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


16/02/2012 13:34 AST

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 Gazette
Saudi Mobile Telecommunications Co. - ZAIN.TASI
2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | News Archive
Most Viewed Companies
Ticker Price Volume
QNBK 150.9 190,420
SABIC 84.06 6,913,674
TAWUNIYA 94.73 174,479
WALAA 15.71 2,586,259
RIBL 11 957,888
EEC 28.63 935,817
ALINMA 13.33 55,462,329
Recent News

IMF approves $3.47 billion for Morocco under the precautionary
Moroccan authorities have stated that they intend to treat the arrangement as precautionary The new PLL provides Morocco with useful insurance against external shocks as authorities pursue reform ag

Saudi stocks lead Gulf equity drop as volumes plummet
Saudi Arabian stocks led a retreat across Gulf equities as trading volumes plunged. Four benchmark gauges in the six-nation Gulf Cooperation Council (GCC) declined, with Bloomberg’s GCC 200 Index poi

Oman’s mining industry seeks speedy processing of licences
Oman’s mining industry has urged authorities to incorporate clear clauses for speedy processing of mining licence in a move to avoid project delays and possibility of losses arising from wide fluctua

Omantel strengthens Dhofar mobile network
As part of its efforts to enrich the experience of residents and visitors to Salalah, Omantel — the main sponsor of 2016 Salalah Tourism Festival, completed a major enhancement of its mobile network

Yen remains strongest major developed currency in 2016
Strategists forecasting the yen will post its first annual gain since 2011 are standing their ground in the face of a rout driven by speculation the Bank of Japan (BoJ) will expand record stimulus.

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

Poll

Looking ahead, what change you are more likely to make in investing in your domestic stock market?