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.
Qatar Chamber gets ‘nod’ for QR2bn venture
Qatar Chamber (QC) received preliminary approval from concerned authorities to establish its ambitious QR2bn private company. Expected to emerge as a key driver in the transformation of Qatar’s indus
QE index inches up
Qatari stocks showed marginal gains last week as the country’s main index inched up 14.04 points (0.14 percent) to 10,389.10.
The trading value (of over QR1.58bn), though, declined over t
Dubai World arm sells Atlantis
A unit of Dubai World has sold its Atlantis resort, which sits on a palm tree-shaped island in the Gulf, in an asset shuffle between state entities to help the group meet huge debt repayments after