Saudi Telecom posts in-line results for Q2, says NCB Cap

Saudi Telecom Co.'s (STC) second quarter net profit grew by 8 percent year-on-year (YoY) to SAR 2.37 billion, coming in line with NCB Capital's estimate SAR 2.30 billion, backed by higher income, the brokerage firm said in an earnings review.

"We believe higher income from international operations and lower non-opex offset the YoY decline in EBIT… Income from international operations was SAR 92.6 million vs. a loss of SAR 145 million in Q2 2016," NCB Capital added.

Revenue also matched forecast of SAR 13.30 despite a decline of 1.6 percent YoY to SAR 13.2 billion impacted by the application of the fingerprint verification system.

Gross profit, which stood at SA 7.28 billion, came in line with NCB Capital's expectations, leading to a gross margin of 55.2 percent, compared to the brokerage firm's estimate of 54 percent.

Saudi operator networks are likely to see more pressures due to the telecom industry regulator's new regulation for ending fair usage policy.

"However, new spectrums offered recently and adjusting customer packages will offset any negative impact," NCB Capital added.

The brokerage firm recommended "neutral" rating on the stock, with a price target of SAR 72.1.

Key upsides are STC's strong balance sheet, attractive dividend yield and progress in tower sale and Oman license.