 per cent lower year-on-year (y-o-y) compared with Digi which was higher 1.4 per cent y-o-y and Celcom up 2.8 per cent y-o-y.
This was due to the prepaid segment’s weakness against the backdrop of SIM consolidation and prepaid to postpaid migration, TA Securities noted.
“While cost optimisation efforts kept the bottom line steady, with normalised Ebitda lower by 0.1 per cent y-o-y and core net profit slipping 0.2 per cent y-o-y, we expect a weaker H2 FY18.
“This is premised on the progressive termination of the group’s RAN sharing alliance agreement with U Mobile that is scheduled to end on December 27 this year,” according to TA Securities.
The research house remains sanguine of the group’s ability to keep within its comfortable net debt/Ebitda threshold of 2.0 times and sustain its dividend payout of 20 sen per year.
TA Securities continues to project Maxis’ earnings growth to be flattish due to limited room for service revenue growth in a matured telecommunications market, with high mobile penetration rate and the increased competition from fellow incumbents — Celcom and Digi — to capture the market share within the higher average revenue per user (Arpu) postpaid segment.
The research house is not too upbeat on Maxis’ broadband segment.
While lower access pricing following the implementation of the Mandatory Standard on Access Pricing had enabled the group to reduce the prices of its broadband plans but it would be vying for market share with competitors which have done the same.
“We do not expect a significant impact from the segment as its revenue contribution was small at four per cent of revenue,” TA Securities noted.
The research house has lowered its target price for Maxis to RM5, following the cut in its FY18FY20 earnings estimates by three to four per cent.
This was after adjusting further for the termination of the 3G RAN sharing alliance agreement with U Mobile and performing housekeeping on Arpu and subscriber assumptions.
It has reiterated its “sell” call on Maxis.