Is Maxis Bhd Still A Good Stock To Buy?

Maxis Bhd is a leading mobile communications corporation in Malaysia. The telecommunication giant was re-listed on the main market of Bursa Malaysia on 19 November 2009 after it was being delisted on 13 July 2007. Presently, it is worth RM 44.1 billion in market capitalization and forms one of the top 30 constituents of the KLSE index. In this article, I’ll list down 9 key things that you need to know about Maxis Bhd before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: MAXIS / KLSE: 6012
Market Capitalization: RM 44.1 Billion (20 March 2018)

Share Price: RM 5.76 (20 March 2018)

Industry: Telecommunications

Syariah Compliant: Yes

#2: The Business

Maxis Bhd derives income mainly from two business divisions:

1. Postpaid
   This mainly involves the provision of MaxisONE Plans to individual consumers across Malaysia. As at 31 December 2017, the corporation has a total of 2.9 million postpaid customers where 2.0 million of the customers have subscribed to MaxisOne Plans. The postpaid division is Maxis Bhd’s largest contributor to sales. In 2017, it has contributed RM 4.12 billion in revenue, accounting for 47.4% of revenue reported by Maxis Bhd in that financial year.  
2. Prepaid
   This mainly involves the provision of Hotlink products to individual consumers across Malaysia. As at 31 December 2017, Maxis Bhd has a total of 8.0 million Hotlink customers. The prepaid division is solidly the second largest sales contributor to Maxis Bhd. In 2017, it reported RM 3.85 billion in revenue, accounting for 44.2% of sales achieved by Maxis Bhd in that financial year.

Collectively, they had contributed 91.6% of total revenue generated by Maxis Bhd in 2017.

#3: The Financials

Maxis Bhd has maintained its group revenues at RM 8.6 – 8.7 billion per year from 2015 to 2017. This is because Maxis Bhd has achieved an increase in its Average Revenue per Unit (ARPU) despite experiencing a marginal decline in its number of subscribers, both postpaid and prepaid, during the period.

Maxis Bhd has marginally improved its profit margins as it has lowered some expenses such as traffic, commissions, marketing and other direct costs. This has resulted in a marginal increase in shareholders’ earnings, up from RM 1.72 billion in 2014 to RM 2.19 billion in 2017.

Source: Maxis Bhd’s Quarterly Reports

#4: Balance Sheet Strength

As at 31 December 2017, Maxis Bhd has RM 8.3 billion in long-term debt and thus, its debt-to-equity ratio works out to be 117.51%. It is like a man who has RM 117.51 in long-term borrowings for every RM 100 he owns. In 2017, Maxis Bhd has reported making RM 3.82 billion in operating cash flows. It is in the range of RM 3.1 – 4.1 billion in cash flows from operations generated over the last 5 years. Hence, Maxis Bhd is capable of settling its long-term borrowings in 2 – 3 years if the board of directors decides to do so.

#5: Future Prospects

For 2018, Maxis Bhd expects a low single-digit decline in service revenue and a mid-single-digit decline in earnings before depreciation, amortization, taxes and interests (EBITDA). It is based on the full impact on Maxis Bhd which is stemmed from the progressive termination of a network sharing arrangement.

#6: New Interim CEO Appointed

On 2 March 2018, Maxis Bhd has announced its appointment of Robert Alan Nason to be its interim CEO with effect on 1 April 2018, replacing its current CEO, Morten Lundal. Robert has been elected as an independent director of Maxis Bhd on 7 March 2016 after his retirement from Telstra Corporation in September 2015 where he spent 5½ years leading a major transformation of its operations. Maxis would continue to search for its CEO and would make announcements on it at an appropriate time.

#7: Valuation

As I write, Maxis Bhd is trading at RM 5.76 a share.

In 2017, it has made RM 0.286 in earnings per share (EPS). Thus, its current P/E Ratio works out to be 20.14.

In 2017, it was reported to have RM 0.90 in net assets a share. Hence, at the stock price of RM 5.76, its current P/B Ratio works out to be 6.40.

In 2017, it has paid out RM 0.20 in dividends per share (DPS). It is the third consecutive year where Maxis Bhd has paid out RM 0.20 in DPS. Therefore, if Maxis Bhd is able to maintain its DPS at RM 0.20 for 2018, I would expect 3.47% in gross dividend yields if I invest in Maxis Bhd at RM 5.76 a share.

#8: Investors Relation

For further enquiries or to request for additional investment information on Maxis Bhd’s Investors Relation matters, you may contact:
Ms. Neelah Alhabshi

Email: ir@maxis.com.my

Website: http://maxis.listedcompany.com/home.html

#9: Major Shareholders

As at 15 February 2018, the substantial shareholders of Maxis Bhd and their respective shareholdings are as followed:

– BGSM Equity Holdings Sdn Bhd: 62.42%

– Employees Provident Fund Board: 11.42%

– Amanah Saham Bumiputera: 8.06%

– Lembaga Tabung Haji: 1.79%

– Kumpulan Wang Persaraan (Diperbadankan): 1.39%

Here, I’ll provide a summarized breakdown of the ultimate shareholders of Maxis Bhd who held their interests via BGSM Equity Holdings Sdn Bhd as at 15 February 2018. First, BGSM Equity Holdings Sdn Bhd is 100%-owned by Binariang GSM Sdn Bhd (BGSM) and the major shareholders of BGSM are as followed:

– PanOcean Management Ltd: 37%

– Harapan Nusantara Sdn Bhd: 30%

– STC Malaysia Holding Ltd: 25%

PanOcean Management Ltd is a trust where its beneficiaries are members of the family of Ananda Krishnan Tatparanandam and foundations for charity purposes.

Tun Haji Mohammed Hanif bin Omar, Dato’ Haji Badri bin Haji Masri and Mohamad Shahrin bin Merican are shareholders of Harapan Nusantara Sdn Bhd and thus, are substantial shareholders of Maxis Bhd.

Saudi Telecom Company is a substantial shareholder of Maxis Bhd through its interest in STC Malaysia Holding Ltd.

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