Monday, October 24, 2011

Maxis up, RHB Research keeps fair value at RM5.65

KUALA LUMPUR: Maxis Bhd shares rose in afternoon trade on Monday, Oct 24, but the gains were outpaced by other key KLCI stocks, though analysts were positive on the telco's tie up with U Mobile to provide its 3G radio access network (RAN)

At 3.01pm, Maxis rose nine sen to RM5.34. There were 831,500 shares done at prices ranging from RM5.30 and RM5.37.

RHB Research Institute said it was positive on the tie-up which would stretch an initial period of 10 years and cater for long-term evolution (LTE) when the spectrum becomes available.

Maxis and U Mobile entered into an agreement to share Maxis' 3G radio access network (RAN), for an initial period of 10 years and will cater for long-term evolution (LTE) when the spectrum becomes available.

'Details were vague, but we are positive on the move as a means to help maintain Maxis' industry leading EBITDA margin of 50% in the medium term through capex and opex savings,' it said.

RHB Research said the active sharing arrangement could help Maxis mitigate margin erosion arising from subscriber acquisition costs related to its new Home Services. Besides that, Maxis will also likely generate some roaming revenue on a net basis given its wider 3G network coverage.

'We however believe that both companies may not gain as much as the RM2.2bn capex and opex combined savings that Celcom and DiGi are targeting through passive sharing over 10 years, given that Maxis and U Mobile do not have significant overlap in 3G coverage, except in mainly urban areas such as the Klang Valley and Johor Baru.

'Also, U Mobile does not have a nationwide 2G network, relying instead on an existing domestic 2G network roaming arrangement with Celcom, which will expire by Sep 2013.

'DCF fair value maintained at RM5.65. As a defensive play with purely domestic mobile operations, we maintain our Outperform call on Maxis amid global external uncertainties,' it said.

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