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United Arab Emirates-based telecom company Du announced on Thursday a 7.35 percent drop in third quarter (Q3) net profit for the year 2018, just short of analysts' expectations and resulting in its share price remaining flat as the markets closed for the week.
Q3 net profit amounted to 440.8 million dirhams ($120 million) versus 475.7 million dirhams a year ago.
“We reiterate BUY rating underpinned by solid dividend yield of 7.1 percent. Du shares trade at 12.3x 2018 P/E [price earnings ratio] vs its 5-yr average 13.7x," FAB securities said in a note to clients, seen by Zawya.
Du and Etisalat have to pay the UAE government a royalty tax on revenue and profit. In the third quarter, Du paid 531.1 million dirhams in royalties, compared to 515.2 million dirhams paid in royalties last year. In Q2 2018, the company paid 527.5 million dirhams in royalties.
SICO Bahrain forecast Du would make a quarterly net profit of 467.15 million dirhams.
“Overall, only a marginal weak earnings due to higher than expected royalty. Mobile segment revenue is stabilising as post paid is compensating for pressure in pre-paid. Something similar to what even Etisalat is witnessing. Fixed segment continues to grow,” Nishit Lakhotia, head of research at Bahrain-based SICO, told Zawya by email.
Fixed line revenue stood at 579 million dirhams for Q3 2018, increasing 7.9 percent year-on-year from 537 million dirhams in Q3 2017 (583 million dirhams quarter-on-quarter). Fixed line subscribers increased to 760,000 (755,000 quarter-on-quarter, and 724,000 year-on-year).
The stock is now trading 3.92 percent lower for the year to date and ended Thursday’s trading session flat. However, Du’s shares outperformed Dubai’s stock market index during 2018 as the DFM dropped 16.76 percent for the year and added 0.74 percent on Thursday.
Du’s competitor, Etisalat, reported a 4.2 percent drop in third-quarter net profit at the end of last week.
According to data from Eikon, one analyst rated Du’s stock as “Strong Buy”, while three analysts rated the stock as “Buy”.
Elsewhere in the region, Abu Dhabi’s index added 0.38 percent, Qatar’s index fell 0.19 percent, Oman’s index ended the day flat, Bahrain’s index fell 0.11 percent and Kuwait’s index gained 0.55 percent.
On 14:45 GST, Egypt’s blue chip index was mainly flat and Saudi Arabia’s index was 0.1 percent lower.
(Reporting by Gerard Aoun; Editing by Shane McGinley)
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