MIDF Research downgrades Maxis on back of lower-than-expected FY18 profit

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KUALA LUMPUR (Feb 18): MIDF Amanah Investment Bank Bhd Research has downgraded Maxis Bhd to "sell" (from "neutral") with a lower target price of RM4.73 (previously RM5.67), on the back of lower-than-expected FY18 profit.

In a note today, the research house said Maxis Bhd's results for the fourth quarter of the financial year 2018 (4QFY18) decreased by 50% year-on-year (y-o-y) to RM259 million.

MIDF Research said this decrease was due to higher expenses such as the group's investment in its fibre internet offerings, network improvements and optimisation to improve customer experience, and higher operating and maintenance expenses stemming from investment in its productivity programme.

As a result of the lower 4QFY18 earnings, the group's overall full-year FY18 earnings contracted 14.7% y-o-y to RM1.77 billion, a 2.4% y-o-y decline in group revenue.

MIDF Research said Maxis' full-year financial performance came below its and consensus expectations, accounting for 87.7% and 90.8% of full-year FY18 earnings estimates respectively.

"In light of the weaker-than-expected FY18 reported earnings, we are revising lower FY19 earnings forecasts by -18.7%. We are inputting lower profit margin of 18.3% as compared to 23.5% previously.

"We are revising our target price to RM4.73 (previously RM5.67). This is based on pegging unchanged forward price-earnings ratio (PER) of 22.5 times to the forecasted financial year 2019 (FY19F) earnings per share (EPS) of 21.0 sen. Our target PER is the stock's average low PER of the group over the past four years," the research house said.