Broadband to boost Saudi telecom growth
Riyadh, June 23, 2013
The growth in the Saudi Arabian telecom sector will remain driven by the broadband and corporate segments, said a report by NCB Capital.
However, the increasing competition in broadband and the continuous changes in the sector’s regulations are the main concerns, the top GCC wealth manager said in its review on Saudi telecom sector.
“We maintain our Overweight rating on Mobily with a PT of SR93.2 (18 per cent upside) and STC with a PT of SR45.7 (upside of 15 per cent),” noted Abdulelah Babgi, Equity Research Analyst at NCB Capital. “We also upgraded Zain from Neutral to Overweight with a PT of SR11.6 (upside of 16 per cent).”
NCB Capital has upgraded its rating on Zain to Overweight following the recent positive developments on the company’s debt issues.
“We believe the agreement with the Ministry of Finance and the refinancing of the junior debt will reduce financial charges and accordingly alleviate some of the pressure on the bottom-line,” remarked Babgi.
“Based on this, we have revised our estimates for Zain by 3-12 per cent for the projection period between 2013 and 2020. We also believe that these agreements indicate a greater likelihood that Zain will secure a positive deal in refinancing its senior debt of SR9bn. This should be a major positive catalyst for the stock once completed,” he added.
NCB Capital for Mobily has increased slightly off the back of a reduction in the equity risk premium by 0.5 per cent.
“However, our forecasts for Mobily remain broadly the same following the 1Q13 results which were in-line with our estimates,” explained the expert.
“Our PT for STC is down by 0.4 per cent off the back of lower than expected results in 1Q13, although this was slightly offset by the reduction in the equity risk premium. Despite the strong local operations, some of STC’s international operations remain a significant concern,” he added.
In its report, NCB Capital said it continues to believe growth in the sector will be mainly driven by the data and corporate segments, supported by continued investments and increased smartphone penetration rates.
However, increasing competition in these segments and further changes in the CITC’s regulations are the main concerns, it added.
From the telecom stocks under coverage, Mobily remains NCB Capital’s top pick due to its strong financial prospects coupled with a strong dividend outlook, said the report.-TradeArabia News Service