MAXIS: Solid Earnings Driven by Enterprise Growth and Cost Efficiency, Rating Upgraded

A recent investment bank research report indicates a robust financial performance for the period ending FY25, with core profit largely meeting or exceeding expectations. The positive results were primarily driven by strong growth in the enterprise segment and effective cost management strategies, leading to an upward revision in earnings forecasts and an upgrade of the stock’s recommendation.

Performance Review

The company reported a core profit of RM1,561 million for FY25, which aligned closely with TA Securities’ estimate at 98.7% and slightly surpassed the consensus estimate at 101.4%. This performance was supported by a 5.0% increase in EBITDA, reaching RM4,329 million, and an 11.8% rise in core profit. Overall service revenue saw a modest increase of 0.5% to RM8,912 million.

The enterprise business proved to be a significant growth driver, with its service revenue climbing 3.4% to RM1,665 million, bolstered by healthy growth in both fixed and mobile solutions. Conversely, the consumer business experienced a slight decline of 0.2%, attributed to a new commercial arrangement under the Safe Device Programme and reduced regulated interconnect rates.

In terms of shareholder returns, the company declared a fourth interim dividend of 4.0 sen per share and a special dividend of 1.5 sen per share, bringing the total FY25 dividend to 17.5 sen per share, a slight increase from FY24’s 17.0 sen per share.

Operational Challenges

While the overall FY25 performance was strong, the fourth quarter presented some challenges. Although 4QFY25 service revenue grew 2.5% quarter-on-quarter across both consumer and enterprise segments, EBITDA declined 2.2% during the same period to RM1,078 million. This decline was primarily due to higher device costs and increased depreciation charges, which subsequently led to a 7.8% quarter-on-quarter fall in core net profit to RM380 million.

Future Outlook and Recommendation

Management has guided for low single-digit growth in both service revenue and EBITDA for FY26, with a capital expenditure-to-total revenue ratio projected to be between 10% and 12%. The company plans to continue strengthening its customer base through strategic bundling initiatives aimed at enhancing retention and improving customer lifetime value. The enterprise business is expected to remain a key growth driver, underpinned by ongoing digitalisation initiatives across both the private and public sectors.

Following the company’s latest earnings guidance and factoring in higher revenue growth, TA Securities has revised its earnings forecasts for FY26 and FY27 upwards by 5.1% and 9.5% respectively. An initial earnings forecast for FY28 has also been introduced at RM1,848 million, indicating an 8.3% growth. Consequently, the investment bank has upgraded its recommendation for the stock from “Hold” to “Buy” and revised its target price upwards from RM4.15 to RM4.37.