Wednesday, August 14, 2013

Maxis :Margins Back Above 50% (MIB)

Hold (unchanged)
Share price: MYR7.15
Target price: MYR7.20 (unchanged)
Margins Back Above 50%

Overall in line. Maxis’ 2Q13 net profit of MYR528m (+14% YoY, +11% QoQ) brings 1H13 net profit to MYR1,003m (-3% YoY), 49% of ours and 47% of consensus full-year forecast. An 8sen DPS was declared as expected. Maxis continues to offer attractive dividend yields, but we are wary of the long-term sustainability of its dividend commitment. Maintain HOLD with an unchanged target price of MYR7.20.

A spike in margins. 2Q13 normalised EBITDA margin rose by 2.6ppt QoQ to 50.8% due to 1) lower device sales (-28% QoQ; device sales are usually low-margin) and 2) lower costs (staff, marketing and general and administrative). We believe margins could have peaked. Management’s EBITDA margin guidance of 48-48.5% for the full year (1H13: 49.5%) remains unchanged.

Slight blemish on prepaid trends. Maxis lost 16k prepaid subscribers in 2Q13 (after 6 quarters of subscriber gains) despite a 3% ARPU decline. Management attributes this to the expiry of a promotional program (Hotlink Youth Club SIM), and expects to regain subscriber momentum in the coming quarters. Postpaid trends were healthier, with Maxis adding 33k subscribers on a 1% ARPU increase.

IPTV service faces initial hiccups. Maxis added 5.4k home subscribers in 2Q13 (5k subscribers added in 1Q13). Management noted that bookings for the Astro IPTV service (launched in May 2013) have been strong, but the pace of installation has not kept up due to initial teething issues. Management expects the conversion rate to improve going forward.

Maintain HOLD, target price unchanged at MYR7.20. There is no change to our earnings forecasts. We value Maxis on a DCF, assuming 6.5% WACC and 2% long term growth. Our target price implies 26.4x PER, 14.0x EV/EBITDA and 5.6% net dividend yield in FY13. The sector lacks strong re-rating catalysts in an environment of rising bond yields. Maxis’ net gearing has breached 1x as at Jun-2013.

Source/Extract/Excerpts/来源/转贴/摘录: MKE-Research,
Publish date: 12/08/13

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