This article first appeared in The Edge Financial Daily on July 19, 2019

Maxis Bhd
(July 18, RM5.61)
Maintain hold with an unchanged fair value of RM5.60: Maxis Bhd and property developer Gamuda Land Sdn Bhd have signed a memorandum of understanding (MoU) to form a strategic partnership. Under the MoU, Maxis will be appointed the preferred connectivity and solutions provider to create Malaysia’s first Maxis-delivered 5G township for Gamuda Cove, a 1,530-acre (619.17 ha) development located in the southern part of the Klang Valley, along the Elite Highway, opposite Cyberjaya and near the Kuala Lumpur International Airport (KLIA) and klia2.

Besides the Paya Indah Wetlands and Kuala Langat Forrest Reserve, the township is envisaged to comprise over 20,000 residential units. Under the MoU, Gamuda Land will be working with Maxis to fibre up parts of Gamuda Cove with its high-speed broadband connectivity and explore smart city and retailing solutions across all Gamuda Land townships in Malaysia.

This comes on the back of a 2018 collaboration where Maxis provided a customised MaxisOne Home fibre plan for Gamuda Land’s twentyfive.7 township in Kota Kemuning, Shah Alam.

This development is not a surprise as it is part of Maxis’ plan to expand its fibre broadband services deploying Telekom Malaysia Bhd’s high speed broadband network, following the implementation of the mandatory standard on access pricing last year.

As the only mobile player currently with nationwide fibre connectivity, Maxis has indicated its intention to offer innovative bundled plans while negotiating access agreements with multiple partners, including property developers. Maxis is also the only broadband provider offering a backup 4G LTE connection should there be a fibre connection issue.

As such, Maxis’ home connections have grown impressively by 67,000 year-on-year to 251,000. Besides demographically younger customers, Maxis is also aggressively targeting the small-medium business and enterprise segment.

For business users, Maxis offers RM99 per month for 30 megabits per second (Mbps) and RM139 per month for 100Mbps, which are far more attractive than Time dotcom Bhd’s RM188 per month for 20Mbps, RM318 per month for 50Mbps and RM348 per month for 100Mbps. For further comparison, Unifi Biz Lite offers RM179 per month for only 10Mbps, RM249 per month for 30Mbps, RM299 per month for 50Mbps and RM349 per month for 100Mbps.

We view the stock’s financial year 2020 forecast enterprise value-to-earnings before interest, taxes, depreciation and amortisation of 13 times as reasonable and on par with its three-year average, while providing a fair dividend yield of 4%. — AmInvestment Bank, July 18