Zain Saudi misses Q4 estimates on lower revenues: NCB Cap

Mobile Telecommunication Company Saudi Arabia (Zain Saudi) reported a “disappointing” set of financial results for the fourth quarter of 2017, with its net loss of SAR 45 million falling below NCB Capital and consensus estimates of a net profit of SAR 8 million and SAR 10.2 million, respectively, the brokerage said in an earnings review.

“This is the first net loss since Q4 2016. We believe the variance is attributed to the decline of 4.7 percent year-on-year (YoY) in sales,” NCB Capital said.

Revenues declined 4.7 percent YoY and 5 percent against the previous quarter to SAR 1.7 billion – about 8.4 percent lower than NCB estimates.

Gross margin at 66 percent was slightly lower than NCB estimate of 66.5 percent.

“We believe the lower than expected margin is due to the increasing competition and lower contribution of the data segment,” the brokerage said.

Earnings before interest and taxes (EBIT) at SAR 166 million were also lower estimated SAR 239 million, which the report said could be due to lower-than-expected sales.

NCB Capital maintained a “neutral” on Zain with a target price of SAR 9.9.

“Strong revenue growth and gross margin expansion are the key positives while increasing competition, the impact of the recent economic reforms are the key risks,” it said.