Mobile Telecommunications Co. (Zain KSA)

ZAIN KSA
Telecommunication & Information Technology Sector
ZAINKSA AB - 7030.SE
April 22, 2015
Mobile Telecommunications Co. (Zain KSA)
Recommendation
Overweight
Fair Value (SAR)
13.60
Price as of April 22, 2015
12.19
Expected Return
11.6%
Company Data
Tadawul Symbol
7030.SE
52 Week High (SAR)
21.65
52 Week Low (SAR)
10.10
YTD Change
0.7%
3-Month Average Volume (Thousand Shares)
13,164
Market Cap. (SAR Million)
5,753.7
Market Cap. (USD Million)
1,534.3
Outstanding Shares (Million Shares)
47.2
Major Shareholders ( > 5% )
Mobile Telecommunications Company K.S.C.
37.04%
Faden Trading and Contracting Est.
Saudi Plastic Factory
Zain K SA
Telecom Sector
5.97%
5.84%
Tadawul
Q1 2015 Update
Zain KSA stated that its net loss slumped 19.2% YoY in Q1 2015 hitting SAR
257 million compared to a loss of SAR 318 million in Q1 2014. The figure tumbled 16% versus the previous quarter.
The decrease in the net loss compared with Q1 2014 emanated from the reduction of operating losses by 54% fueled by cost optimization and in light of
the 9% revenue growth to SAR 1,678 million versus SAR 1,546 million in Q1
2014, owing to increased demand for the company's services.
Lower operating losses and revenue growth are also the reasons that prompted the company's loss to shrink compared to the previous quarter, though the
rate of decline in operating losses a bit more reaching 57%, while revenues
grew 6%.
In Q1 2015, EBITDA rose skyrocketed 16% YoY and 27% QoQ coming in at SAR
348 million, thus boosting EBITDA margin from 19% in Q1 2014 and 17% in Q4
2014 to 21% in Q1 2015 driven by sales growth and expenses control.
According to the company’s data, the number of subscribers in Q1 2015
climbed 24% YoY reaching 10.6 million compared to 8.5 million subscribers in
March 2014, while the number of internet customers rose 135% from March
2014.
Latest Developments
Regarding the arbitration filed by Mobily, the arbitration panel asked Mobily
to make it submission by no later than 23 May 2015. The panel also granted
Zain two and half months from the date of receiving Mobily detailed statement of claim to submit its response.
In February, Communications and Information Technology Commission (CITC)
announced the reduction of voice calls local terminal rates on mobile networks so that the price ceiling is 15 halalas instead of 25 halalas. In addition,
CITC ordered a reduction in the domestic fixed termination rates to a maximum of 7 halalas instead of 10 halalas. The application of the new prices will
begin in May 2015.
120
110
100
90
80
70
60
Valuation and Recommendation
50
The Q1 2015 KPIs beat our estimate of SAR 284 million as well as the analyst’s
consensus of SAR 287 million. In addition, Zain KSA unveiled significant growth
in top line. In a recent meeting with the company's management, the company disclosed that it has increased prices for some internet package driven by
increasing demand.
For more information you may contact:
Turki Fadaak
Research & Advisory Manager
[email protected]
Or Albilad Capital Head Office:
Tel:
Fax:
P.O. Box:
Riyadh
+966 11 203 9892
+966 11 479 8453
140
11411
Our website:
www.albilad-capital.com/en/research
Our current fair value is SAR 13.6, thus an “overweight” recommendation is
assigned for the share.
2102A
2102A
2102A
2102E
EV/EBITDA
22.11
22.96
18.99
16.05
EV/Sales
3.15
3.13
3.35
3.03
Dividend Yield
0.0%
0.0%
0.0%
0.0%
P/B
0.84
1.05
1.30
1.64
Price/sales
1.15
1.09
1.14
1.02
FY - Ending December
Current Ratio
0.28
0.87
1.00
0.46
Revenues growth
-7.9%
5.7%
-4.3%
11.6%
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ZAIN KSA
Telecommunication & Information Technology Sector
ZAINKSA AB - 7030.SE
Income Statement (SAR mn)
April 22, 2015
Q1 2014
Q1 2015*
Change (%)
Revenues
COGS
SG&A
Provisions, Net
EBITDA
EBITDA Margin
Depreciation and Amortization
EBIT
Net Interest Income
Investment Income
Others (Net)
Pre-Tax and Zakat Income
Tax and Zakat
Net Income
1,546
747
485
14
300
19.4%
427
-127
(193.9)
N/A
2.7
-318
0.0
-318
1,678
804
348
20.7%
-59
-257
0.0
-257
8.55%
7.61%
16.18%
1.4%
-53.61%
-19.27%
ROS
-20.6%
-15.3%
5.3%
Q1 2014
Q1 2015*
Change (%)
Cash and Marketable securities
Accounts Receivables
Inventory
Others
Total ST Assets
1,476
1,333
133
709
3,651
-
-
Net Fixed Assets
Intangible assets
Others
Total LT Assets
Total Assets
4,236
18,144
265
22,645
26,296
-
-
200
-
-
Accounts Payable
Accrued Expenses
Others
Total ST Liabilities
585
2,725
473
3,984
-
-
Total Long Term Debt
11,287
-
-
Other Non-Current Liabilities
Equity
Total Liabilities and Equity
4,596
6,429
26,296
-
-
Q1 2014
Q1 2015*
Change (%)
423.6
(60.2)
(189.5)
174.0
1,476.1
-
-
Balance Sheet (SAR mn)
Short Term Debt and CPLTD
Cash Flow Statement (SAR mn)
Operating Cash Flow
Financing Cash Flow
Investing Cash Flow
Change in Cash
Ending Cash
-19.27%
* Figures released by the company
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
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ZAIN KSA
Telecommunication & Information Technology Sector
ZAINKSA AB - 7030.SE
Income Statement (SAR mn)
April 22, 2015
2011A
2012A
2013A
2014A
2015E
6,699
3,499
2,225
76
899
13.4%
1,710
-811
(1,113.9)
0.1
-1,925
0.0
-1,925
6,171
3,311
1,948
33
879
14.2%
1,810
-932
(823.4)
5.6
-1,749
0.0
-1,749
6,523
3,388
2,191
53
890
13.7%
1,840
-949
(722.8)
20.6
-1,651
0.0
-1,651
6,244
3,021
2,201
-78
1,100
17.6%
1,633
-534
(745.3)
9.4
-1,270
0.0
-1,270
6,966
3,236
2,358
57
1,315
18.9%
1,707
-392
(737.1)
10.5
-1,118
0.0
-1,118
ROS
-28.7%
-28.4%
-25.3%
-20.3%
-16.1%
Balance Sheet (SAR mn)
2011A
2012A
2013A
2014A
2015E
Cash and Marketable securities
Accounts Receivables
Inventory
Others
Total ST Assets
780
1,007
44
602
2,432
2,385
1,319
50
626
4,380
1,293
1,221
141
655
3,310
1,092
1,394
63
1,340
3,888
668
1,405
92
1,097
3,262
Net Fixed Assets
Intangible assets
Others
Total LT Assets
Total Assets
4,059
20,253
0
24,312
26,744
4,285
19,274
77
23,636
28,016
4,293
18,351
283
22,927
26,237
4,296
17,469
212
21,977
25,866
5,225
16,500
191
21,916
25,178
Short term debt and CPLTD
9,748
11,420
200
200
2,881
Accounts Payable
2,525
888
529
266
621
Accrued Expenses
3,211
3,046
3,056
2,913
3,543
507
432
444
519
520
Total ST Liabilities
15,991
15,786
4,228
3,898
7,566
Total Long Term Debt
2,224
714
11,390
11,187
8,306
Other Non-Current Liabilities
4,716
3,449
4,268
5,317
5,477
Equity
4,293
8,452
6,759
5,464
4,346
Total Liabilities and Equity
27,224
28,401
26,644
25,866
25,694
Cash Flow Statement (SAR mn)
2011A
2012A
2013A
2014A
2015E
Operating Cash Flow
(87.5)
(1,149.7)
229.0
286.8
1,321.2
Financing Cash Flow
474.8
3,316.1
(517.4)
31.0
(99.5)
Investing Cash Flow
Revenues
COGS
SG&A
Provisions, Net
EBITDA
EBITDA Margin
Depreciation and amortization
EBIT
Net Interest Income
Others, Net
Pre-Tax and Zakat Income
Tax and Zakat
Net Income
Others
(309.1)
(561.8)
(803.4)
(518.8)
(1,645.8)
Change in Cash
78.2
1,604.6
(1,091.8)
(201.0)
(424.1)
Ending Cash
780.3
2,384.9
1,293.1
1,092.1
668.0
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
3
ZAIN KSA
Telecommunication & Information Technology Sector
ZAINKSA AB - 7030.SE
April 22, 2015
Albilad Capital Rating Methodology
Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts.
Moreover, the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair
value that we set and the possibility of ascent/descent.
Overweight:
The Target share price exceeds the current share price by ≥ 10%. We expect the share price to reach the Target price over the next
9-12 months
Neutral:
The Target share price is either more or less than the current share price by < 10% We expect the share price to reach the Target
price over the next 9-12 months
Underweight:
The Target share price is less than the current share price by ≥ 10%. We expect the share price to reach the Target price over the
next 9-12 months
To be Revised: No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials ,
waiting for more data to be updated, major change in company`s performance, change in market conditions or any other reason
from Albilad Capital Research.
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