Roman GłogulskiMaxis Bhd, according to CGS-CIMB Research, is set to be responsible for building the second 5G network in Malaysia. The research suggests that after resolving the issues related to ownership and construction of the 5G network in the first half of this year, Maxis will play a crucial role in developing this network. This development will address significant uncertainties in Malaysia’s telecommunications sector.
Digital Nasional Bhd (DNB), a listed telecommunications company, is expected to complete the review process by the end of March 2024. After its completion, the transition to a dual wholesale network (DWN) will begin. The 5G network coverage of DNB is projected to reach 80%, creating opportunities for Maxis and CelcomDigi Bhd to become key stakeholders in both networks, with Maxis leading the construction of the second network.
The clarification of network ownership will reduce uncertainties regarding investment expenditures, financing, and revenue for mobile operators. CGS-CIMB Research believes that this clear resolution will have a positive impact on the industry, providing stability and paving the way for future growth.
In addition to network development, the economic team at CGS-CIMB research predicts a 4.9% increase in private consumption in Malaysia in 2023, with an expected acceleration to around 6.5% in 2024. The research highlights the importance of introducing new solutions, especially in the enterprise sector, to boost growth for mobile operators. While 5G presents an opportunity, operators must convince businesses, both large and small, that investments in digitization will yield positive financial results.
CGS-CIMB Research maintains a “hold” recommendation for Maxis and adjusts the target price to RM4.26. The research notes a decline in growth factors for Maxis and believes that the new trading range reflects fairer valuation fundamentals after industry consolidation.
Despite experiencing a decline in valuation since 2021, Malaysian mobile operators, including Maxis, are still valued at a premium compared to their competitors in Singapore and Indonesia. However, factors such as slower growth in mobile service revenues, uncertainty about network ownership, and reallocation of funds to other sectors have contributed to this decline.
Despite these challenges, Maxis’ valuation may have growth potential due to revenue and profit growth, which would support higher dividends. On the other hand, downside risks include the inability to sustain revenue and profit growth and increased regulatory scrutiny leading to higher spending on network infrastructure.
FAQ
Who will build the second 5G network in Malaysia?
Maxis Bhd is set to be responsible for building the second 5G network in Malaysia, according to CGS-CIMB Research.
What is Digital Nasional Bhd (DNB) and what role will it play in the transition to a dual wholesale network?
Digital Nasional Bhd (DNB) is a listed telecommunications company. After completing the review process by the end of March 2024, the transition to a dual wholesale network (DWN) will begin. The 5G network coverage of DNB is projected to reach 80%.
What are the benefits of clarifying network ownership?
The clarification of network ownership will reduce uncertainties regarding investment expenditures, financing, and revenue for mobile operators. This clear resolution has a positive impact on the industry, providing stability and paving the way for future growth.
What is the projected growth of private consumption in Malaysia in 2023 and 2024?
The economic team at CGS-CIMB research predicts a 4.9% increase in private consumption in Malaysia in 2023, with an expected acceleration to around 6.5% in 2024.
How can mobile operators boost growth in the enterprise sector?
CGS-CIMB research emphasizes the importance of introducing new solutions in the enterprise sector to boost growth for mobile operators. While 5G presents an opportunity, operators must convince businesses, both large and small, that investments in digitization will yield positive financial results.
What is the current recommendation for Maxis according to CGS-CIMB Research?
CGS-CIMB Research maintains a “hold” recommendation for Maxis and adjusts the target price to RM4.26. The research notes a decline in growth factors for Maxis and believes that the new trading range reflects fairer valuation fundamentals after industry consolidation.
What factors have contributed to the decline in valuation of Malaysian mobile operators?
Factors such as slower growth in mobile service revenues, uncertainty about network ownership, and the reallocation of funds to other sectors have contributed to the decline in valuation of Malaysian mobile operators, including Maxis.
Definitions
5G Network: The next generation of wireless technology that promises faster speeds, lower latency, and greater connectivity compared to previous generations.
Due Diligence: The process of conducting a thorough examination or investigation of the financial, legal, and operational aspects before making a decision or entering into a transaction.
Dual Wholesale Network (DWN): A model of network infrastructure where multiple telecommunications companies collaborate in building and sharing network resources, enabling the provision of services to end-users.
Valuation Fundamentals: The method or approach used to determine the value or valuation of a company or asset.
Valuation Decline: A decrease in the valuation or market value of a company or asset.
Sources
Maxis official website
Celcom official website
Digi official website
CIMB official website
