|24 June, 2019

du signs JV agreement with Batelco to set up regional infrastructure platform

An increase in the foreign ownership limit of the stock at some point will be the main catalyst, analyst says

People attend the Gitex 2006 fair on its opening day in Dubai November 18, 2006. Man holding bag with du logo. Image for illustrative purposes.

People attend the Gitex 2006 fair on its opening day in Dubai November 18, 2006. Man holding bag with du logo. Image for illustrative purposes.

REUTERS/Ahmed Jadallah

Dubai’s Emirates Integrated Telecommunications Company (du) said on Monday that it has signed a joint venture agreement with Bahrain Telecommunication Company (Batelco).

“The 50:50 percentage owned joint venture by the Company and Batelco will create a regional infrastructure platform capable of delivering connectivity and data centre services across the region,” du said in a notice to the exchange.

The company’s shares dropped 0.97 percent to 5.1 United Arab Emirates dirhams on Monday but have still gained 1.39 percent since the start of the year.

“We still think valuations are compelling, offering an attractive dividend yield, and we remain buyers of the stock as it is undervalued at current levels,” Omar Maher, vice president of equity research at EFG Hermes told Zawya by email.

du’s net profit for the first quarter of the year 2019 dropped 12.31 percent, in line with analysts’ estimates, while the company’s revenue dropped 5.71 percent, missing estimates. The company said that the decline in revenue was due to a clean-up of its prepaid customer base following the My Number, My Identity campaign linking telephone numbers to a customer's Emirates ID. (Read more here).

“The issue is the stock lacks a catalyst; we remain of the view foreign ownership of the stock will be allowed at some point, which will trigger a re-rating, but we have no visibility on the timeline,” Maher added.

According to Eikon data, 79.52 percent of the company’s shares are owned by the UAE government and government-related entities.

Ziad Itani, a director of equity research at Arqaam Capital, told Zawya by email that he also thinks the main catalyst for unlocking value in the stock remains the removal of foreign ownership limit restrictions, although he believes that “this is unlikely to materialize in the next 12 months”.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

Our Standards: The Thomson Reuters Trust Principles

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2019

More From Markets