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Nikkei Markets

Malaysia's Maxis 4Q net profit more than halves

Analysts flag potential pressure on balance sheet as spending grows

Maxis booked one-off charge of 250 million ringgit during the fourth quarter.   © Reuters

KUALA LUMPUR (Nikkei Markets) - Malaysian wireless carrier Maxis said Friday net profit fell 50.8% in the fourth quarter from a year earlier largely due to one-off expenses, dragging its full-year profit lower and sent its share price lower.

Net profit for the three months ended Dec. 31 was 266 million ringgit ($65.16 million) compared to 541 million ringgit in the same quarter last year, Maxis said in an exchange filing. Maxis booked one-off charge of 250 million ringgit for the so-called Fibrenation program during the quarter.

Analysts said Maxis will likely face earnings pressure in the immediate term as the company boosts spending on various initiatives and flagged risks to dividend payments.

"Maxis may need to cut dividend to shareholders to fund their capital expenditure needs," said BIMB Securities Analyst Khairul Fahmi. Maxis's balance sheet is "quite stretched" and the company has limited room for more borrowings, he noted.

The company launched its Fibrenation program to gain "the first mover advantage in home fibre business, which includes repricing and migration initiatives, new modems, marketing campaigns and additional resources to support the high volumes of subscriptions."

Higher network expenses and investment in resources in enterprise segment also weighed on bottom line. Quarterly revenue however rose 2.9% year-on-year to 2.45 billion ringgit from 2.38 billion ringgit, it said.

Shares of Maxis fell 1.2% to 5.63 ringgit, underperforming the benchmark FTSE Bursa Malaysia KLCI that ended relatively flat. Despite volatile earnings, Maxis' stock still attracts investors thanks to its high-spending customers even as the company continued to lose subscribers to its rivals.

"They're changing their strategy, so there will be some pressure in the short-term," said JF Apex Securities Analyst Siau Li Shen. "They will need time as they're pushing into digital services like providing integrated solutions to business."

Postpaid service revenue grew 6% on year, while prepaid service revenue declined 6.4% mainly due to a lower subscription base which was impacted by continued SIM consolidation, migration to postpaid and intense price competition, it said.

Service revenue excludes device, hubbing, and network income. Mobile internet revenue was 61.1% of prepaid revenue which contributed to the average revenue per user of 42 ringgit.

Capital expenditure for the quarter grew 37.2% on year to 524 million ringgit on continued investment in network capacity.

The company expects core network capital expenditure to be around one billion ringgit in 2019. Separately, it plans to spend one billion ringgit over three years for growth opportunities in broadband and enterprise business.

Maxis aims to deliver internal annual service revenue target of 10 billion ringgit by 2023, it said. In 2019, Maxis expects service revenue and earnings before interest, tax, depreciation and amortization, or EBITDA, to decline by low single digit and mid-single digit, respectively.

For the whole of 2018, net profit fell more than 18% to 1.78 billion ringgit. Capital expenditure for the year rose 1% to 1.04 billion ringgit while EBITDA fell 8% to 3.84 billion ringgit. Revenue for the year fell 2.4% to 9.19 billion ringgit as service revenue fell 2% to 8.07 billion ringgit.

The company lost about 134,000 revenue-generating subscribers in 2018. That compares to reduction of nearly 850,000 subscribers in 2017. Still, the blended average revenue per user rose 4% to 58 ringgit per month last year.

- Jason Ng and Gho Chee Yuan

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