For 5G, CGSI Research views clarity on network rollout as the key catalyst for a re-rating of Maxis shares.
PETALING JAYA: Maxis Bhd
seems to be back on a growth trajectory for service revenues and net profit, while capital expenditure (capex) is expected at low levels pending clarity on its 5G rollout plans.
CGS International (CGSI) Research believes Maxis has several options for providing 5G services but a decision may take time due to its complexity.
Following Maxis’ fourth quarter of 2024 (4Q24) results, CGSI Research raised its financial year 2025 (FY25) to FY26 core net profit estimates by 6.3% and 5.4%, alongside an upward revision in service revenue projections.
For FY24 to FY27, CGSI Research expects service revenue compounded annual growth rate (CAGR) of 2%, which will in turn support a 3.4% core net profit CAGR over the same period.
The research house deferred its capex estimates, expecting muted spending until Maxis establishes a clear 5G rollout strategy, in line with its “less than RM1bil” FY25 capex guidance.
It reiterated its “add” call on Maxis with a higher price target of RM3.93 a share on the back of tweaks to its forecasts. At last look, Maxis’ share price was at RM3.19. The stock has declined 55.8% (versus the FBM KLCI’s down 15.9%) over the last 10 years, the research house said.
For 5G, CGSI Research views clarity on network rollout as the key catalyst for a re-rating of Maxis shares.
While this could take up to 18 months in its view, a FY25 dividend yield of 5.6% provides a healthy return, in the meantime.
The key downside risks cited for its call would be an expensive acquisition, which could negatively impact its earnings and dividend payments, as well as a step up in competitive pressure in the telecoms market.
Since U Mobile was chosen to lead Malaysia’s second 5G network rollout, Maxis – previously assumed by CGSI Research to take the lead – has several options, including remaining a joint shareholder with Celcom Digi Bhd in Digital Nasional Bhd’s network.
Alternatively, Maxis could collaborate with U Mobile on the second network, operate as a mobile virtual network operator by renting capacity from one or both 5G networks or even merge with U Mobile to co-manage the second network.
CGSI Research said while a merger could make sense, it would depend on pricing, shareholding structure and post-merger dividends, amongst others.
Its current model assumes that Maxis will rent 5G capacity for at least two years and expand capital on building out its own 5G capacity from FY26.
However, the research house did not factor in any additional equity investments in a new network.
