Riyadh – Mubasher: NCB Capital said it remained the "Overweight" on Saudi Telecom Company (STC), with a price target (PT) of SAR 68.9, according to a latest report.

The research firm favoured STC, saying that it is one of its top picks in the Saudi market, added that this is due to the defensive nature of the telecom sector overall, STC’s strong balance sheet and sustainable dividends of SAR 4 per share.

"STC is trading at a 2017 price earning P/E 11.8x, in-line with regional peers whilst we believe it should trade at a premium," the report said.

The telecom company 2016's earnings came lower 16.6% to SAR 8.1 billion, reflecting a year-on-year decline of 13%.

NCB Capital attributed the lower earnings to lower margins, higher FX losses from international operations and higher other losses.

The investment firm commented on Mobily-StC agreement to manage towers, expecting that it will result in a non-cash transaction reducing tower capex & opex, specifically meets STC objectives.

"We believe this may reflect difficulties in selling the towers directly to investors due to low offer price, weak demand and/or legal and operational issues," the report said.

The number of mobile subscribers declined to 48 million with a penetration rate of 152% down from 169% in 2015, according to CITC data.

The report shows further declines expected in the third quarter of 2016, as the 3rd party company which verifies the finger-print data had system issues.

"Therefore, we reduced STC 2016 revenue by -0.3%. Revenues are expected to remain flat year-on-year at SAR 50.7 billion in 2016, while a growth of 3.9% is expected in 2017," NCB Capital said.