Saudi Fransi Capital downgrades Mobily to ‘sell’

Saudi Fransi Capital downgraded its rating on Mobily from hold to sell, and revised its target price to SAR 30 based on the telecom operator’s “quite surprising” results in fourth quarter 2014.

The firm pointed out that Mobily’s statements failed to dispel investor worries.

Mobily, the second largest telecom operator in Saudi Arabia, had discussed a number of key issues during its conference call with various analysts— namely, accounts classification, disclosures, bearish performance, future objectives, cash dividends and the money that it is owed by Zain Saudi.

The discussion was quite objective, noted Saudi Capital. However, the Tadawul-listed operator gave no mention of expected operating performance or financials— a key factor for the current stock trend.

Mobily stated that fourth quarter figures were exceptional, and investors should depend on the first quarter of 2015 financials to evaluate the telecom operator’s performance.

The board will discuss dividend payout plans for fourth quarter 2014 and fiscal year 2015 in its coming meeting.

Mobily’s management will likely focus on maintaining its voice market share, which is not expected to see strong growth.

There is also ample room for potential growth of data through fixed-line services, fiber-optics, and business sectors since its market share is relatively small.

The Saudi-based company will also focus on cost efficiency, capital expenditure cut, better working capital management, better direct sale channels, finance sources diversification, transparent disclosures.

Saudi Fransi expected Mobily to generate SAR 2 billion earnings in fiscal year 2015-2016.