Kenanga Research said Maxis’ margins are likely to improve on higher-end products and services.
PETALING JAYA: Maxis Bhd
could join the 5G bandwagon together with its peers to offer subscribers a faster mobile Internet connectivity option as early as next week.
The telecommunications company will convene an EGM on Aug 14 to seek shareholder approval on the matter.
If approved, this will see the group being able to enter into the access agreement with Digital Nasional Bhd (DNB) to gain access to 5G products and services so it can provide 5G services to its customers.
DNB was set up to drive the development of the 5G infrastructure in Malaysia.
Meanwhile, Maxis saw its postpaid and broadband subscribers continue to drive its growth, while the group’s prepaid customers saw a decline in the recent first-half reporting season for the financial year 2023 (FY23).
Its prepaid subscribers saw a decline in migration to the postpaid service, of which the latter had grown by some 6% in the period.
According to Kenanga Research, the growth of Maxis’ postpaid segment was driven by its attractive device bundled plans, converged propositions for homes as well as entry-level plans.
Despite this growth, in the year-on-year period, Kenanga Research said Maxis’ overall mobile subscriber growth still moderated by about 1%.
It noted that both Maxis’ prepaid and postpaid average revenue per user (Arpu) continued to remain stable.
Meanwhile, its home Internet or broadband segment revenue had jumped by 17%, underpinned by a 16% growth in subscribers and a stable Arpu of RM108.
“The robust growth in its home Internet segment is a boon for Maxis, as it lowers the churn rate of its mobile postpaid segment.
“The company is committed to raising its subscriber growth thanks to its fixed mobile convergence proposition,” it said.
TA Research also highlighted Maxis’ lower dividends despite better earnings delivery in the recently reported second-quarter results.
“Maxis declared a second interim dividend of four sen per share compared with five sen in the second quarter of FY22. This brought the first-half FY23’s total dividends declared to eight sen per share.
“The lower dividend reflects conservative cash management in consideration of potential commitments for 5G and investments in fibre and other investment opportunities,” TA Research said.
It noted that at the current share price of Maxis, its forecast FY23 to FY25 dividends per share at 16 sen implies a forward yield of 4%.
TA Research also noted that Maxis’ continued growth in its postpaid segment was due to its value proposition for some packages.
“The postpaid segment’s revenue advanced quarter-on-quarter for the sixth consecutive quarter, climbing 0.8% quarter-on-quarter to RM871mil.
“The segment saw further subscriber net adds to 3.4 million with a higher take-up of Maxis postpaid and affordable entry-level Hotlink postpaid plans,” it noted.
Kenanga Research, which rated Maxis as an “outperform” with an unchanged target price of RM5.30, said Maxis’ margins were likely to improve on higher-end products and services.
TA Research reiterated its “sell” recommendation on Maxis with a target price of RM3.70, noting its risk-reward potential remained unfavourable in case of any unexpected spends for the potential 5G rollout.
