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|06 February, 2019

Saudi Electricity Company's shares dropped on Wednesday, analyst says Q4 earnings were "disappointing"

SECO's shares dropped 3% on Wednesday as the company recorded losses for Q4 2018

Image used for illustrative purpose. A vehicle drives past workers near power plant number 10 at Saudi Electricity Company's Central Operation Area, south of Riyadh.

Image used for illustrative purpose. A vehicle drives past workers near power plant number 10 at Saudi Electricity Company's Central Operation Area, south of Riyadh.

REUTERS/Fahad Shadeed

Shares in Saudi Electricity Company (SECO) dropped sharply on Wednesday after the company reported a loss for the fourth quarter (Q4) of 2018.

The company declared a Q4 2018 net loss after zakat and tax of 3.77 billion Saudi riyals ($1.01 billion), which was actually 31.7 percent lower than the 5.52 billion Saudi riyals loss in Q4 2017.

The company said in a statement to the exchange that losses were lower this year, because llasts year's figure had included a one-off sum "related to the human resources productivity program".

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Q4 2018 revenue amounted to 13.03 billion Saudi riyals, which was 13.7 percent higher than the 11.48 billion Saudi riyals earned in Q4 2017.

“Even after adjusting for one-off expense, net loss disappointed,” Asim Bukhtiar, capital markets head of research at Saudi Fransi Capital said in a note seen by Zawya.

SECO announced (a) disappointing quarter underscored by (a) 2.6% Y/Y (year on year) decline in sold energy,” Bukhtiar said, adding that “residential and commercial consumption deteriorated during the year, -5% and -14%, respectively.”

The company’s shares dropped 2.42 percent on Wednesday while Saudi Arabia’s stock market edged 0.11 percent higher. SECO’s shares have gained 11.49 percent so far since the start of the year, despite today’s drop.

SECO’s stock ended the trading session at 16.84 Saudi riyals and was the second-worst performer during Tadawul’s Wednesday session, behind Al-Etihad Cooperative Insurance Company which saw its shares drop 5.11 percent during the day to 26 Saudi riyals.

“Key to earnings recovery in 2019 will be consumption, particularly from higher value industrial users,” Saudi Fransi Capital’s Bukhtiar said.

“On the expense side, we expect further rationalization of fixed costs as SECO scales back generation capacity,” he added.

According to data from Eikon, three analysts have a ‘hold' rating on the bank's stock and one analyst has a ‘sell’ rating.

The company had announced in December 2018 that it has obtained a 2.4 billion Saudi riyal bilateral facility for five years from Samba Financial Group. The credit facility is for general corporate purposes and capital expenditures.

Elsewhere in the region, Dubai’s index added 0.56 percent on Wednesday, Abu Dhabi’s index edged 0.12 percent higher, Qatar’s index dropped 0.29 percent, Kuwait’s premier market index dropped 0.22 percent, while Bahrain’s index added 0.37 percent and Oman’s index edged 0.2 percent lower.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

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© ZAWYA 2019

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