Riyad Capital ups price target on Saudi’s Mobily

Riyad Capital ups price target on Saudi’s Mobily

Etihad Etisalat Co (Mobily) is set to deliver another year of double-digit revenue growth following strong performance last year on improved post-paid sales, Riyad Capital said and raised its price target on the stock by 12 riyals to 74 riyals.

February 6, 2012 2:44 by Reuters

The carrier, an affiliate of UAE’s Etisalat, reported a 16 percent rise in fourth-quarter profit on Jan. 18 helped by a rise in its data revenue and post-paid mobile subscriber.

The Saudi Arabian telecom company had also proposed a larger-than-expected dividend of 2 riyals per share for the second half of the year.

“We believe rising free cashflows and declining debt burden has cushioned Mobily to distribute more cash to shareholders,” said Riyad, which kept its “buy” rating on the stock.

Still, rising dividends will not compromise planned capital expenditures, and the telecom operator will have ample cash to pursue strategic acquisitions should such opportunities arise, Riyad wrote in a note dated Feb 5.

The brokerage raised its 2012 revenue estimate for Mobily by 13 percent to 22.67 billion riyals, but lowered its gross margin outlook for the company to 51.1 percent from 55.8 percent on higher hardware contribution.

“We estimate each percentage increase in hardware contribution to total sales shaves 48 basis points off gross margins,” Riyad said.

Mobily shares closed at 58.25 riyals on Sunday. They have risen 8 percent since it reported fourth-quarter results on January 18. (Reporting by Sweta Singh in Bangalore; Editing by Tenzin Pema, Joyjeet Das) *image from waleg.com