Maxis Bhd ’s immediate business outlook is expected to remain challenging, as AmInvestment Bank Research cautioned investors to watch out for weaker earnings in the second half of financial year 2018.
The research firm, which downgraded its view on the stock to “underweight”, said Maxis’ results for the third quarter would see noticeable impact as it neared the termination of its 3G radio access network (RAN) deal with U Mobile on Dec 27.
Maxis’ third quarter results will likely be announced on Oct 18.
“We have reduced our earnings estimates for financial years 2019 and 2020 (FY19-FY20) by 4%.
“This is on expectation of a more significant impact from the loss of U Mobile roaming revenue, which has contributed RM300mil annually in the past.
“Our new FY19-FY20 earnings are now 10% to 14% below consensus,” it said in a note.
AmInvestment said it understood that the impact would be more noticeable in third-quarter 2018 and increasingly substantive in fourth-quarter 2019.
“The management hopes to mitigate the full FY19 impact by expanding its home fibre business and fixed-enterprise solutions, which rely on Telekom Malaysia’s high-speed broadband network,” it said, adding that it has lowered its fair value to RM5.20 per share from RM5.65 previously.
Contrary to the management of Maxis, AmInvestment is not convinced that a higher revenue growth from the home fibre and fixed-enterprise segments could mitigate the financial effects due to the termination of the network sharing deal.
This is primarily because the lower margin from these operations are not expected to be sufficient to offset the immediate loss in the RAN roaming revenue.
Meanwhile, JF Apex Securities said in a note that it remained neutral on Maxis’ future prospects, as it anticipated a negative impact on the telecommunications player following the end of the network sharing deal.
On Maxis’ plan to bank on enterprise solution offerings, the research house said “the significant impact will not be coming anytime soon”.