HSBC says Etisalat is only worth AED 14 now, in a report (actual report not seen). As always, nice of them to tell us now. Etislat 2008 Q4 profits fell 20% to AED 1.4 billion, a still pretty solid result. People are still making phonecalls - perhaps more as they phone the airport to check on the exit time for their escape flight from the UAE ...
Etisalat shares closed up slightly (0.4%) yesterday at AED 12.40, on low trading (less than AED 1m worth).
Khaleej Times 20 March 2009:
HSBC Downgrades Etisalat
Rocel Felix
DUBAI - HSBC Bank downgraded Emirates Telecommunications Corp. (ETISALAT) to ‘neutral’ from ‘overweight,’ saying its expects flat earnings in the next two years as the company will wobble from the slowdown of the UAE economy. HSBC also cut its price target by 22 per cent to Dh14.0 from Dh18.0.
Etisalat’s earnings are under pressure as population growth, the main source of the company’s revenue will slowdown, said HSBC. Easing economic activity has led to job losses in the UAE and droves of foreign workers are being sent home.
“This, coupled with a seemingly saturated market and a step-up in mobile price competition from Du, mean that Etisalat could lose mobile customers over the next few years,” said HSBC.
Also, roaming revenue will be under pressure due to fewer tourists visiting the country and fewer people going abroad. Other risks for Etisalat include its recent international greenfield investments in Iran, Nigeria, Afghanistan and Egypt. “These are likely to be capital-intensive with a minimal contribution to the group’s bottomline. We think there is also a risk of writedowns in these operations, as their book value is lower than their market value.”
HSBC said a key catalyst for Etisalat would be the opening up of share ownership to foreigners and a reduction in royalty payments currently pegged at 50 per cent. Etisalat is now waiting for the decision of the UAE federal government which owns 60 per cent of the company.
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