|24 July, 2019

Dubai's Du reports higher Q2 net profit, drop in revenue

The company's shares dropped 1.07% on Wednesday to AED5.55 by 12:27 GST but have still added 10.34% so far since the start of the year 2019

A man walks past a Du telecommunications advertisement in Deira in Dubai

A man walks past a Du telecommunications advertisement in Deira in Dubai

REUTERS/Jumana El-Heloueh

Dubai-based telecoms operator Emirates Integrated Telecommunications Company (Du) reported a 2.43 percent rise in net profit for Q2 2019 at 464 million dirhams ($126.33 million) after royalty payments.

The company’s revenues dropped 4.78 percent to 3.19 billion dirhams in Q2 2019, from 3.35 billion dirhams in Q2 2018, missing EFG Hermes' estimate.

Omar Maher, vice president of equity research at EFG Hermes told Zawya that despite a “slight miss” in revenues, Du’s net profit came right in line with EFG Hermes’ estimate, as the top-line miss “was offset by stronger-than-expected margin performance.”

Gross profit margin rose 2.5 percentage points year-on-year, according to EFG Hermes’ calculations, to 68.4 percent in Q2 2019, from 65.9 percent in Q2 2018.

“We find the results rather uninspiring, particularly due to persistent weakness in top-line performance coming from the mobile segment,” Maher added.

The company’s shares dropped 1.07 percent on Wednesday to 5.55 dirhams by 12:27 GST but have still added 10.34 percent so far since the start of the year 2019.

Maher said that EFG Hermes remain “buyers” of Du’s stock on attractive valuations, as both market weakness and competition risks are priced in.

“The stock trades at an EV/EBITDA of just 4.2x, vs. 7.4x for Etisalat and 5.7x for MSCI EM Telecoms. Moreover, it offers an attractive dividend yield of 6.2 percent vs. Etisalat’s 4.5 percent, along with an option of significant re-rating in the event of increasing FOL (foreign ownership limit), which we believe is increasingly probable.”

The company’s board of directors approved the distribution of a 13 fils per share interim dividends for the first half of the year 2019, in line with EFG Hermes’ estimate.

(Reporting by Gerard Aoun; Editing by Seban Scaria)

(gerard.aoun@refinitiv.com)

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© ZAWYA 2019

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