PHOTO
Kuwait Telecommunications Company (Viva), announced late on Monday a drop in first quarter (Q1) net profit for 2019.
Viva reported a net profit attributable to company shareholders of 9.6 million Kuwaiti dinars ($31.54 million) for Q1 2019, compared to 11.6 million dinars in Q1 2018, translating into a 17.24 percent decrease.
“Viva Q1 numbers reflect a soft start to the year, though operational performance is satisfactory,” Ziad Itani, a director of equity research at Arqaam Capital, told Zawya by email.
Viva’s Q1 total operating revenue amounted to 66.6 million dinars, compared to 77.6 million dinars in Q1 2018, a 14.18 percent drop.
“We are not alarmed by the net income drop (-17 percent year-on-year) as we attribute this mostly to lower auxiliary income,” Itani said.
“Viva Kuwait is one our top picks in the telecom sector. The stock is a play on both value and growth, while the dividend yield potential is the highest amongst GCC peers,” Itani added, noting that dividends are gradually increasing, while the payout (40 percent of earnings paid as dividends) remains the lowest amongst GCC peers.
“The dividend yield of 4.8 percent would more than double once the payout is aligned with sector average. The major constraint for institutional investors remains the stock liquidity.”
Viva announced in February this year the establishment of a 5G Innovation Center “with the aim to explore, develop, and launch new 5G use cases in Kuwait by 2019”. (Read more here).
Commenting on the company’s Q1 2019 results, Dr. Mahmoud Ahmed Abdulrahman, VIVA’s chairman said in a press release: “Despite the continued competition witnessed in the Kuwaiti telecom market, VIVA was able to achieve good levels of revenues as well as enhanced the operational efficiency to ensure generating positive return to our shareholders."
The company’s shares dropped 3.49 percent on Tuesday to 802 Kuwaiti fils by 12:39 GST, but have still added 0.25 percent so far since the start of 2019. Viva is majority-owned by Saudi Telecommunications Company, which holds a 51.8 percent stake.
Itani described the company's current valuation as "compelling", with a price-to-earnings ratio of just 8.5x based on anticipated 2019 earnings, which is a 50 percent discount to the average company valuation in the sector.
(Reporting by Gerard Aoun; Editing by Michael Fahy)
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
