Covid-19, MCO seen weighing on Maxis’ near-term profitability

PETALING JAYA: The Covid-19 pandemic and the movement control order (MCO) are expected to affect Maxis Bhd’s near-term profitability with lower prepaid average revenue per user (ARPU), with the ensuing weak economic conditions affecting its 2020-2021 ARPU due to cautious consumer/business spending.

“Besides, high operating costs such as traffic, commission costs, and allowance for doubtful debts would also weigh on its profitability,” Affin Hwang Capital said in a report yesterday.

The research house has tweaked its 2021-2022 earnings per share (EPS) forecasts for Maxis by 0.4% - 0.8% on higher interest income.

“As we now expect its payout to track its earnings, we have lowered our 2020-2022 divendend per share (DPS) forecasts, assuming a 100% payout ratio instead of a fixed 20 sen DPS per annum. We made no changes to our sell rating or 12-month price target of RM4.55,” it said.

Broadly, Affin Hwang said Maxis’ first quarter results were within its expectations (26% of full-year forecast) but below market expectations (23% of consensus full-year estimate).

Last week, Maxis reported that its net profit for the first quarter ended March 31, 2020, fell 12% to RM358 million from RM409 million a year ago mainly due to loss of wholesale business and higher impairment made to receivables. Its revenue, however, jumped 5% to RM2.34 billion compared with RM2.23 billion in the previous year’s corresponding quarter.

Maxis unexpectedly lowered its DPS to 4 sen (from 5 sen in Q1’19), given that it has been consistently paying a quarterly DPS of 5 sen since Q1’15. Looking ahead, Affin Hwang expect the group’s quarterly payout to track its earnings.

PublicInvest Research said although it is not expecting Maxis’ near-term earnings to be significantly impacted by the MCO, the slowdown in economic activities could cap the growth potential of its enterprise business, an area which Maxis is committed to expanding further.

As part of the stimulus package announced in March, telcos have collectively offered RM600 million worth of free internet to all customers, postpaid and prepaid, for the duration of the MCO. Customers will receive free internet of 1GB per day to be used between 8am and 6pm.

“Although the sum appears to be sizeable, we believe there is minimal financial impact on the telcos as most customers’ plans are underutilised and there should be no additional cost incurred for offering free internet,” said PublicInvest.

At this juncture, it has maintained its earnings forecasts and ‘underperform’ rating on Maxis.

Meanwhile, CGS CIMB cut its EPS forecasts for Maxis by 5.4% to factor in the drop in international roaming revenue and higher bad debts, and distribution per share to 18 sen, from 20 sen previously. It is maintaining its reduce rating on Maxis, with a target price of RM5.10.

source https://www.thesundaily.my/business/covid-19-mco-seen-weighing-on-maxis-near-term-profitability-EF2340969