STC posts in-line Q4 profit on lower non-OPEX, says NCB Cap

Saudi Telecom Co.’s (STC) Q4-2016 net profit of SAR 2.15 billion was in line with NCB Capital’s estimate but higher than consensus forecasts of SAR 2.06 million, the brokerage firm said in an earnings review.

The earnings match was due to better gross margins and lower non-operating expenses, which plunged 86.6 percent year-on-year (YoY) to SAR 81 million from SAR 604 million in Q4-2015, lower than the brokerage firm’s expectation of SAR 497 million.

Revenue dropped 9.3 percent decline YoY to SAR 12 billion, hurt by the suspension of unregistered SIMs on application of the finger print verification system.

“Although top-line was 13.8 percent below estimates, the improvement in gross margins and lower non-operating expenses offset this weakness,” NCBC added.

The telecom operator reported a gross margin of 61.7 percent – the highest since Q3-2014 - exceeding NCBC’s estimate of 54.7 percent backed by growth in the high margin data segment.

NCBC maintained an “overweight” rating on the stock, with a target price of SAR 68.9.

“STC announced a DPS (dividend per share) of SAR 1 for Q4-2016, in-line with our expectations. This takes total 2016 DPS to SAR 4.0,” it added.