Mobily: Positive Earnings Surprise Reveals More Value Than Anticipated.
27 Aug 2010
Glimpse of financial results
Mobily reported earnings for the second quarter of 2010 jumping 33.5% Y-o-Y; SAR 901 million compared to SAR 675 million last year.

Holding ground in market share
While market share and subscriber count have not been reported on a half year basis, we believe that, within a highly competitive environment, Mobily retained its market share at 39% for the first half of 2010.

Main contributors to revenue growth
Growth in broadband revenues and rise in post-paid and HSPA subscribers were the main contributors to revenue growth.

Catalysts to positive quarterly results
Catalysts for the quarter were associated with higher broadband revenues triggered by the growth in HSPA wireless broadband users, increase in postpaid subscribers along with a rise in volume for international calls, and a higher EBITDA margin (compared to last quarter).

Future Anticipated Catalysts
In a nutshell, positive catalysts can be achieved through focusing on business and wholesale enterprises as the company intends to, and offering attractive packages during the Hajj season in the second half will increase usage and profitability.

We have updated our financials for Mobily after taking into account better than expected first half results. We maintain our Accumulate recommendation on Mobily and raise our Target Price from SAR 53.44 to SAR 65.89, providing investors with an upside potential of 26.1%. We derive this new Target Price from our valuation model, given higher than anticipated revenues, subscribers and consequently earnings.
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