‘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 | AUG | SEP | OCT
Most Viewed Companies
Ticker Price Volume
SPIMACO 45.86 428,866
EMAAR 10.3 11,369,691
ALKHODARI 65.92 4,110,576
RIBL 20.14 1,028,811
SABIC 115.42 6,037,734
SORAYAI 21.59 654,998
SECO 17.47 3,186,647
Recent News

Sabic-Shell scrap Jubail plant plan
Saudi Basic Industries Corporation (Sabic) and Royal Dutch Shell have shelved plans to expand an existing petrochemical joint venture in Saudi Arabia as the results of feasibility studies were not en

Petchem delegates explore sustainability challenges
GCC petrochemical companies are being urged to educate their staff to enable them to work around sustainability challenges.

Energy companies embarking on conservation efforts will benefit fr

Al-Tayyar Travel Group Q3 profit rises 13.5%
Saudi Arabia’s Al-Tayyar Travel Group posted a 13.5 percent rise in third-quarter net profit rise, slightly below analysts’ forecasts, as sales increased.

The company made a net profit of SR

Jarir proposes Q3 dividend of SR1.8 per share
Saudi Arabia’s Jarir Marketing Co. has proposed a third-quarter dividend of SR1.8 per share, the retailer said in a statement.

This is slightly above the dividend of SR1.67 per share the com

Al-Khodari may double capex to handle big projects
Major Saudi Arabian construction firm Abdullah Abdul Mohsin Al-Khodari and Sons says it may double its capital spending in coming years to cope with the work it hopes to do on the country’s big infra

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?