‘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

Most Viewed Companies
Ticker Price Volume
RIBL 21.6 469,326
EMAAR 11.6 60,373,531
MESC 20.32 1,643,459
SAGRINSURANCE 49.47 507,514
ALKHODARI 63.98 978,296
HOKAIR 123 244,145
SECO 17.83 1,438,822
Recent News

SABIC signs agreement with German company to fast-track R&D catalysis
The Saudi Basic Industries Corporation (Sabic) has entered into an agreement with hte in Heidelberg, Germany, to set up a satellite laboratory for high throughput experimentation to increase its rese

Omniyat launches twin-tower project
Omniyat, a leading development group in the Middle East, has unveiled The Sterling By Omniyat, a gleaming twin-tower project in the prestigious Burj Khalifa District.

The distinguished pr

Mubadala units drive revenue growth during first half
Mubadala Development, the strategic investment vehicle owned by the Abu Dhabi Government, said revenue and operating income rose in the first half of the year, mainly because of higher sales and inco

Bourse remains in higher trajectory near 14,400 mark
Foreign institutions’ net bought equities worth QR264mn to place the Qatar Stock Exchange in a higher trajectory near the 14,400 mark during the week as Standard and Poor’s-Dow Jones officially place

Kuwait’s sovereign funds need to be tapped for development goals
The Kuwaiti authorities are right to press ahead with a new five-year development plan. The country’s first such plan covered the period from 2010-2014 and had committed investments of $105 billion.<

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


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