JEDDAH, 16 May 2007 — The Saudi Telecom Company (STC), the second largest stock on the Saudi market, remains to be of great value for investors, HSBC Saudi Arabia said in the second in-depth company report released yesterday.
STC has opportunities for growth from 3.50, which were launched last year, and from broadband which has a penetration representing only 1 percent of the population.
“With a present dividend yield of 9 percent, the market is already discounting a risk to the dividend by acquisition, but not the growth, which would be achieved,” the report said.
STC has missed previous opportunities to build from its domestic base to expand abroad, but has a strong balance sheet, which gives it access to lower cost debt than other telecom operators.
Peter Hutton, head of Riyadh-based HSBC Research, said that “experience from other countries suggests that they (investors) are underestimating the potential in the Saudi telecoms market. What’s more, unloved stocks often represent the greatest value for investors.”
Kunal Bajaj, telecoms analyst at HSBC, said that “over the past few years, the market has constantly underestimated mobile growth in emerging markets. For instance, Russia, Kuwait and UAE have seen growth well in excess of expectations and reported mobile penetration in these markets is comfortably above 100 percent.”