AlJazira Cap says Zain KSA Q4 2020 earnings below expectations, retains rating at ‘Overweight’

A branch of Zain KSA

Mobile Telecommunication Company Saudi Arabia’s (Zain KSA) net profit of SAR 36 million in Q4 2020 fell below AlJazira Capital and consensus estimates of SAR 59 million and SAR 128 million, respectively, the research firm said in an earnings review.

“The deviation from our estimate was mainly due to lower-than-expected gross and operating margins,” AlJazira Capital said.

The company’s revenue continues to be impacted by travel restrictions due to COVID-19, and the pressure on the top-line from visitor’s packages is likely to remain in Q1 2021 due to the recent rise in new infections. The number of foreign pilgrims might also be limited during this period.

The telecom service provider’s successful rights issue anticipated repayment of a part of debt and lower interest rates would help in terms of substantial decline in finance cost, the report said.

Meanwhile, the improved capital structure would enable Zain KSA to continue with capex required for 5G network expansion and maintain its strong position.

AlJazira Capital maintained its “Overweight” recommendation on the stock, with a target price (TP) of SAR 16.5 per share.