Maxis likely to pay lower dividend in FY20


ANALYSTS expect Maxis Bhd to reduce its dividend payout for the year amid the Covid-19 pandemic, after the telecommunications company (telco) declared a lower dividend and earnings for the first quarter partly due to the Covid-19 pandemic.

Maxis declared a dividend of four sen in the first quarter ended March 31, 2020 (1Q20) compared to five sen in the same quarter last year, which translates to a payout ratio of 87% in 1Q20 against 96% in 1Q19.

“Hence, we have lowered the forecast financial year ending Dec 31, 2020 (FY20F) dividend per share (DPS) by one sen to 19 sen,” AmInvestment Bank Bhd analyst Alex Goh noted in a research report yesterday.

“Given the uncertain impact from the Covid-19 movement restrictions, management is withdrawing its earlier guidance for a ‘flat to low single-digit increase’ for both FY20F service revenue and normalised Ebitda.”

Maxis paid a total dividend of 20 sen per share in FY19.

AmInvestment downgraded its call on Maxis from ‘Buy’ to ‘Hold’ as the telco’s share price has risen by 15% since March from a 10-year low of RM4.68 per share to near AmInvestment’s lower discounted cash- flow-derived fair value of RM5.50 per share (from an earlier RM5.76).

The number is based on a weighted average cost of capital discount rate of 6.3% and terminal growth rate assumption of 2%, implying an FY20F enterprise value per Ebitda of 13 times and is on par with the stock’s three-year average.

Goh said AmInvestment’s lower fair value stems from a 6% drop in Maxis’ FY20F to FY22F earnings from higher operating cost assumptions, as Maxis’ 1Q20 normalised net profit of RM360 million came in below its and street’s expectations, accounting for 23% of the firm’s FY20F net profit.

Meanwhile, Affin Hwang Investment Bank Bhd (Affin Hwang Capital) tweaked its FY21 to FY22 earnings per share forecasts for Maxis by 0.4% to 0.8% on higher interest income.

“As we now expect its payout to track its earnings, we have lowered our FY20 to FY22 DPS forecasts, assuming a 100% payout ratio instead of a fixed 20 sen DPS per annum,” its analyst Isaac Chow wrote in a note yesterday.

“Broadly, we expect the Covid-19 pandemic and Movement Control Order to affect Maxis’ near-term profitability — lower prepaid average revenue per user (ARPU) — and the ensuing weak economic conditions to affect its FY20 to FY21 ARPU due to cautious consumer and business spending.”

Chow added that Maxis’ high operating costs, including traffic, commission costs and allowance for doubtful debts, would also weigh on the group’s profitability.

The telco’s dividend for 1Q20 was “unexpectedly lowered” to four sen after having consistently paid a quarterly DPS of five sen since 1Q15, he said.

Affin Hwang Capital maintained its ‘Sell’ call on Maxis, with an unchanged target price of RM4.55.

Maxis’ net profit slid 12% to RM358 million in 1Q20 from RM409 million last year, mainly due to loss of wholesale business and higher impairment made to receivables as the group revised the expected loss rates derive from the impairment of trade receivables.

In an exchange filing last Friday, the telco said the Covid-19 pandemic and its impact on economies worldwide “have caused a significant increase in credit risk”.

“Consequently, the expected loss rates are now determined based on the historical ageing profile and the corresponding historical credit losses experienced since the outbreak of Covid-19,” it said.

The group also withdrew its guidance for FY20 which was included in the telco’s 4Q19 quarterly report, citing difficulty in predicting the impact of Covid-19 on the telco’s business operations.

However, it “remains in a strong financial position to weather the crisis created by the Covid-19 pandemic”.

“Moving forward, we foresee the Covid-19 situation evolving and are prepared to overcome these challenging times with a well-developed Business Continuity Plan that has been in place for several years,” Maxis CEO Gokhan Ogut added.