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BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2012(029624)

Monday, 27 February, 2012

Results Review

Maxis
Above
Stock Data
Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Maxis MK 44,925.0 Equity 7,500.0 6.06 5.16 3,564,117 23.9% Y

Buy
Earnings Higher by Tax Incentives
Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders
Binariang GSM SB EPF 6.0 9.3% 1.8% 0.5 70.0% 5.0%

Price: Target Price:

RM5.99 (5.5% upside) RM6.30

Financial Derivatives Share Performance (%) Absolute vs. KLCI Financial Highlights FY 31 Dec (RMm) Turnover EBIT Pretax profit Core Net Profit EPS (sen) PER (x) DPS (sen) Div. Yield (%) NTA/share (RM) EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pretax profit Core Net profit EPS Share Price Chart

n.a. 1mth 5.1 7.0 3mth 12.1 1.5 12mth 20.5 7.0

2009 7,611 2,267 1,939 1,578 21.0 28.5 15.0 2.5% (0.28) 29.8% 25.5% 18.6% 30.1% 15.1% net cash

2010 8,869 3,343 3,133 2,295 30.6 19.6 40.0 6.7% (0.31) 37.7% 35.3% 26.7% 26.1% 12.7% 0.48

2011 8,800 3,232 3,004 2,527 33.7 17.8 40.0 6.7% (0.40) 36.7% 34.1% 15.7% 30.2% 14.0% 0.62

2012E 9,210 3,367 3,128 2,346 31.3 19.1 40.0 6.7% (0.31) 36.6% 34.0% 25.0% 28.1% 12.8% 0.47

2013E 9,601 3,422 3,173 2,380 31.7 18.9 40.0 6.7% (0.21) 35.6% 33.0% 25.0% 26.7% 12.5% 0.28

Maxis FY11 net earnings of RM2.53bn came in 14% above our expectation due to lower tax rate, nevertheless, without the tax incentive, it is within our forecast. Despite a lower revenue (-0.8%) net earnings grew by 10.1% due to the abovementioned reason. Meanwhile EBITDA margin remains stable. We have revised our earnings forecasts upwards. Maxis declared 4th interim and final dividend of 8sen each, totalling to 40sen for FY11, translating into yield of 6.7% based on current price. We believe the company will maintain the same payout in FY12. We have upgraded our FY12 and FY13 earnings forecasts and raised our target price to RM6.30. Coupled with potential upside of 5.5% and dividend yield of 6.7%, the stock offers potential return of more than 12%; hence, we reiterate our BUY recommendation on Maxis. Lower overall revenue. Revenue dipped 0.8% to RM8.8bn from previous year mainly due to lower hubbing revenue resulted from a scale-down of the low-margin hubbing business. Nonetheless, mobile revenue grew by 3.6%. On the other hand, higher finance expenses pulled PBT down by 4.1%. However, net earnings increased by 10.1% due to lower tax rate, resulted from recognition of last mile broadband tax incentive for the prior years and current year. Mobile revenue still growing. Mobile services posted a YoY revenue increase of 2% or RM167m primarily driven by increase in non-voice revenues. The growth in non-voice revenue was mainly due to increase in mobile internet usage, content subscription and outright sale of devices coupled with higher wireless broadband revenue from a higher subscription base. Total non-voice revenue as a percentage of total mobile services revenue increased by 5.4% to 43.5%. Nonetheless, mobile operating profit dropped by 1.4% mainly due to higher operating costs. Earnings forecast revised slightly. We have fine-tuned our FY12 and FY13 net earnings forecast by 2.1% and 1.3% to RM2.35bn and RM2.38bn respectively by factoring in slightly higher mobile revenue. Maxis proposed 4th interim and final dividend of 8sen each, totalling 40sen for FY11, translating into yield of 6.7% based on current price. We expect the company to maintain this payout for FY12. View & Valuation. Following the earnings revision, our target price is raised to RM6.30 based on DCF valuation (WACC assumption of 7.5%). The current share price offers potential upside of 5.5%, couple with dividend yield of 6.7% going forward, the stock offers potential return of more than 12%; hence we maintain our BUY recommendation on Maxis.

5.9% 608.8% 42098.0% 42098.0% -1600.0%

16.5% 47.5% 61.6% 61.6% 45.7%

-0.8% -3.3% -4.1% -4.1% 10.1%

4.7% 4.2% 4.1% 4.1% -7.1%

4.2% 1.6% 1.4% 1.4% 1.3%

6.20
6.00

5.80
5.60

5.40
5.20

5.00
4.80 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11

The Research Team research@bimbsec.com.my 03-26918887 ext 111

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27 February 2012

Results Review: Maxis 4QFY11

Quarterly figures
FY 31 Dec (RMm) Revenue EBIT Pretax profit Taxation Minority Interest Net Profit EPS (sen) Net gearing (x) EBIT margin (%) PBT margin (%) Net profit margin (%) Effective tax rate (%) 4QFY10 2,310 887 833 (222) 0 610 8 0.5 38.4% 36.0% 26.4% 26.7% 1QFY11 2,133 805 741 (201) 0 540 7 0.5 37.7% 34.7% 25.3% 27.1% 2QFY11 2,158 818 757 (205) 0 552 7 0.5 37.9% 35.1% 25.6% 27.1% 3QFY11 2,244 814 746 (208) 0 538 7 0.6 36.3% 33.2% 24.0% 27.9% 4QFY11 2,265 795 760 141 (4) 897 12 0.6 35.1% 33.6% 39.6% -18.6% QoQ Chg 0.9% -2.3% 1.9% -167.8% n.a. 66.7% 66.7% -3.0% -3.2% 0.9% 65.2% -166.5% YoY Chg -1.9% -10.4% -8.7% -163.5% n.a. 46.9% 46.9% 29.3% -8.6% -6.9% 49.9% -169.5% FY10 8,869 3,343 3,133 (837) 0 2,295 31 0.5 37.7% 35.3% 25.9% 26.7% FY11 8,800 3,232 3,004 (473) (4) 2,527 34 0.6 36.7% 34.1% 28.7% 15.7% YTD Chg -0.8% -3.3% -4.1% -43.5% n.a. 10.1% 10.1% 29.3% -2.6% -3.4% 11.0% -41.1%

Source: BIMB Securities

Income Statement
FY 31 Dec (RMm) Revenue EBITDA Pretax profit Tax MI Core Net profit EPS (sen) EPS growth (%) DPS (sen) NTA/ share (RM) Net gearing (x) PER (x) Div. yield (%) P/ NTA (x) ROE (%) ROA (%) 2009 7,611 2,624 1,939 (361) 0 1,578 21.0 -1600.0% 15.0 (0.28) net cash 28.5 2.5% (21.7) 30.1% 15.1% 2010 8,869 4,395 3,133 (837) 0 2,295 30.6 45.7% 40.0 (0.31) 0.5 19.6 6.7% (19.1) 26.1% 12.7% 2011 8,800 4,380 3,004 (473) (4) 2,527 33.7 10.1% 40.0 (0.40) 0.6 17.8 6.7% (15.1) 30.2% 14.0% 2012E 2013E 9,210 9,601 4,672 4,861 3,128 3,173 (782) (793) 0 0 2,346 2,380 31.3 31.7 -7.1% 1.3% 40.0 40.0 (0.31) (0.21) 0.5 0.3 19.1 18.9 6.7% 6.7% (19.6) (28.5) 28.1% 26.7% 12.8% 12.5% Source: BIMB Securities

Balance Sheet
FY 31 Dec (RMm) Non Current Assets Current Assets Total Assets Current Liabilities Non Current Liabilities Shareholders' Fund Minority Interests Equity & Liabilities 2009 15,666 2,132 17,798 3,311 5,542 8,945 0 17,798 2010 16,122 2,103 18,225 3,323 6,235 8,667 0 18,225 2011 16,155 1,836 17,991 4,386 5,517 8,084 4 17,991 2012E 15,744 2,905 18,649 4,501 5,517 8,630 1 18,649 2013E 14,997 4,363 19,360 4,631 5,517 9,210 2 19,360 Source: BIMB Securities

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27 February 2012

Results Review: Maxis 4QFY11

DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

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27 February 2012

Results Review: Maxis 4QFY11

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