The Three Numbers That Connect Maxis Berhad

The third-largest telecoms company in Malaysia is Maxis Berhad (KLSE: MAXIS; 6012.KL). It has over 11 million subscribers of which three-quarters are pre-paid customers.

Maxis Berhad’s ranking as Malaysia’s number three telecom companies belies its market-leading Return on Equity (RoE), which is one of the highest on the Kuala Lumpur Stock Exchange. It generated a RoE of 41.8%, which implies that it delivered a bottom-line profit of MYR41.80 on every MYR100 invested in the company.

The telecoms company boasted an impressive Net Income Margin of 20.2% last year. In other words, it generated a Net Profit of MYR20.20 on every MYR100 of sales. That is higher than peers Axiata Group (KLSE: AXIATA; 6888.KL) and Telekom Malaysia (KLSE: TM; 4863.KL), which managed 12.8% and 5.9%, respectively.

Maxis Berhad is quite efficient at making use of the assets at its disposal. Its Asset Turnover of 0.46 means that it generated MYR46.50 of revenues on every MYR100 of assets. That is slightly lower than the median Asset Turnover for the Malaysia market.

Malaysia’s third-largest telecoms company does make use of leverage, which is reason for its impressive Return on Equity. The company had Total Liabilities of MYR14.8 billion and Total Assets of MYR18.9, which equates to a Leverage Ratio of 4.49. That is nearly four times higher than Axiata Group and Telekom Malaysia.

By unpicking Maxis Berhad’s Return on Equity, it is easy to understand how they are connected. Its RoE of 41.8% is the product of a high Net Income Margin of 20.2%; a decent Asset Turnover of 0.46 and a heavy Leverage Ratio of 4.5.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned.