8/10/2019 Mobily Ratio.pdf
1/8
All rights reserved, AlJAZIRA CAPITAL
Research DivisionCompany Reports
Please read Disclaimer on the back
SEPTEMBER
2012
Etihad Etisalat Company(MOBILY)
8/10/2019 Mobily Ratio.pdf
2/8
8/10/2019 Mobily Ratio.pdf
3/8
September2012
Etihad Etisalat Company (MOBILY)Result Update 2Q12 | KSA | Telecommunications | September 2012
Strong earnings growth led by higher data and business revenue
Etihad Etisalat (Mobily) posted a net prot of SAR1,421mn (EPS: SAR2.03) in
2Q-2012. The actual 2Q-2012 protability indicates a growth of 17.7% QoQ
and 22.1% YoY. The earnings growth was on account of rise in data usage,
business sector revenue and smartphone sales. The total business sector
revenue (SAR2,039 mn) registered a growth of 15.9% YoY and 12.6% QoQin 2Q-2012.
Mobilys actual 2Q-2012 revenue was 5.3% higher than our estimate of
SAR5.4 bn. However, the protability is viewed to be largely in line with our
expectations, with actual prot just 1% higher vis--vis our estimate for the
quarter under review.
Mobilys earnings surged 21.6% YoY during 1H-2012 led by trickledown
effect of growth in revenue which surged 11.2%. Further, gross margins
expanded 251bps YoY and operating margins expanded 177bps on account
of strong growth in the high-margin data segment. Share of the data segmentin total revenue increased to 24% in 1H-2012 from 22% in 2011.
5,000.0
6,000.0
7,000.0
8,000.0
9,000.0 TASI - LHS Mobily
40.0
50.0
60.0
70.0
80.0
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Source: Bloomberg
Financial performance 2Q-2012
All figures in SAR mn,unless otherwise stated
2Q2011
1Q2012
2Q2012
YoY-Change(2Q12 / 2Q11)
QoQ-Change(2Q12 / 1Q12)
Sales revenue 5,127 5,009 5,678 10.8% 13.4%
COGS (2,649) (2,396) (2,723) 2.8% 13.7%
Gross profit 2,478 2,613 2,956 19.3% 13.1%
Gross margins 48.3% 52.2% 52.1%
Operating profit 1,223 1,254 1,468 20.0% 17.1%
Operating margin 23.9% 25.0% 25.8%
Net profit 1,164 1,207 1,421 22.1% 17.7%
Net margin 22.7% 24.1% 25.0%
EPS (SAR) 1.66 1.72 2.03
Source: Quarterly nancial reports
Financial performance 1H-2012
All figures in SAR mn,unless otherwise stated
1H-2011 1H-2012YoY-Change (1H-
2012 / 1H-2011)
Sales revenue 9,611 10,687 11.2%
COGS (4,844) (5,118) 5.7%
Gross profit 4,767 5,569 16.8%
Gross margins 49.6% 52.1%
Operating profit 2,277 2,721 19.5%
Operating margin 23.7% 25.5%
Net profit 2,162 2,629 21.6%
Net margin 22.5% 24.6%
EPS (SAR) 3.09 3.76 21.6%
Source: Quarterly nancial reports
Strong 2Q12 financial performance; broadly in line
Higher data revenue aids margin expansion
Business segment emerging growth driver
Maintain Overweight recommendation
Rating: Overweight
Current Price: SAR69.8
12-month price target: SAR87.3
Upside/(Downside): 25.1%
Key Information
Reuters Code 7020.SE
Bloomberg Code EEC AB
Country: Saudi Arabia
Sector: Telecommunication
Primary Listing: TASI
M-Cap: SAR48.8bn
52 Weeks H/L: SAR70.5/SAR49.9
Price Chart
Key Financials
Key Financials2011
(a)
2012
(e)
2013
(e)
Sales revenue (SAR mn) 20,052 22,365 23,963
Revenue growth (%) 25.2 11.5 7.1Gross profit (SAR mn) 10,324 11,648 12,266
Gross margin (%) 51.5 52.1 51.2
Operating profit (SAR mn) 5,305 5,734 6,314
Operating margin (%) 26.5 25.6 26.3
Net profit (SAR mn) 5,083 5,548 6,177
Net profit growth (%) 20.7 9.1 11.3
EPS (SAR) 7.3 7.9 8.8
Source: Company annual report & Aljazira Capital
Price performance
1 -
month
3 -
month
12 -
month
Absolute 3.3 8.6 29.2
Relative 1.3 3.7 12.8
Source: Zawya & Aljazira Capital
Abdullah Alawi(AGM - Head of Research)
[email protected]+966-2-6618275
8/10/2019 Mobily Ratio.pdf
4/8
September2012
Business segment rapidly emerging as key growth driver
Business sector has emerged as key growth drivers for Mobily since the last two quarters.
Business sector revenues witnessed a 63% YoY growth in 1H-2012. Growth in thissegments revenue is expected to remain rm in the near to medium term. We believe,
there is a signicant scope for growth in the enterprise segment in the Kingdom, given
the increased need for mobility, seamless integration of communication functionality and
web-based technologies. Moreover, government initiatives are also contributing to the
growing need for advanced telecom services. Recently the company has signed a 3-year
contract with the Ministry of Education to supply Broadband devices to 1,400 schools in
the Eastern Province. The company is also currently working to link 30 government bodies
with ber optic network. According to the management, Mobily aims to connect 250,000
buildings (800,000 housing and commercial units) with ber optic network by the end of
2016. Furthermore, Mobily recently signed a 5-year contract with IBM valued at SAR1bn
for outsourcing the IT Operation Services. This investment is expected to improve Mobilys
technical advantage and delivery capabilities while catering to business clients.
Data segment to remain prime forte
Saudi Arabias mobile data segment has emerged as a fast growing market over the last
couple of years. We expect Mobily to remain market leader in this segment primarily due to
its mobile broadband-focused strategy. Mobily dominated the mobile broadband market
with a staggering 75.7% share in 2011. We believe its investment in direct ber optic
connections would help in offering a diverse range of data services at higher speeds.
Investment considerationConsidering the 2Q-2012 performance and our current outlook and estimate, we arrived at
an updated 12-month price target of SAR87.3/share, indicating a potential upside of 25.1%
over the market price of SAR69.8 (as of September 17, 2012. Therefore, we maintain our
Overweight recommendation on the stock.
Mobily has started paying quarterly dividends 2012 onwards, and announced the
distribution of initial dividends of SAR1.0 per share for 2Q-2012 amounting to SAR700
mn. We expect the company to pay a total dividend of SAR3.25 per share in 2012; this
translates into a dividend yield of 4.7% at the current price.
Marginal downward revisions to
2012 proftability estimate
We have marginally revised ourearnings estimates downwards for
2012 to factor in higher operating
expenses as per companys 1H-
2012 operating costs.
Key nancial updates 2012
All figures in SAR mn,unless otherwise stated
Earlier estimates
2012New estimates 2012
Upward/(Downward)
revision
Sales Revenue 22,077 22,365 1.3%COGS (10,602) (10,717) 1.1%
Gross Profit 11,475 11,648 1.5%
Gross Margin 52.0% 52.1%
Operating Profit 5,929 5,734 -3.3%
Operating Margin 26.9% 25.6%
Net Profit 5,755 5,548 -3.6%
Net Margin 26.1% 24.8%
EPS (SAR) 8.22 7.93
Source: Aljazira capital
8/10/2019 Mobily Ratio.pdf
5/8
September2012
All figures in SAR mn,unless otherwise stated
2010 2011 2012E 2013E 2014E 2015E
Income statement
Sales revenue 16,013 20,052 22,365 23,963 24,451 24,923
Growth YoY (%) 22.6% 25.2% 11.5% 7.1% 2.0% 1.9%
Cost of sales (7,230) (9,728) (10,717) (11,697) (11,752) (11,917)
Gross Profit 8,783 10,324 11,648 12,266 12,699 13,006
Growth YoY (%) 16.4% 17.5% 12.8% 5.3% 3.5% 2.4%
Selling & marketing (1,059) (1,086) (1,289) (1,246) (1,247) (1,271)
General & administrative (1,559) (1,784) (2,231) (2,085) (2,115) (2,168)
EBITDA 6,165 7,454 8,127 8,935 9,337 9,567
Growth YoY (%) 27.5% 20.9% 9.0% 9.9% 4.5% 2.5%
Depreciation and amortization (1,810) (2,149) (2,393) (2,621) (2,749) (2,906)
Operating Profit 4,355 5,305 5,734 6,314 6,588 6,661
Growth YoY (%) 35.8% 21.8% 8.1% 10.1% 4.3% 1.1%
Other Income and Expenses 70 46 67 72 73 75
Financing costs (146) (213) (194) (143) (112) (76)
Profit before zakat & minority interest 4,279 5,138 5,607 6,243 6,549 6,660
Provision for Zakat (67) (54) (59) (66) (69) (70)
Net profit 4,211 5,083 5,548 6,177 6,480 6,589
Growth YoY (%) 39.7% 20.7% 9.1% 11.3% 4.9% 1.7%
Balance sheet
Assets
Cash and cash equivalents 1,661 1,690 778 1,761 3,954 5,876
Short term investments 450 - - - - -
Accounts receivable, net 5,748 6,323 7,027 7,529 7,683 7,831
Due from related parties 23 11 12 13 14 14
Prepaid expenses and other assets 1,237 1,399 1,938 2,106 2,124 2,156
Inventories 297 470 440 385 386 392
Property, plant and equipment, net 12,457 16,412 17,908 18,937 19,779 20,647
License Acquisition fees (net) 10,028 9,665 9,131 8,596 8,062 7,527
Good will 1,530 1,530 1,530 1,530 1,530 1,530
Investment in unconsolidated subsidiary - - - - - -
Total assets 33,430 37,501 38,765 40,857 43,531 45,973
Liabilities & owners' equity
Short term debt 599 1,201 1,201 1,201 1,201 1,201
Accounts payable 6,225 7,808 6,799 5,499 5,231 4,885
Current portion of long term 1,843 4,895 1,083 1,068 1,399 1,034
Due to related parties 281 193 315 344 345 350
Accrued expenses and other liabilities 3,307 3,949 4,351 4,748 4,771 4,837
Long term debt 5,529 977 3,249 2,492 1,399 689
Provisions for end of service benefits 66 89 107 117 118 119
Founder shareholders loan - - - - - -
Share Capital 7,000 7,000 7,000 7,000 7,000 7,000
Statutory reserve 1,070 1,578 2,133 2,751 3,399 3,500
Retained earnings 7,510 9,810 12,528 15,638 18,670 22,358
Total owners' equity 15,580 18,388 21,661 25,388 29,069 32,858
Total equity & liabilities 33,430 37,501 38,764 40,857 43,531 45,973
Cashflows Statement
Cash flow from operating activities 5,357 6,673 6,259 7,320 8,812 9,036
Cash flow from investing activities (3,113) (3,408) (3,355) (3,115) (3,056) (3,240)
Cash flow from financing activities (1,516) (3,237) (3,816) (3,221) (3,562) (3,875)
Change in cash 728 28 (912) 983 2,193 1,921
Net cash at end 1,661 1,690 778 1,761 3,954 5,876
Updated Financial Statements
8/10/2019 Mobily Ratio.pdf
6/8
8/10/2019 Mobily Ratio.pdf
7/8
AlJazira Capital, the investment arm of Bank AlJazira, is a Shariaa Compliant Saudi
Closed Joint Stock company and operating under the regulatory supervision of the
Capital Market Authority. AlJazira Capital is licensed to conduct securities business in
all securities business as authorized by CMA, including dealing, managing, arranging,advisory, and custody. AlJazira Capital is the continuation of a long success story
in the Saudi Tadawul market, having occupied the market leadership position for
several years. With an objective to maintain its market leadership position, AlJazira
Capital is expanding its brokerage capabilities to offer further value-added services,
brokerage across MENA and International markets, as well as offering a full suite of
securities business.
Overweight:This rating implies that the stock is currently trading at a discount to its
12 months price target. Stocks rated Overweight will typically provide an upside
potential of over 10% from the current price levels over next twelve months.
Underweight:This rating implies that the stock is currently trading at a premium to
its 12 months price target. Stocks rated Underweight would typically decline by
over 10% from the current price levels over next twelve months.
Neutral:The rating implies that the stock is trading in the proximate range of its 12
months price target. Stocks rated Neutral is expected to stagnate within +/- 10%
range from the current price levels over next twelve months.
Suspension of rating or rating on hold (SR/RH): This basically implies suspension
of a rating pending further analysis of a material change in the fundamentals of the
company.
For further queries about our special services, contact us at the toll free number 800 116 9999.
COMPANYPROFILE
RATING
TERMINO
LOGY
8/10/2019 Mobily Ratio.pdf
8/8
Disclaimer
The purpose of producing this report is to present a general view on the company/economic sector/economic subject under research, and not to
recommend a buy/sell/hold for any security or any other assets. Based on that, this report does not take into consideration the specic nancial
position of every investor and/or his/her risk appetite in relation to investing in the security or any other assets, and hence, may not be suitable for
all clients depending on their nancial position and their ability and willingness to undertake risks. It is advised that every potential investor seek
professional advice from several sources concerning investment decision and should study the impact of such decisions on his/her nancial/legal/tax position and other concerns before getting into such investments or liquidate them partially or fully. The market of stocks, bonds,
macroeconomic or microeconomic are of a volatile nature and could witness sudden changes without any prior warning, therefore, the investor
in securities or other assets might face some unexpected risks and uctuations. All the information, views and expectations and fair values ortarget prices contained in this report have been compiled or arrived at by AlJazira Capital from sources believed to be reliable, but AlJazira Capital
has not independently veried the contents obtained from these sources and such information may be condensed or incomplete. Accordingly,
no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness orcorrectness of the information and opinions contained in this report. AlJazira Capital shall not be liable for any loss as that may arise from the
use of this report or its contents or otherwise arising in connection therewith. The past performance of any investment is not an indicator of
future performance. Any nancial projections, fair value estimates or price targets and statements regarding future prospects contained in this
document may not be realized. The value of the security or any other assets or the return from them might increase or decrease. Any change incurrency rates may have a positive or negative impact on the value/return on the stock or securities mentioned in the report. The investor might
get an amount less than the amount invested in some cases. Some stocks or securities maybe, by nature, of low volume/trades or may become
like that unexpectedly in special circumstances and this might increase the risk on the investor. Some fees might be levied on some investments
in securities. This report has been written by professional employees in AlJazira Capital, and they undertake that neither them, nor their wives orchildren hold positions directly in any listed shares or securities contained in this report during the time of publication of this report. This report
has been produced independently and separately and no party (in-house or outside) who might have interest whether direct or indirect have seenthe contents of this report. It should be also noted that the Research Division of AlJazira Capital had no information at the time of issuing this
report regarding any conict of interest between the company/companies mentioned in this report and any members of the board / executives /employees of AlJazira Capital or any of Bank AlJazira Group companies. No part of this document may be reproduced whether inside or outside
the Kingdom of Saudi Arabia without the written permission of AlJazira Capital. Persons who receive this document should make themselves
aware, of and adhere to, any such restrictions. By accepting this document, the recipient agrees to be bound by the foregoing limitations.
Asset Management Brokerage Corporate Finance Custody Advisory
Head Ofce: Madinah Road, Mosadia
P.O. Box: 6277, Jeddah 21442, Saudi Arabia
Tel: 02 6692669 - Fax: 02 669 7761