Mobile Telecommunication Company Saudi Arabia (Zain Saudi) is expected to generate net income of SAR 82.9 million this year, marking the first annual profit since launching full operations, NCB Capital said in a note Sunday.
The brokerage has revised its previous estimate of SAR 648 million in net losses.
These profit estimates are driven by higher sales, boosted by data revenues, increased market share, higher gross profit margins, decreased pre-operating costs and lower amortization charges on 15-year license extension.
The progress on the company’s towers sale is a key upside fundamental, NCB Capital said, expecting Zain to generate SAR 2.6 billion in profit from the sale, which would reduce interest expense by around SAR 172 million.
However, the telecom operator’s high debt level of SAR 12 billion is a key downside risk, in addition to being a negative impact on the existing shareholders in case of capital restructuring.
The brokerage reiterated a “neutral” rating on Zain, and upgraded the stock’s target price from SAR 7.60 to SAR 9.0.
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Recommendations issued for Zain during the last 3 months |
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Firm |
Recommendation |
Target Price |
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NCB Capital |
Neutral |
9.90 |
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Albilad Capital |
Neutral |
9.60 |
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Riyad Capital |
Buy |
13.00 |
|
Al Rajhi Capital |
Neutral |
9.50 |
|
Aljazira Capital |
Overweight |
12.40 |
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Average Target Price |
10.88 |
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