Maxis Shares Decline as Analysts Question Dividend, 5G Plans

By Ying Xian Wong

Shares of Maxis Bhd. fell Monday, with some analysts disappointed by a lower dividend and an uncertain outlook even as revenue looked stable.

The Malaysian communications-service provider's stock was 3.9% lower at 4.18 ringgit ($0.92) by the midday break, trimming gains this year to 8.9%. Malaysia's benchmark KLCI was 0.6% lower.

Maxis on Friday posted a 7.4% rise in first-quarter net profit, helped by a 5% increase in revenue and the absence of a one-off prosperity tax on large corporations booked in the same quarter a year ago. Earnings were largely in line with expectations, leaving the stock little changed in afternoon trading Friday.

But on Monday analysts said they were in a holding pattern, citing a drop in dividend to MYR0.04 a share from MYR0.05 the preceding quarter and questions about the company's 5G plans.

Maybank Investment Bank analyst Tan Chi Wei said in a research note that Maxis's risk-reward ratio is "merely balanced presently," with generally stable earnings offset by uncertainty over 5G services amid a government policy review. He also had questions about the company's dividend outlook after an unexpected drop.

Tan said the company cited "prudence in lieu of possible investments in upcoming quarters" and noted that Maxis aims to sign up for 5G network access with the current sole provider of 5G infrastructure--Digital Nasional--in the interim, while details on the new dual 5G network model remain scant with negotiations still preliminary. Maybank maintained a hold rating on Maxis with an unchanged target price of MYR4.00.

APEX Securities downgraded Maxis to a hold, with shares already near its MYR4.44 target price following a run-up since March. "We are concerned on the dwindling cash position which could impact future dividends" but maintain a full-year dividend forecast of MYR0.20 for now, Lee Cherng Wee said in a note.

CGS-CIMB kept a hold rating with a target price of MYR4.60, saying in a note released Friday that it thinks valuations fully reflect Maxis's current fundamentals. Analyst Prem Jearajasingam described the 20% dividend reduction as "less a war chest for large acquisitions and more a buffer for Maxis to invest in and enhance its network and business."

Write to Ying Xian Wong at yingxian.wong@wsj.com

(END) Dow Jones Newswires

May 22, 2023 02:51 ET (06:51 GMT)

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