Aljazira Cap says STC’s Q3 2019 results meet estimates

Aljazira Capital said Saudi Telecom Co.’s (STC) Q3 2019 earnings broadly came in line with its estimates.

The brokerage firm said in a research note that KSA telecom sector is witnessing a growth story - primarily driven by increase in data usage.

The network expansion has improved traffic volume growth up to 137% compared to last year. The 4G traffic volume (VoLTE) has also grown at peak hours to more than 366% over last year, it added.

Aljazira Capital also noted that STC has delivered highest average performance of 37.2 megabytes per second; a 51.0% Q/Q rise in Q2 2019, adding that the company is likely to face stiff competition as Zain officially rolled out 5G services at competitive rates, thus leading to lower than expected ARPU’s.

STC witnessed a rise in net margins in the last three quarters owing to its expenditure efficiency program, however, the margins witnessed a slight dip in the last quarter to 19.5% from 20.9% in Q2 2019, the brokerage firm said.

The brokerage firm expected STC to report SAR 11.1 billion net profit in Q3 2019, compared to SAR 10.8 billion in year-earlier period.

It also maintained its ‘Overweight’ recommendation with a target price of SAR 112.2 per share.