en.Wedoany.com Reported - UOB Kay Hian maintains a market weight rating on Malaysia's telecommunications sector and has upgraded Maxis's stock rating from hold to buy following a share price correction.

UOB Kay Hian stated that the overall earnings of Malaysia's telecommunications sector in the first quarter of 2026 were in line with expectations, with Axiata and Maxis outperforming forecasts. The sector's core net profit for the quarter increased by 32% year-on-year and 32% quarter-on-quarter, reaching 1.8 billion ringgit. The growth was primarily driven by a 2% year-on-year increase in service revenue, the ongoing migration of prepaid users to postpaid plans, strong demand for fiber broadband, and cost control measures.

UOB Kay Hian has raised its 2026 sector earnings forecast by 5%, citing stronger earnings contributions from Axiata and lower-than-expected losses from Digital Nasional Berhad impacting Maxis. The brokerage expects sector earnings to grow by 5% in 2026 and 18% in 2027. It anticipates that DNB's losses will only be consolidated in the fourth quarter of 2026, as the transfer of the Ministry of Finance's stake is expected to be completed by year-end. UOB Kay Hian forecasts that DNB's losses will narrow in 2027, supported by cost optimization and more efficient use of existing tower assets, and may reach breakeven by 2028.

CelcomDigi also plans to achieve annual cost savings of 700 million to 800 million ringgit by 2028. Management expects to realize 465 million ringgit in anticipated synergies in 2026. UOB Kay Hian upgraded Maxis from hold to buy, maintaining its target price of 4.20 ringgit unchanged, following a significant share price correction.

The brokerage maintains a market weight rating on the sector, noting that key catalysts include Axiata's potential infrastructure asset monetization and CelcomDigi's synergy savings by 2027. UOB Kay Hian lists CelcomDigi, Maxis, and Axiata as preferred stocks. Key risks include earnings pressure on fixed-line operators due to competition, lower-than-expected merger savings for CelcomDigi, and an economic downturn that could weaken customer spending and service revenue.

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