(MAXIS MK EQUITY, MSXC.KL)
(Maintained)
MAXIS Maintains Top Pick Status
Company Report
Paul Yap Ee Xing, CFA
paul-ee-xing@ambankgroup.com
+603 2036 2281
Rationale for report: Company Result
Investment Highlights
Maxis remains our top pick for Malaysia Telcos with a TP of RM4.20 and +28% upside. 1H25 core earnings delivered a +9% YoY growth, driven by cost savings. Reflecting inelastic demand, service revenues were stable. Dividend yield is solid at 5%. This is supported by a robust FCF yield of 7%, which helps buffer potential risks from 5G related cashflows and higher SST cost. Additional upside could emerge from market consolidation opportunities.
- Top pick for Telcos. Our TP is unchanged at RM4.20/share, which is based on an EV/Ebitda multiple of 9.5x and CY26 Ebitda. The stock remains attractive due to its resilient domestic demand and a solid dividend yield of 5%. Further upside could stem from M&A developments, particularly following previous reports that Maxis is exploring a potential acquisition of U Mobile (see here)
- Driven by cost savings. 1H25 core profit rose 9% YoY to RM769mil. This is within expectations, accounting for 50% and 52% of ours and consensus estimates. The earnings uplift was cost driven, with traffic, commissions and other direct cost declining 5% YoY. This improvement reflects successful negotiations with its manufacturer, to secure more favourable terms for key hero products. Looking ahead, the group is prioritising digitalisation and AI adoption, with early success seen in collections, which could unlock further cost efficiencies in the future.
- Service revenues saw slight increase on normalised basis. Although 1H25 service revenue declined marginally by 0.7% YoY, this is due to the new commercial agreement for the Maxis SafeDevice program, where revenues are now recognized on a net basis. Normalising for this, service revenues would have seen a slight increase. Softer consumer revenues (-1% YoY) were partially offset by enterprise growth (+2% YoY).
- Comfortable dividends. A second interim dividend of 4 sen/share was declared, bringing the YTD total to 8sen/share. We maintain our full-year dividend forecast at 16sen/share, implying a 5% yield. We view this as sustainable, supported by a projected FY25F free cash flow yield of 7%, despite potential headwinds from 5G-related cash flow risks and higher costs stemming from the expanded SST.
RM3.42
RM4.20
RM4.00/RM3.11
Fair value ⇔
EPS ↔
YE to Dec
| FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|
| Revenue (RM mil) | 10,536.0 | 10,829.8 | 11,075.1 | 11,316.5 |
| Core net profit (RM mil) | 1,396.0 | 1,529.0 | 1,650.9 | 1,763.3 |
| FD Core EPS (sen) | 17.8 | 19.5 | 21.1 | 22.5 |
| FD Core EPS growth (%) | 3.1 | 9.5 | 8.0 | 6.8 |
| Consensus Net Profit (RM mil) | ||||
| DPS (sen) | 17.0 | 16.0 | 16.0 | 16.0 |
| PE (x) | 19.2 | 17.5 | 16.2 | 15.2 |
| EV/EBITDA (x) | 8.6 | 8.1 | 7.7 | 7.4 |
| Div yield (%) | 4.9 | 4.7 | 4.7 | 4.7 |
| ROE (%) | 24.0 | 25.4 | 26.0 | 26.0 |
| Net Gearing (%) | nm | nm | nm | nm |
Stock and Financial Data
Major Shareholders
- Binariang GSM (62.2%)
- EPF (12.1%)
- Amanah Saham Nasional Bhd (10.3%)
Price performance
| 3mth | 6mth | 12mth | |
|---|---|---|---|
| Absolute (%) | (3.9) | (0.3) | (3.4) |
| Relative (%) | (6.3) | (1.0) | (0.1) |
Company profile
Maxis is Malaysia’s second largest mobile operator. Starting off in mobile, it expanded into the fixed broadband market in 2013. The group serves 13 million customers, which includes postpaid, prepaid and broadband subscribers. In terms of market positioning, it positions itself as a premium brand, historically known for its reliable network. 4G population coverage stands at 95%, supported by more than 11k network sites and 22,000km fibre footprint.
Investment thesis and catalysts
Potential merger with U Mobile. It has been previously reported that Maxis is exploring a buyout of U Mobile. If it fruitions, we see positives from potential merger synergies, market consolidation and enhanced spectrum, with U Mobile being selected to implement Malaysia’s second 5G network. Potential hurdles to a deal are pricing and regulatory risks, given it will represent a decrease in competition.
Service revenues have stabilised. Service revenues returned to a growth trajectory in FY21 and have sustained since. This has been driven by pre-to-post migration trends and fixed-mobile convergence. The group has also been gaining service revenue market share.
Valuation methodology
Our target price is derived from an EV/Ebitda multiple of 9.5x and CY26 Ebitda. Our multiple is the two-year average for the Malaysia mobile sector. We believe this is more relevant than the five-year average, as it better reflects the sector de-rating post 5G developments in Malaysia.
With the transition to a wholesale network model for 5G, Malaysia mobile players have undergone a sector derating, on expectations of reduced pricing power in the future and threats of increased competition.
Risk factors
Competition remains the biggest risk, due to the already mature mobile market (high penetration rates) and lower barriers to entry, following a transition to the dual 5G network model. We estimate every 1% decrease in ARPU, lowers earnings by 4%.
Financial Data
EXHIBIT 1: 2Q25 EARNINGS SUMMARY
| RMm | 2Q25 | 2Q24 | YOY (%) | 1Q25 | QoQ (%) | 1H25 | 1H24 | YOY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 2,562 | 2,586 | -0.9 | 2,608 | -1.8 | 5,170 | 5,189 | -0.4 |
| EBITDA | 1,090 | 1,046 | 4.2 | 1,055 | 3.3 | 2,145 | 2,090 | 2.6 |
| Margin (%) | 42.5 | 40.4 | 2.1 | 40.5 | 2.1 | 41.5 | 40.3 | 1.2 |
| Depreciation and amortisation | -446 | -439 | -1.6 | -441 | -1.1 | -887 | -887 | 0.0 |
| EBIT | 644 | 607 | 6.1 | 614 | 4.9 | 1,258 | 1,203 | 4.6 |
| Interest income | 11 | 7 | 57.1 | 11 | 0.0 | 22 | 16 | 37.5 |
| Interest expense | -121 | -119 | -1.7 | -122 | 0.8 | -243 | -244 | 0.4 |
| Others | 3 | -12 | nm | -3 | nm | 0 | -13 | nm |
| PBT | 537 | 483 | 11.2 | 500 | 7.4 | 1,037 | 962 | 7.8 |
| Tax | -139 | -127 | -9.4 | -129 | -7.8 | -268 | -253 | -5.9 |
| Effective tax rate (%) | 25.9 | 26.3 | -0.4 | 25.8 | 0.1 | 25.8 | 26.3 | -0.5 |
| MI | 0 | 0 | nm | 0 | nm | 0 | 0 | nm |
| Net profit | 398 | 356 | 11.8 | 371 | 7.3 | 769 | 709 | 8.5 |
| Core net profit | 398 | 356 | 11.8 | 371 | 7.3 | 769 | 709 | 8.5 |
| Capex | 165 | 116 | 42.2 | 86 | 91.9 | 251 | 222 | 13.1 |
| EPS (sen) | 5.1 | 4.6 | 10.9 | 4.7 | 8.5 | 9.8 | 9.1 | 7.7 |
| Core EPS (sen) | 5.1 | 4.5 | 11.8 | 4.7 | 7.3 | 9.8 | 9.1 | 8.5 |
| DPS (sen) | 5.1 | 4.0 | 27.5 | 4.0 | 27.5 | 9.1 | 8.0 | 13.8 |
Source: Maxis, AmInvestment Bank
EXHIBIT 2: 2Q25 REVENUE AND COST BREAKDOWN
| RMm | 2Q25 | 2Q24 | YOY (%) | 1Q25 | QoQ (%) | 1H25 | 1H24 | YOY (%) |
|---|---|---|---|---|---|---|---|---|
| Revenue | 2,562 | 2,586 | -0.9 | 2,608 | -1.8 | 5,170 | 5,189 | -0.4 |
| Service | 2,204 | 2,216 | -0.5 | 2,171 | 1.5 | 4,375 | 4,407 | -0.7 |
| Consumer converged revenue | 1,797 | 1,815 | -1.0 | 1,773 | 1.4 | 3,570 | 3,619 | -1.4 |
| Postpaid | 933 | 916 | 1.9 | 924 | 1.0 | 1,857 | 1,827 | 1.6 |
| Prepaid | 610 | 648 | -5.9 | 595 | 2.5 | 1,205 | 1,297 | -7.1 |
| Fibre | 254 | 224 | 13.4 | 230 | 10.4 | 484 | 440 | 10.0 |
| WBB | 0 | 27 | nm | 24 | nm | 24 | 55 | -56.4 |
| Enterprise converged revenue | 407 | 401 | 1.5 | 398 | 2.3 | 805 | 788 | 2.2 |
| Mobile | 207 | 202 | 2.5 | 213 | -2.8 | 420 | 402 | 4.5 |
| Fixed and solutions | 200 | 199 | 0.5 | 185 | 8.1 | 385 | 386 | -0.3 |
| Non service revenue | 358 | 370 | -3.2 | 437 | -18.1 | 795 | 782 | 1.7 |
| Device | 358 | 370 | -3.2 | 437 | -18.1 | 795 | 782 | 1.7 |
| Total expenses | 1,468 | 1,540 | -4.7 | 1,553 | -5.5 | 3,021 | 3,099 | -2.5 |
| Traffic, commissions and other direct costs + Device cost | 914 | 996 | -8.2 | 1,012 | -9.7 | 1,926 | 2,033 | -5.3 |
| Spectrum license fees | 63 | 62 | 1.6 | 62 | 1.6 | 125 | 124 | 0.8 |
| Network | 150 | 139 | 7.9 | 146 | 2.7 | 296 | 277 | 6.9 |
| Staff and resource | 209 | 208 | 0.5 | 199 | 5.0 | 408 | 410 | -0.5 |
| Marketing | 41 | 47 | -12.8 | 42 | -2.4 | 83 | 86 | -3.5 |
| Operation and maintenance | 111 | 109 | 1.8 | 102 | 8.8 | 213 | 211 | 0.9 |
| Allowance for doubtful debts, net | 37 | 38 | -2.6 | 34 | 8.8 | 71 | 78 | -9.0 |
| Government grants and other income, net | -57 | -59 | 3.4 | -44 | -29.5 | -101 | -120 | 15.8 |
Source: Maxis, AmInvestment Bank
EXHIBIT 3: 2Q25 SUBSCRIBER AND ARPU BREAKDOWN
| RMm | 2Q25 | 2Q24 | YoY (%) | 1Q25 | QoQ (%) |
|---|---|---|---|---|---|
| Operational metrics | |||||
| Mobile subscriptions (‘000) | 13,236 | 12,753 | 3.8 | 13,236 | 0.0 |
| Postpaid (excl. WBB) | 5,647 | 5,129 | 10.1 | 5,549 | 1.8 |
| Prepaid | 7,601 | 7,497 | 1.4 | 7,566 | 0.5 |
| Wireless broadband | 123 | 127 | -3.1 | 121 | 1.7 |
| Home connections (‘000) | 727 | 707 | 2.8 | 727 | 0.0 |
| ARPU (RM/month) | 43 | 45 | -4.7 | 42 | 0.5 |
| Postpaid | 64 | 68 | -5.2 | 65 | -0.9 |
| Prepaid | 27 | 29 | -7.3 | 26 | 1.9 |
| Data usage (GB/month) | 34.3 | 29.7 | 15.5 | 33.2 | 3.3 |
| Postpaid | 36.6 | 32.5 | 12.6 | 35.0 | 4.6 |
| Prepaid | 32.7 | 27.9 | 17.2 | 31.9 | 2.5 |
Source: Maxis, AmInvestment Bank
EXHIBIT 13: VALUATIONS
| Target EV/Ebitda (x) – 1sd to sector 5-year average | 9.5x |
| CY26 Ebitda (RMmil) | RM4,401mil |
| Enterprise value (RMmil) | RM41,806mil |
| Less: Borrowings (RMmil) | (RM9,289mil) |
| Add: Cash (RMmil) | RM464mil |
| Equity value (RMmil) | RM32,981mil |
| Shares outstanding (mil shares) | 7,832mil |
| ESG premium | |
| 12-month target price | RM4.20 |
Source: AmInvestment Bank
EXHIBIT 14: FINANCIAL DATA
Income Statement (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue | 10,180.0 | 10,536.0 | 10,829.8 | 11,075.1 | 11,316.5 |
| EBITDA | 3,960.0 | 4,122.0 | 4,296.3 | 4,400.6 | 4,501.8 |
| Depreciation/Amortisation | (1,903.0) | (1,780.0) | (1,838.5) | (1,818.7) | (1,807.4) |
| Operating income (EBIT) | 2,057.0 | 2,342.0 | 2,457.8 | 2,581.9 | 2,694.4 |
| Other income & associates | (167.0) | (18.0) | |||
| Net interest | (446.0) | (447.0) | (419.1) | (380.8) | (343.4) |
| Exceptional items | |||||
| Pretax profit | 1,444.0 | 1,877.0 | 2,038.7 | 2,201.2 | 2,351.0 |
| Taxation | (452.0) | (481.0) | (509.7) | (550.3) | (587.8) |
| Minorities/pref dividends | 1.0 | ||||
| Net profit | 993.0 | 1,396.0 | 1,529.0 | 1,650.9 | 1,763.3 |
| Core net profit | 1,354.0 | 1,396.0 | 1,529.0 | 1,650.9 | 1,763.3 |
Balance Sheet (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Fixed assets | 7,210.0 | 6,885.0 | 6,787.2 | 6,734.5 | 6,717.9 |
| Intangible assets | 11,193.0 | 11,042.0 | 10,817.4 | 10,602.0 | 10,395.4 |
| Other long-term assets | 1,337.0 | 1,492.0 | 1,492.0 | 1,492.0 | 1,492.0 |
| Total non-current assets | 19,740.0 | 19,419.0 | 19,096.6 | 18,828.5 | 18,605.3 |
| Cash & equivalent | 569.0 | 464.0 | 698.6 | 886.9 | 1,190.7 |
| Stock | 22.0 | 17.0 | 15.8 | 16.1 | 16.4 |
| Trade debtors | 2,450.0 | 2,419.0 | 2,435.4 | 2,490.5 | 2,544.7 |
| Other current assets | 4.0 | 4.0 | 4.0 | ||
| Total current assets | 3,041.0 | 2,904.0 | 3,153.7 | 3,397.5 | 3,755.8 |
| Trade creditors | 4,126.0 | 4,111.0 | 4,342.0 | 4,435.7 | 4,528.9 |
| Short-term borrowings | 857.0 | 1,193.0 | 910.9 | 858.5 | 811.1 |
| Other current liabilities | 439.0 | 297.0 | 297.0 | 297.0 | 297.0 |
| Total current liabilities | 5,422.0 | 5,601.0 | 5,549.9 | 5,591.3 | 5,637.0 |
| Long-term borrowings | 8,915.0 | 8,096.0 | 7,799.3 | 7,325.4 | 6,894.3 |
| Other long-term liabilities | 2,700.0 | 2,720.0 | 2,758.4 | 2,768.9 | 2,779.2 |
| Total long-term liabilities | 11,615.0 | 10,816.0 | 10,557.8 | 10,094.2 | 9,673.6 |
| Shareholders’ funds | 5,743.0 | 5,905.0 | 6,141.7 | 6,539.5 | 7,049.6 |
| Minority interests | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| BV/share (RM) | 0.73 | 0.75 | 0.78 | 0.83 | 0.90 |
Cash Flow (RMmil, YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Pretax profit | 1,444.0 | 1,877.0 | 2,038.7 | 2,201.2 | 2,351.0 |
| Depreciation/Amortisation | 1,903.0 | 1,780.0 | 1,838.5 | 1,818.7 | 1,807.4 |
| Net change in working capital | (857.0) | (651.0) | 254.4 | 48.7 | 49.0 |
| Others | 326.0 | 51.0 | (64.3) | (133.8) | (197.5) |
| Cash flow from operations | 2,816.0 | 3,057.0 | 4,067.2 | 3,934.8 | 4,009.9 |
| Capital expenditure | (1,141.0) | (1,011.0) | (1,191.3) | (1,218.3) | (1,244.8) |
| Net investments & sale of fixed assets | 1.0 | 1.0 | |||
| Others | 376.0 | 317.0 | |||
| Cash flow from investing | (764.0) | (693.0) | (1,191.3) | (1,218.3) | (1,244.8) |
| Debt raised/(repaid) | (362.0) | (737.0) | (903.7) | (858.6) | (818.0) |
| Equity raised/(repaid) | 3.0 | ||||
| Dividends paid | (1,331.0) | (1,253.0) | (1,292.3) | (1,253.1) | (1,253.1) |
| Others | (421.0) | (479.0) | (445.3) | (416.5) | (390.3) |
| Cash flow from financing | (2,111.0) | (2,469.0) | (2,641.3) | (2,528.2) | (2,461.4) |
| Net cash flow | (59.0) | (105.0) | 234.6 | 188.3 | 303.7 |
| Net cash/(debt) b/f | 628.0 | 569.0 | 464.0 | 698.6 | 886.9 |
| Net cash/(debt) c/f | 569.0 | 464.0 | 698.6 | 886.9 | 1,190.7 |
Key Ratios (YE 31 Dec)
| FY23 | FY24 | FY25F | FY26F | FY27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | 4.0 | 3.5 | 2.8 | 2.3 | 2.2 |
| EBITDA growth (%) | 1.0 | 4.1 | 4.2 | 2.4 | 2.3 |
| Pretax margin (%) | 14.2 | 17.8 | 18.8 | 19.9 | 20.8 |
| Net profit margin (%) | 9.8 | 13.2 | 14.1 | 14.9 | 15.6 |
| Interest cover (x) | 4.6 | 5.2 | 5.9 | 6.8 | 7.8 |
| Effective tax rate (%) | 31.3 | 25.6 | 25.0 | 25.0 | 25.0 |
| Dividend payout (%) | 134.0 | 89.8 | 84.5 | 75.9 | 71.1 |
| Debtors turnover (days) | 82 | 84 | 82 | 81 | 81 |
| Stock turnover (days) | 1 | 1 | 1 | 1 | 1 |
| Creditors turnover (days) | 149 | 143 | 142 | 145 | 145 |
Source: Company, AmInvestment Bank Bhd estimates
DISCLOSURE AND DISCLAIMER
This report is prepared for information purposes only and it is issued by AmInvestment Bank Berhad (“AmInvestment”) without regard to your individual financial circumstances and objectives. Nothing in this report shall constitute an offer to sell, warranty, representation, recommendation, legal, accounting or tax advice, solicitation or expression of views to influence any one to buy or sell any real estate, securities, stocks, foreign exchange, futures or investment products. AmInvestment recommends that you evaluate a particular investment or strategy based on your individual circumstances and objectives and/or seek financial, legal or other advice on the appropriateness of the particular investment or strategy.
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