STC’s Q1 profit tops estimates, says Al Rajhi Cap

Saudi Telecom Co.’s (STC) first quarter net profit of SAR 2.53 billion topped Al Rajhi Capital and consensus’ estimates of SAR 2.2 billion.

The telco’s operating income which stood at SAR 2.6 billion came broadly in line with the brokerage forecast of SAR 2.53 billion, so the earnings beat could be mostly related to non-operating items, Al Rajhi Capital said in an earnings review.

Revenue registered a 3 percent year-on-year (YoY) decline in Q1-2017, following a drop of 11 percent on a quarterly basis in Q4-2016, due to allowance cuts.  

“While revenue decline could reverse post recent restatement of allowances, we believe costs are likely to increase as well, as generally costs in the first quarter of a year are the lowest,” brokerage said.

It has reaffirmed its “neutral” rating on the stock with the target price unchanged at SAR 68, as operating items came largely in line with its estimates.