Etihad Etisalat Co.’s (Mobily) net loss of SAR 79 million in Q2 2018 came much below NCB Capital (NCBC) and consensus estimated loss of SAR 112 million and SAR113 million, respectively, the brokerage firm said in an earnings review on Tuesday.
The better-than-expected results were attributed to gross margin expansion.
Gross margin was higher-than-expected at 61.3 percent, compared to NCBC's estimates of 57.6 percent, due to Mobily’s focus on data segment.
The telco reported its first revenue growth in five years as revenue rose 1.4 percent year-on-year to SAR 2.9 billion, broadly in-line with the brokerage's estimates.
The primary factors leading to revenue increase were improvement in the subscriber’s mix, growth in data and the increase in FTTH business.
Gross profit stood at SAR 1.78 billion, beating NCB Capital's estimate by 9.1 percent. EBITDA margin also reached 36.8 percent, the highest level since 2014.
Capex spent rose to SAR 1.36 billion compared to SAR 792 million in H1, 2017.
"The increase in capex is due to the implementation of network modernization program that commenced in Q4 2017 and the capitalization of the spectrum.
We expect Mobily’s capex to reach SAR 2.1 billion in 2018, in-line with 2017 and reflecting a capex-to-sales ratio of 19 percent," the report noted.
The brokerage firm recommended a “neutral” rating on the stock, with a target price of SAR 20.8.
“We believe the progress on RISE strategy and the ability to control costs will be the key drivers in 2018. We expect Mobily to reach breakeven in 2019," NCB Capital said.
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