KUALA LUMPUR: CIMB Securities Sdn Bhd says the concerns regarding Maxis Bhd's involvement in the 5G network rollout may be exaggerated.
According to the research firm, Digital Nasional Bhd (DNB)'s wholesale charge in the 2024 fiscal year (FY24) would be lower than anticipated.
"Any investment in Entity B (the second 5G network operator) is unlikely to significantly impact Maxis's balance sheet," it said.
CIMB Securities said that their main expectation is for Maxis to exit from DNB and purchase a 50 per cent joint venture share in Entity B with a single investment of RM750 million in the latter half of 2024 (2H24).
"Subsequently, we anticipate Entity B to become self-sustainable through debt and wholesale fees.
"Our projections suggest that Maxis's wholesale fees to Entity B will increase from RM180 million in financial year 2025 (FY25) to RM807 million per annum from financial year 2030 (FY30) onwards," the firm added.
CIMB Securities also expects Maxis' capital expenditure (capex) to decrease from RM800 million to RM300 million per year as investments in 4G infrastructure decline.
The total network-related payments of RM1.0 billion to RM1.2 billion per annum align with Maxis' historical capex trend.
Furthermore, CIMB Securities noted that, based on its 5G access agreement (AA), Maxis is to pay a fixed wholesale fee of RM360 million in FY24 after DNB hit 80 per cent.
"However, we now anticipate that the wholesale fees to DNB may range between RM150 million and RM200 million due to a lower provision of 5G network capacity from DNB, which is below the previously expected 1,000Gbps.
"Additionally, this fee reduction will be compensated by an annual cost saving of RM70 million to RM75 million from a staff right-sizing initiative in the third quarter of 2023, and estimated 4G domestic roaming and mobile virtual network operator (MOCN) fees of approximately RM130 million per annum from Telekom Malaysia (TM) since August 2023," it said in a research note today.
CIMB Securities has upgraded Maxis' call from 'hold' to 'buy' with a target price of RM4.
"We anticipate a decline in wholesale fees to DNB in FY25 as Maxis gradually transitions traffic to Entity B, with the access agreement expected to conclude by the end of 2025," said CIMB Securities.
The firm anticipates a modest three-year core earnings per share (EPS) compound annual growth rate (CAGR) of 1.7 per cent, from FY24 to financial year 2026 (FY26), but does not foresee any significant negative impact on Maxis' earnings.
"We project Maxis' dividend per share (DPS) for FY24 to 26F to range between 16 and 18 sen, offering a robust yield of 4.6 per cent to 5.2 per cent.
"We believe that as the 5G situation becomes clearer, investor apprehensions will diminish, leading to a potential revaluation of Maxis' share price," it said.