Riyadh – Mubasher: AlJazira Capital has retained the target price (TP) of the Saudi Telecom Company (stc) at SAR 97.4 per share and revised its recommendation on the stock to ‘Neutral’, according to a report released on Monday.

In the second quarter (Q2) of 2020, stc’s net income slid 4.4% yearly to SAR 2.7 billion, below AlJazira’s and the consensus estimate of SAR 2.9 billion, ascribed largely to lower-than-expected gross and operating margins.

Meanwhile, the telecom operator’s revenue grew 9.7% YoY to SAR 14.9 billion, exceeding estimates of SAR 13.8 billion, owing to the strong performance from stc’s enterprise segment and higher revenue from its subsidiaries.

During the second half (H2) of 2020 and given the current situation of the COVID-19 pandemic, margins of stc are expected to remain under pressure amid an increase in provisions for doubtful debt and higher costs, AlJazira Capital said. 

However, the expanding fibre optics and broadband subscriber base and growth in demand for data would continue to drive stc’s revenue.

“Additionally, with the expansion of 5G and FTTH networks, the company is well-positioned to tap opportunities in the IoT, Cloud, 5G, and Enterprise segments. Furthermore, with a licence to provide electronic digital wallet services and customer base of 2mn across the MENA region, STC Pay provides great revenue potential to the company in the long term,” the report concluded.