‘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
Most Viewed Companies
Ticker Price Volume
GFH 0.21
SECO 14.74 5,260,462
DARALARKAN 12.5 47,357,023
ADIB 6.78 826,911
NBAD 15.05 1,349,794
TRADEUNION 28.3 1,588,836
DIC 3.96 16,705,251
Recent News

TAQA secures $200 million Samurai loan to refinance bonds
The Abu Dhabi market index ADXGI finished the second week of April with a day gain of 0.50 per cent, closing at 5,156.65 points on Thursday, April 17. The shares of Abu Dhabi National Energy Company

Developers gain as lenders lose at Dubai market
The Dubai Financial Market General Index (DFMGI) advanced by 0.72 per cent to close at 4,762.21 points on Thursday, April 17. The gauge gained 150 per cent in the past 12 months and showed few signs

Saudi PetroRabigh Says Unit Shutdown Extended To April 25
Saudi Arabia’s PetroRabigh will extend the shutdown of a vacuum gas oil treatment unit to April 25, the company said.

The joint venture between Saudi Aramco and Japan’s Sumitomo Chemical s

Qatar Stock Exchange up 0.78pc
Qatar Exchange added 97.12 points (or 0.78pc) when the bourse closed at 12,550.98 points Thursday afternoon.

The volume of the shares traded was up to 37,110,091 from 35,161,071 on Wednesd

SABIC CEO meets Chinese Premier during Boao Forum for Asia
Mohamed Al-Mady, SABIC Vice Chairman and CEO, interacted with Li Keqiang, Premier of People's Republic of China, on several occasions during the Boao Forum for Asia (BFA) Annual Conference 2014 in Ha

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

Poll

Are you satisfied with your full-service broker?