• Overview. Maxis’s 4Q22 top-line improved by 4.0% YoY to RM2,554mn mainly supported by consumer business revenue (4.8% YoY). Its bottom-line was down by 17.3% YoY to RM239mn however due to a one-off increase in corporate tax rate to 33%. Cumulatively, the group revenue in FY22 was up by 5.9% YoY to RM9,789mn on the back of steady performance across consumer and enterprise business. However, Maxis FY22 earnings declined by  9.7% YoY due to negative effect of Prosperity Tax. That said, post-paid business revenue and subscriber increased by 6.9% YoY and 6.5% YoY respectively driven by an increase in contracted devices. Post-paid ARPU  expanded slightly or to RM79.2 in FY22 from RM78.6 in FY21 thanks to higher international outbound roaming. Prepaid business on the other hand recorded lower revenue and subscription or by 0.8% and 2.9% due to periodic churning-out of non-revenue SIM card that impacted RGS.

• Key Highlight. In regards to 5G development, Maxis guided that the group will postpone seeking its shareholders’ approval for the entry into 5G Access  Agreement (AA) with DNB until the 5G network implementation policy is finalised. To recap, Maxis previously announced that the group will be seeking the approval in November 2022. Note that government is expected to table the 5G network implementation policy by the end of 1Q23. We believe that  Maxis will most likely sign the AA as the group already allowed its customer to enjoy 5G coverage in 29 countries. Maxis may however fall behind if there is a further delay in Maxis 5G rollout.

• Against estimates: In-line. Maxis’s 2022 PATAMI of RM9,789mn (+5.9% YoY)  was in-line our and consensus, accounting 96% and 93%, of full year forecast.

• Dividend. The Board declared an interim DPS of 5.0sen (4Q21: 5.0sen) bringing cumulative FY22 DPS to 20.0 sen (versus 17.0sen in FY21),  representing >100% dividend payout ratio.

• Outlook. We foresee a flattish earnings growth and remains concern on Maxis near term outlook on the back of challenging financial performance and uncertainties over 5G resolution. Note that the management guided the group  FY23 service revenue growth to be in the range of flat to low single digit.

• Our call. Maintain a HOLD call with a TP of RM3.95. Our valuation is derived based on DCF valuation with a WACC of 8.0% and a long-term growth of 1.0%. Maxis share price could take a beating should the board remains undecisive over 5G network participation.

Source: BIMB Securities Research - 24 Feb 2023