MAXIS: Buy, target price RM5.90

ECM Libra Investment Research upgraded its recommendation on Maxis Bhd (6012) following the recent weakness in its share price.

However, it maintained its target price of RM5.90 as it did not upgrade its earnings estimates.

"Maxis' first quarter results were within expectations, as revenue and net profit achieved 24 per cent of our FY10 estimates. Likewise, against consensus estimates, first quarter revenue and net profit met 24 per cent and 22 per cent of FY10 figures respectively," it said.

Maxis added a total of 400,000 new subscribers in the first quarter to 12.69 million subscribers. Most of the net adds came from prepaid (in particular the youth segment) whereby Maxis added 351,000 prepaid subscribers to 9.67 million while postpaid subs base stayed flat at 2.71 million for a second consecutive quarter.

"Management reiterated its focus on quality postpaid subs, and this has been reflected by the noticeable drop in bad debts exposure within their opex (1.4 per cent of revenue in 1QFY10 versus 2.1 per cent in 3QFY09)," it said.

Maxis declared a first interim single-tier tax exempt dividend of 8 sen/share, which represents 108 per cent of first quarter 2010 EPS.

"We have revised our dividend payout assumption to 113 per cent (previously 85 per cent), following management hinting of similar dividends for the remaining three quarters. This implies FY10 DPS of 35 sen or an attractive yield of 6.7 per cent," it said.