Zain Saudi’s Q1 net profit positive surprise, says Aljazira Cap

Mobile Telecommunications Company Saudi Arabia’s (Zain Saudi) first-quarter net income of SAR 45 million was a positive surprise, as it beat Aljazira Capital’s estimates of a SAR 91 million loss and the market consensus.

Revenue rose 8.7 percent year-on-year (YoY) to SAR 1.92 billion in the same period, despite lower subscriber base of 10.1 million in Q1, compared to 11.6 million in the same period of 2016, the brokerage said in an earnings note. The decline in subscribers was attributed to the biometric registration regulation in the kingdom.

Profit margins expanded to 67.3 percent, from 61.5 percent in Q1 2016 and 63.4 percent in Q4 2016.

“Revenue growth on the back of ARPU improvement, along with higher margin helped the company in achieving its first profitable quarter,” the brokerage added.

Higher margin services and lower interconnection charges helped the company increase gross margins by SAR 205 million compared to Q1 2016.

Meanwhile, Zain Saudi reported a cut in amortization expenses and non-cash expense by nearly SAR 85 million, due to the telecom regulator’s decision to extend the company’s license for 15 years.

Aljazira Capital affirmed its “overweight” rating on the telco, but revised the stock’s target price to SAR 12.4.