‘Still risky to invest’in Zain KSA: Al Rajhi


16/02/2012 13:34 AST  Saudi Gazette

Zain Saudi Arabia “is still risky to invest”, Al Rajhi Capital said in a research released Wednesday.

It said that though Zain is performing decent as a number 3 operator, trying to tap the growth in voice and data services, “the problem for Zain is its high debt burden, which reduces the share of enterprise value attributable to equity shareholders.” It said Zain has been relying heavily on low-income groups to generate revenues.

However, the study expects mobile to continue to outperform fixed-line telecoms in Saudi Arabia over the next few years, driven by mobile data.

Zain has managed its SG&A costs and maintained a positive EBITDA, but it again reported net loss due to high financial costs on its massive debt, Al Rajhi Capital said.

“The key issue now for Zain is to plan out its restructuring smoothly as it’s hurting the company’s financials as well as morale,” it noted.

Accumulated losses have reached 69 percent of the paid up capital and thus restructuring is a necessity to avoid delisting. “With financial restructuring plans being worked out, we think investing in Zain is still risky. We retain our target price of SR6.0 but due to recent rally in the share price, we downgrade our rating to Underweight.”

Though the operating results just satisfactory, the EBITDA of SR260 million was close but below Al Rajhi Capital’s estimate of SR271 million.

The study further suggested that Zain needs to cut its accumulated losses and reduce net debt by about SR6 billion. “We believe that the restructuring will not only support Zain’s financials, but also improve the company’s damaged morale which has been reflected on its results. Once the restructuring gets completed, investors will hopefully be able to look at Zain afresh as a fast-growing operator,” it noted.

Zain has managed its SG&A costs and maintained a positive EBITDA, but it again reported net loss due to high financial costs on its massive debt. Accumulated losses have reached 69 percent of the paid up capital.

Saudi Mobile Telecommunications Co. - ZAIN.TASI
2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 | 2007 | News Archive

JAN | FEB | MAR | APR | MAY | JUN | JUL
Most Viewed Companies
Ticker Price Volume
MMG 12.55
RIBL 19.1 5,134,816
ARTC 4.05 93,976,309
SFICO 37.88 409,239
ZAIN 640 374,689
STC 72.96 1,218,611
EMAAR 9.7 5,267,368
Recent News

SAMA net foreign assets reach SR2.737 trillion
The Kingdom’s M3 money supply growth edged up to 12.3 percent year-on-year in June from a five-month low of 12.1 percent in the previous month, Saudi Arabian Monetary Agency (SAMA) data showed.

GCC projects underpin sustainable development
Driven by higher capital expenditure, GCC countries will see projects underpin their sustainable development and diversification, a new report has shown.

According to QNB, GCC countries ha

Dubai industrial rents up in first half
Enquiries for industrial property in Dubai were significantly stronger in first half of 2014, compared to six months earlier.

However, due to the limited availability of stock, leasing de

Arabtec Q2 net profit up 11pc
Arabtec, the construction company at the centre of Dubai’s stock market turmoil, reported an 11 percent rise in second-quarter profit yesterday, missing analysts’ estimates.

Net profit cli

Saudi water membrane facility project awarded
The Dow Chemical Company has awarded Fluor Corporation the engineering, procurement and construction (EPC) contract for its Reverse Osmosis (RO) manufacturing facility in Saudi Arabia.

Lo

GulfBase GCC Index
Search By
  • Company Symbol
  • Company Name
  • Mutual Fund Name
  • News Content
Send this page to a friend

Poll

Which of the following do you think is the best long-term investment?