The research house said the call was made on account of Maxis taking a more prudent and sustainable stance on both its strategy and dividends.
“Hence, the discounted cash flow-based TP of RM4.00 (assuming a 7.7% weighted average cost of capital and 2% long-term growth rate) remains unchanged,” Maybank IB said in a note today.
The research house views risk-reward as being merely balanced, assessing that Maxis’ stable earnings delivery is being offset by a more conservative dividend outlook and overall 5G uncertainty.
It has lowered the group’s annual dividend per share (DPS) assumption to 17 sen from 20 sen previously, and forecasts net profit for FY2025 to increase by 1%.
“Given the lack of clarity with regards to its 5G involvement, we expect Maxis’ management to continue with a 4 sen quarterly DPS in the near term,” Maybank IB said.
The research house holds a more positive outlook on Telekom Malaysia Bhd, with a “buy” call and a TP of RM6.50.
Meanwhile, Kenanga Research has maintained its “overweight” call on the telecommunications sector today, expecting Maxis to “outperform” as one of its top picks – apart from CelcomDigi Bhd – with a TP of RM5.30.
The research house feels optimistic about Maxis’ outlook due to its strong branding and customer loyalty, especially in the premium segment, as well as resilient demand for its services.
Furthermore, the company has pulled ahead of its competitors in the installation of new 4G towers, fiberisation of premises and upgrading of existing towers, noted Kenanga Research.
“This boosts its B2B (business-to-business) revenue as both corporates and SMEs (small and medium enterprises) continue to upgrade their digitalisation (process) and potentially lowers the 5G access cost,” it said.
Kenanga Research believes that the sector’s fundamentals have improved significantly following the government’s decision to abandon the monopolistic single wholesale network (SWN) model for the 5G roll-out, replacing it with a more market-driven dual network model, which is likely to lower 5G access charges.
“Despite the significant outperformance in the first half of 2023, valuations of key players are still noticeably below levels prior to the sell-off triggered by the introduction of the SWN model for the 5G roll-out in Malaysia in late 2021.
“We see room for upwards valuation re-rating as the plan for a second 5G network firms up under the new market-driven dual network model,” it said.
As at 12.08am, Maxis Bhd’s share price was up 1 sen or 0.25% at RM4.05, giving it a market capitalisation of RM31.72 billion.