The aggregate Q4 net profit of Tadawul-listed telecom operators came better than Al Rajhi Capital expected, the brokerage firm said in a statement.
Saudi Telecom Co.’s (STC) net profit came in line with estimates, while Etihad Etisalat Co. (Mobily) and Mobile Telecommunications Saudi Arabia (Zain Saudi) exceeded Al Rajhi’s forecasts.
“However, a closer look at the numbers reveal a few emerging trends for the sector as Q4 was a period of normalized performance without one-offs after last two quarters of uncertainty post the fingerprint exercise, reduction in interconnection rates, Hajj season etc.,” the brokerage firm said in a recent note.
STC’s Q4-2016 revenue declined 11 percent quarter-on-quarter (QoQ) at SAR 1.2 billion, missing the brokerage firm’s estimates. STC maintained its quarterly dividend of SAR 1 per share, missing expectations. The telco is shifting to acquisitions to drive its growth and is also looking to raise its stake in OTAS, which owns a 55 percent stake in Turk Telekom.
Al Rajhi maintained its “neutral” rating on STC, but cut the stock’s target price to SAR 68, on weak revenue.
Meanwhile, Mobily and Zain Saudi saw their top line grow by 10 percent QoQ.
“As this was the first quarter after cut on allowances and cap on mobile payments for some Govt employees (mostly STC customers in our view), this could be the new base for STC,” Al Rajhi added.
Mobily is expected to focus mainly on operating cost savings, in addition to maintaining its market share at higher customer acquisition costs.
The stock was rated “overweight” with its target price unchanged at SAR 27.
Zain Saudi narrowed its net losses to SAR 135 million, compared to Al Rajhi Cap’s forecasts of SAR 171 million, backed by higher-than-expected revenue and lower financing charges.
“Overall, though we believe the company may continue to outperform its peers in the sector, the saturated state of the sector (FY2016 revenue growth is less than 3 percent y-o-y) and intense competition may be less appealing in a broader market context,” the brokerage firm added.
Al Rajhi Capital is “neutral” on Zain, with a target price of SAR 8.5.
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Al Rajhi Cap Ratings |
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Company |
Rating |
TP |
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|
Previous |
Current |
Previous |
Current |
|
|
STC |
Neutral |
Neutral |
72.0 |
68.0 |
|
Mobily |
Neutral |
Overweight |
27.0 |
27.0 |
|
Zain |
Under Review |
Overweight |
Under Review |
8.50 |
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