Broadband, corporate segments driving Saudi telecom growth


Published — Sunday 23 June 2013

Last update 24 June 2013 3:46 am

| نسخة PDF Print News | A A

In its latest update on the Kingdom’s telecom sector, NCB Capital, the GCC’s major wealth manager and the Kingdom’s largest asset manager, believes that growth in the sector will remain driven by the broadband and corporate segments. However, the increasing competition in broadband and the continuous changes in the sector’s regulations are the main concerns.
"We maintain our overweight rating on Mobily with a PT of SR 93.2 (18 percent upside) and STC (Saudi Telecom Co.) with a PT of SR 45.7 (upside of 15 percent)," noted Abdulelah Babgi, equity research analyst at NCB Capital. "We also upgraded Zain from neutral to overweight with a PT of SR 11.6 (upside of 16 percent)."

NCB Capital has upgraded its rating on Zain to overweight following the recent positive developments on the company’s debt issues. "We believe the agreement with the Ministry of Finance and the refinancing of the junior debt will reduce financial charges and accordingly alleviate some of the pressure on the bottom line," Babgi said. "Based on this, we have revised our estimates for Zain by 3-12 percent for the projection period between 2013 and 2020. We also believe that these agreements indicate a greater likelihood that Zain will secure a positive deal in refinancing its senior debt of SR 9 billion. This should be a major positive catalyst for the stock once completed," he added.

NCB Capital PT for Mobily has increased slightly off the back of a reduction in the equity risk premium by 0.5 percent. "However, our forecasts for Mobily remain broadly the same following the Q1 2013 results, which were in line with our estimates," added Babgi. "Our PT for STC is down by 0.4 percent off the back of lower than expected results in Q1, 2013, although this was slightly offset by the reduction in the equity risk premium. Despite the strong local operations, some of STC’s international operations remain a significant concern."
NCB Capital continues to believe growth in the sector will be mainly driven by the data and corporate segments, supported by continued investments and increased smart phone penetration rates. However, increasing competition in these segments and further changes in the CITC’s regulations are the main concerns.
The valuation of the sector remains attractive at 9.2x 2013e P/E, compared to regional peers at 10.5x. From the telecom stocks under coverage, Mobily remains NCB Capital’s top pick due to its strong financial prospects coupled with a strong dividend outlook.

What's happening around Saudi Arabia

JEDDAH: Jeddah police have closed all entry points into Makkah to prevent undocumented pilgrims from entering the holy city during this year’s Haj, in a bid to prevent overcrowding that could lead to health and safety problems.Officials have taken ac...
JEDDAH: The Bureau of Investigation and Public Prosecution recently charged three young men in the harassment case at the Jeddah corniche. A number of young men were arrested for harassing two Saudi girls at the corniche a day after Eid Al-Fitr.A vi...
JEDDAH: A total of 232 people injured in Sunday’s Aramco compound fire in Alkhobar have been discharged from hospitals here, the Eastern Province Health Department announced on Tuesday.Fifty-seven are still receiving treatment at four hospitals, with...
RIYADH: The Directorate of Education in Riyadh is keeping a close watch on schools, such as sanctioning health material and monitoring the health of staff and students, to prevent the spread of the MERS coronavirus among students. As a step in this...
RIYADH: The Ministry of Municipal and Rural Affairs has announced new legislation for the Dec. 12 elections, including fines and imprisonment for failure to disclose candidate financing, obstructing procedures or officials, and fraudulent activity.Vi...
JEDDAH: The low turnout of Saudis registering for the municipal elections is likely caused by the poor performance of previous councils, lack of a voting culture, inadequate understanding of the duties of councils, and the timing of the elections wit...

Stay Connected