The much anticipated latest quarterly earnings of Maxis Bhd, Malaysia’s leading mobile-phone operator, came in below market expectations.
For the second quarter ended June 30, 2010 (2QFY10), Maxis posted a net profit of RM532 million on revenue of RM2.19 billion. Data services show that consensus had estimated the telco to post a net profit of RM576.5 million. Basic earnings per share totalled 7.1 sen.
It posted a net loss of RM32 million on revenue of RM1.79 billion a year earlier. However, Maxis noted that this was not a like-for-like comparison as the company was restructured ahead of its listing in November last year.
The mobile operator maintained an interim dividend of eight sen, the same quantum declared for the previous quarter. In its prospectus, Maxis had disclosed its target for a payout ratio of not less than 75% of its net profit.
Nonetheless, Khair Mirza, an analyst with Maybank Investment Bank Research, said Maxis’ earnings were relatively within expectations although earnings before interest, tax, depreciation and amortisation (Ebitda) margin was below Maxis’ own 50% target, coming in at about 47%.
Speaking to reporters at a briefing on Monday, Maxis CEO Sandip Das said Ebitda margin was largely impacted by higher sales and marketing costs incurred for the 2010 FIFA World Cup sponsorship.
He said it spent some RM45 million during the quarter for the World Cup event and another RM25 million would be put under third-quarter expenses.
For 1HFY10, Maxis posted a net profit of RM1.08 billion versus a loss of RM74 million a year earlier, while revenue rose 22% to RM4.34 billion from RM3.57 billion.
Mobile subscriptions increased 14% in 1HFY10, with 1.3 million pre-paid customers and 277,000 wireless broadband subscribers added. Investments in its non-voice business continued to bear fruit as contribution from the segment increased to 36.6% from 34.8% in 1QFY10.
“We added an astonishing 1.55 million subscribers, out of the top three industry operators’ total addition of 3.3 million subscribers over the last four quarters, and gained momentum by snatching incremental wireless broadband leadership in the quarter and raised non-voice revenues to nearly 37%, comparable to some of the best among Asian telcos,” Sandip said.
By next year, he expects non-voice revenue to make up half of the group’s total turnover. “The key is to put smart phones in people’s hands,” he said, adding that broadband revenue had yet to reach a level that it desired, but expected it to grow further.
Sandip added that Maxis was following through on its RM100 million savings to be realised in the short- to medium-term but the group was currently increasing its investments, including subsidies and operating expenses to support its broadband and data business, which would provide significant additional revenue in the future.
“Malaysia is in a transition. We want to look at the broadband business and that will require a lot of investments. But moving forward, revenue from this area will dominate the industry,” Sandip said, adding that the voice business would continue to be its bread and butter for now.
Maxis plans to spend some RM1.2 billion this year to widen its fixed-line and wireless broadband Internet footprint in Malaysia.
The group reportedly has a target of making its 3G coverage available to almost 80% of the population by year-end. Maxis has spent some RM433 million of its planned capex in the first half of the year and Sandip expects capex spending to accelerate in the second half of the year.
“The telco may not fully spend its capex. But the increased expenditure in the second half is generally a seasonal factor. The second half of the year would likely be as good, if not better than the first,” Mirza told The Edge Financial Daily.
Maybank maintained a buy call on the counter with a target price of RM6.20. The stock shed seven sen to RM5.38 on Monday.
Written by Joy Lee
This article appeared in The Edge Financial Daily, September 1, 2010.
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