Zain Saudi’s Q3 results exceeds estimates, says Al Rajhi Cap

Mobile Telecommunications Company Saudi Arabia’s (Zain Saudi) net profit for Q3 2017 of SAR 3 million came above Al Rajhi Capital's estimate of a SAR 4 million loss.

“Revenue declined 3.1 percent Q-o-Q to SAR 1.81 billion, below our estimate, other line items, however, were largely in line with our expectations,” Al Rajhi Cap said in an earning review.

Similar to what we observed with Mobily, Zain saw its revenue decline sequentially and saw its gross and EBITDA margin improve on continued cost saving initiatives,” the brokerage firm said.

“We cut our estimates due to the recent regulatory decision to lift ban on VoIP based calls, though we believe Zain is relatively better positioned as compared to peers given that it earns nearly 60 percent of its revenue from data”, the report included.

The investment arm of Al Rajhi Bank noted that the Saudi-listed telecom company plans to write off about SAR 2.2 billion in accumulated losses by reducing its capital from SAR 5.8 billion to SAR 3.6 billion.

The company also today announced plans for a rights issue to raise its capital by SAR 6 billion, which will allow it to partially pay off its debt, thereby saving on its high interest expense.

Al Rajhi Capital remained “neutral” on the stock, with a target price of SAR 7.8 per share.