Maxis (HOLD) - 4Q11 Results: Tax Incentive to the Rescue

Maxis (HOLD)

4Q11 Results: Tax Incentive to the Rescue

• Declared a final single-tier dividend of 9.8 sen per share lifting the total dividend for FY11 to 19.6 sen per share.
• TM also proposed capital repayment of 30 sen per share via capital reduction.
• As expected, Maxis declared a fourth single-tier tax exempt dividend of 8 sen per ordinary share along with final single-tier tax exempt dividend of 8 sen per ordinary share. The total dividend for FY11 is 40 sen per ordinary share.
• Without the tax incentive, FY11 would have been a bad year for the incumbent telco with PBT suffering with contraction of 4% yoy and 9% qoq.
• Comments: We expect fibre broadband competition to intensify this year, especially ahead of P1’s similar offering coming on shelf. While we do not expect Maxis to engage in price war which will hurt ARPU in the longer term, it is likely to enhance products offering (increase speed) and VAS bundling.
• Our DDM-derived TP was upgraded by 7% to RM5.93 from RM5.54 as WACC was lowered to 7% from 7.5% as a result of increased debt to total capital ratio.

Source: HLIB Research 27 Feb 2012