KUALA LUMPUR, Oct 29 — The core earnings of mobile phone operator Maxis Bhd is forecast to grow at four to seven per cent from financial year 2009 to 2011, according to OSK Research.
“We forecast Maxis’s core earnings to grow at a slower clip of five per cent in the financial year 2009 to RM2.52 billion from a 21.2 per cent growth in 2008 due to the pressure on its topline and earnings before interest, taxes, depreciation and amortisation (EBITDA),” it said in a research note here today.
OSK also said the financial year 2010 core earnings is projected to rise seven per cent at RM2.69 billion and by 4.1 per cent for financial year 2011 to RM2.80 billion. This reflects the full year impact of higher borrowing costs and continuing pressure on revenue and EBITDA, on expectations that competition in the industry will heat up in 2010, it explained.
OSK said one of the assumptions in the forecast is the mobile subscriber growth of seven to nine per cent for financial year 2009-2011 from 14.1 per cent in financial year 2008. “This reflects the deceleration in industry growth due to the maturing market,” it said.
It also stated that blended mobile average revenue per user (ARPU) is projected to contract by three to six per cent to RM53-RM58 for financial year 2009-2011 from RM61 in financial year 2008.
“We forecast postpaid revenue to grow by a compound annual growth rate (CAGR) of 11.7 per cent driven mainly by higher data take-up, mitigating the three to four per cent year-on-year contraction in prepaid revenue,” OSK said.
Maxis is the biggest telco constituent on Bursa Malaysia. “Based on the implied market capitalisation and our assumed free float factor of 0.5-0.75, Maxis will be ranked among the top five of the FBM KLCI when included in the next review of the Index in December,” it said.
OSK said Maxis has had an explicit minimum dividend payout target of 75 per cent from financial year 2010, backed by the group’s strong operational cash flow of over RM3 billion per annum.
“We estimate Maxis’ free cash flow (FCF) yield at eight per cent to 10 per cent for financial year 2010-2011, comfortably above the projected net dividend yields of 5.2-5.5 per cent based on the guidance,” it said.
According to OSK, there is scope for higher dividends on the back of a more proactive capital management. Management has targeted an optimal net debt/EBITDA of 1.5-2 times from 1.2 times currently.
“Maxis will be positioned as a stock that provides sustainable and strong dividend yields, similar to listed mobile telcos in markets where growth has levelled off. Notable examples are StarHub and Mobile One (M1) in Singapore,” OSK said. — Bernama
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