CIMB cuts Maxis profit forecast & TP, prefers DiGi

Business & Markets 2013
Written by Jonathan Gan of theedgemalaysia.com
Friday, 06 December 2013 13:20
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KUALA LUMPUR (Dec 6): CIMB Investment Bank Bhd has downgraded its
earnings forecast for Maxis Bhd and cut its target price (TP) for shares of the
mobile telecommunication network provider.
In a note, CIMB analyst Kelvin Goh said the downgrades take into account
Maxis' guidance for financial year ending December 31, 2014 (FY14).
"We trim our FY14-15 EPS estimates and DCF-based target price as we factor
in its FY14 guidance," said Goh whose note was issued following an analysts
briefing by Maxis CEO Morten Lundal.
According to Goh, Maxis expects its FY14 service revenue to show low
single-digit growth and EBITDA margin to be a little lower year-on-year.
Meanwhile capital expenditure is anticipated to rise to RM1.1 billion from
RM850 million in FY13.
Maxis plans to maintain its dividend per share of 40 sen in FY14, according to
Goh.
Goh who maintained CIMB's "neutral" call for Maxis shares, has cut the TP to
RM7.05 for the stock. This compares to the previously-estimated RM7.40.
"Maxis’ outlook is consistent with ours. We expect its service revenue
to remain under pressure in the coming quarters and we think its revenue
leadership is threatened by Celcom," Goh said.
He said CIMB is concerned about the rapid fall in Maxis' SMS revenue which
makes up 13.3% of 3QFY13 service revenue. Compared to Maxis' peers, the
company’s SMS revenue has fallen 38% over the last two years compared to
24% in Celcom and 18% in DiGi.Com Bhd.
Goh said Maxis lacks re-rating catalysts and CIMB prefers DiGi because of the DiGi's potential capital management.
“Maxis lost market share in (the) prepaid (segment) due to bill shocks from mobile data, poor distribution and neglect of its key user
segments.
“Switch to DiGi where there is a better likelihood of capital management if it restructures into a business trust” Goh said.