Palestine Telecommunications (PALTEL) Palestine Stock Exchange

Transcription

1 October 31, 2011 Flash Result Report - Q Palestine Telecommunications (PALTEL) Palestine Stock Exchange Ticker Sector Trading Currency ISIN Free Float Current Price Forward PE Market Capitalization $ 52 Week high 52 Week low PALTEL Services JOD PS % x 965,373, Company Background Palestine Telecommunications Company was founded in 1995, and started its operation in 1997 as an operator and provider of telecommunications services fixed line, cellular, internet, data transmission and leased lines. Palestine Telecommunications plays a major role in raising the Palestinian economy and supports its development. It employs about 1600 employees. Its capital reached JD 131,625 million and its shareholders base as of September 30, 2011 reached 7,517: that consists of individuals, companies, institutions, Palestinian investment committees and legal bodies. The company skilled unique accomplishments among the past years in various aspects of telecommunications and information technology, where the company introduced to the Palestinian Community all the services and instruments of telecommunications and internet. The company s activities expanded widely to meet the high ambitions, and the efforts have integrated during the year of 2005 to outcome PALTEL group which includes: Paltel Corporation (Paltel), Palestine Cellular Communications (Jawwal), Hadara Technologies, PalMedia, Reach, Paltel Academy, Paltel Group for development institute, to be an integrated weight unit with a unique new experience among the local and global levels to attain a beneficiary subscribes from Paltel Group companies of 2.92 million at the end of September The Services Sector in Palestine contributes by 17.2% of the Gross Domestic Product. GDP, where PALTEL Group alone contributes about 12% of the figure. In the first nine months of 2011, PALTEL constituted 30% of the total trading value in Palestine Exchange PEX and 75.66% of the services sector, 7.74% of the total traded volume of the PEX, while 34.26% of the services sector, 35.12% of the market capitalization of the PEX, whereby, 68.15% of the services sector. According to Palestine Telecommunications s management the restructuring of the Group companies created new strategic directions which led to a refocus on core business operations in the fixed, mobile, and data services. In turn, the implementation of a new operational focus resulted in the steady growth of revenues and profits across all companies as a result of the Group s ability to adapt and adjust to evident market changes. This strategy will enable PALTEL to maintain its market share of 80% from the local market. PALTEL s share price is currently calculated in Al Quds Index formula and weighs around %50. Major Shareholders as of Dec 31, 2010 Palestine Development & Investment (PADICO) # of shares % of Capital 39,056, % Palestine Investment Fund 8,776, % Blakeney L.P.T 6,940, % Growth in Subscribers Base by 7.05% Palestine Telecommunications PALTEL reported a growth of 7.05% in its total number of subscribers to reach 2.92 million as of September 30, 2011; including fixed line, wireless (Mobile) and data services compared to 2.73 million in Wireless services subscribes - which account for 81.81% of the total figure -, increased slightly by 5.85% to reach 2.39 million in Q compared to 2010, but rising significantly by 11.97% compared to Q Sustaining the strong performance in the wireless subscribers came amid rising the competition in the Palestinian Telecommunications sector. Also, average monthly revenue for wireless subscriber stabled at JD10.80 in Q Fixed line subscribers- the second contributor- reached 0.38 million in Q3 2011, up by 6.03% compared to the end of According to PALTEL; this increase is attributed to the intensive offered price campaigns which aim to increase the service s usage through providing several motives and advantages to subscribers. On the other hand, average monthly revenue for fixed line subscriber reached JD in Q3 2011, up from JD14.30 in Data services subscribers - which contributed the least to the total base-, increased significantly by 35.70%, standing at 0.15 million in Q This was accompanied by a decline in the average monthly revenue for data services subscriber from JD16.60 in 2010 to JD13.50 in Q3 2011, due to the switch of large portion of subscriptions to Bitstream access system (BSA). JOD Fixed Lines JOD Wireless (Mobile) JOD Data Services Average Subsriber's Revenue Subscribers 2010 Q Fixed Lines , % Wireless 2,258,000 2,390, % Data Services 108,0,00 146, % Total 2,729,000 2,921, %

2 Income Statement PALTEL recorded a growth in its overall revenues by 11.11% in Q compared to the same period in 2010, to aggregate at JD million. This increase was attributed to an increase in the revenues of the main sectors: wireless services revenues which account for 75.22% of total revenues reported an increase of 11.86% to hit JD million following the growth in subscribers. Fixed line revenues reported an increase of 6.49% to reach JD79.32 million in Q3 2011,while data services revenues reported an increase by 66.95% to settle at JD14.19 million and contribute by 5.06% to the total figure. Cost of revenues increased accordingly by 6.81% standing at JD63.92 million, constituting about 22.79% of the overall revenues in Q3 2011, to conclude an increase in the gross income by 12.45% to aggregate at JD million, followed by an increase in the gross margin by 1.20% to hit 77.21% in Q due to the significant growth in the overall revenues, in addition to maintaining an approximate level of cost of revenues compared to revenues. General & administrative expenses increased by 10.13%, to stand at JD million. In consequence, Operating income increased and amounted to JD98.84 million in Q increasing by 15.34%; operating margin stood at 35.24% up by 3.80% compared to Q due to the growth in the gross income, despite the increase in the G&A expenses. PALTEL recorded investment losses of JD15.27 million in Q compared to a loss of JD6.99 million in Q3 2010, reflecting the company s stake in associates results of operations. In aggregate, PALTEL recorded an increase in its net income by 9.24% to settle at JD 71.1 million. Net margin, slightly decreased by 1.72% due to the noticeable investment losses in Q3 2011, to reach 25.36%. Earning per share stood at JD 0.54 as of 30 September Item Q Q Revenues 252,420, ,468, % Cost of Revenues 59,841,000 63,918, % Gross Income 192,579, ,550, % Gross Margin 76.29% 77.21% 1.20% G&A Expenses 106,882, ,711, % Operating Income 85,697,000 98,839, % Operating Margin 33.95% 35.24% 3.80% Investment Income -6,989,000-15,267, % Net income 65,099,000 71,115, % Net Margin 25.79% 25.36% -1.68% Net income Operating Income Gross Income Balance Sheet PALTEL s total assets increased by 2.90% compared to the end of 2010, to settle at JD million in Q3 2011, in effect of a semi balanced changes in current and noncurrent assets Current assets dropped by 13.25%, to settle at JD million in Q This drop was explained by the reduction in cash & cash equivalents by %23.56 due to financing PALTEL s investments and paying out part of its loans in addition to finance its operating cycle that was accompanied by the revenues growth. Also, other current assets item which represent mainly prepaid expenses and license fees declined from JD54.40 million in 2010 to reach JD37.46 million in Q On the other hand, accounts receivables increased to JD74.67 million; up by 7.22% compared to 2010 parallel to operations expansion. PALTEL s noncurrent assets soared by 13.09% to total JD million in Q This was attributed to the recorded increases in: investment in properties & equipments by 6.99% to hit JD million, investments in associates companies by 10.95% amounting to JD46.62 million, and the available for sale financial assets by % that represent shares in companies whether quoted or unquoted in financial markets. It should be mentioned that PALTEL invested in Jericho Gate Real Estate Investment Company with an amount of JD15.6 million during On the other hand, the balance of prepayment account amounted to JD million in Q which is the remaining outstanding un due balance of license fees to the PNA - did not witness any significant change compared to the end of Revenues Q Q Item 2010 Q Current assets 213,294, ,031, % Noncurrent assets 337,967, ,195, % Total assets 551,261, ,226, % Current liabilities 98,972, ,653, % Noncurrent liabilities 60,915,000 52,806, % Total liabilities 159,887, ,459, % Retained Earnings 212,403, ,868, % Outstanding Shares 131,625, ,625, % Shareholders Equity 391,374, ,767, % Page 2

3 PALTEL s total liabilities decreased by 1.52% to settle at JD million in Q compared to JD million in 2010, as an effect of the drop in non current liabilities opposed to increase in the current liabilities. Current liabilities increased by 5.74% as an effect of the increase in the accounts payables by 10.93% to reach JD38.41 million in Q that accompanied with an increase in inventory. Also, the item of other current liabilities which reflects deferred revenues & accrued expenses increased to JD52.07 million; up by 6.85%. On the other hand, noncurrent liabilities dropped by 13.31% to hit JD52.81 million as a result of paying out part of PALTEL s loans, where long term loans balance declined by 20% to amount JD28.36 million in Q Also, the provision for employees' indemnity dropped by 4% standing at JD24.45 million. PALTEL s shareholders equity grew by 4.70% to aggregate at JD million in Q compared to JD million in 2010, as a result of the growth in the retained earnings by 8.69% which in turn ended the period at the level of JD million. 33,539,520 3,689,393 8,290,901 Investments For Trading - Local 4,989,374 Investments Available for Sale- local Investments For Trading - Regional Investments Available for Sale- Regional Financial Ratios Following the major growth in revenues; gross and operating margins witnessed a significant increase in Q compared to the corresponding period of The controllable increase in direct costs despite the increase in the G&A expenses, had a major role in enhancing these figures, while net profit margin decreased slightly in Q due to the increase in the losses from associates. PALTEL is currently holding a stronger equity position in Q compared to Q3 2010, along with lower leverage ratios due to the reduction in the long term loans, along with the growth in assets and shareholders equity. Loans ratios dropped remarkably since the end of 2010, and along the three quarters of Book value stood at JD3.11 at the end of Q rising by 10.64% compared to Q and by up by 4.71% compared to the end of Working capital declined in Q by 11.14% compared to Q due to the major reduction in cash and cash equivalent, that was reinvested in available for sale assets and associates. Also, the same reason had led to a lower short term liquidity. The expansion in the operations and what has followed of an increase in the accounts payables and other current commercial liabilities items, reported a lower operating liquidity but with good turnover ratios, that reflects management efficiency. DuPont Analysis Item Q Q EPS % BV % Gross Margin 76.29% 77.21% 1.20% Operating Margin 33.95% 35.24% 3.80% Net Margin 25.79% 25.36% -1.67% ROaA 12.03% 11.64% -3.21% ROaE 17.53% 17.75% 1.25% Current Ratio % Debt Ratio 32.44% 27.76% % Equity ratio 67.56% 72.24% 6.92% Loans to assets 7.76% 7.50% -3.36% Loans to equity 11.49% 10.38% -9.62% Total asset turnover 46.05% 49.45% 7.38% Working capital 90,452,000 80,378, % Working capital turnover % % 25.04% ROE simple Net Margin Total asset turnover Equity Multiplier 17.36% 25.36% 49.45% % Page 3

4 Market Indicators PALTEL s share price increased by 2.51% in Q compared to the end of Q3 2010, and approximately experiencing stability compared to the end of 2010, to record a market capitalization of JD million. The share is trading above its book value, and currently recording 170% compared to it, stimulated by a major growth in the book value. Trading volume of PALTEL reached million shares until Q3 2011; recording a turnover of 8.56%. Estimated PE ratio recorded a very attractive level at the end of Q3 2011; 7.36x compared to an actual PE of 8.05x in Item Q Q Price P/BV % % Market Capitalization 680,501, ,612,500 Trading Volume 15,944,705 11,270,405 Turnover 12.10% 8.56% Share's Performance in the First 9 Months , , , , , , , , , Volume High Low Close 3,000,000,000 2,500,000,000 2,000,000,000 82,682,582 1,500,000,000 1,000,000,000 PEX Capitalization Services S. Capitalization PALTEL Capitalization 271,281,248 Paltel Trading Value PEX Trading Value 500,000,000 0 Dividends Analysis Palestine Telecommunications reported a consistent level of distributed dividends in the period between 2008 and Although the price movement was narrow along the period, but the 6.88% growth in the share s price was accompanied with a steady increase in the dividends yield following the profitability growth along the period. Items Price DPS EPS Dividends yield 8.10% 6.81% 7.58% Payout Ratio 58.82% 66.04% 60.61% Page 4

5 Palestine Telecommunications Financial Highlights ( ) - Appendix Balance Sheet Item Current assets 190,636, ,360, % 213,294, % Noncurrent assets 271,312, ,910, % 338,001, % Total assets 461,949, ,270, % 551,261, % Current Liabilities 102,870, ,807, % 98,972, % Noncurrent liabilities 26,291,598 72,278, % 60,915, % Long Term Loans 6,765,223 51,360, % 35,450, % Total Liabilities 129,161, ,085, % 159,887, % Retained Earnings 154,450, ,136, % 212,403, % Outstanding shares 131,625, ,625, % 131,625, % Income Statement Item Revenues 291,105, ,092, % 339,929, % cost of revenues 55,883,945 75,817, % 78,858, % Gross Income 235,221, ,275, % 261,071, % Gross Margin 80.80% 75.94% -6.02% 76.80% 1.14% G & E expenses 136,354, ,920, % 149,321, % Operating Income 98,867, ,355, % 111,750, % Operating Margin 33.96% 33.12% -2.48% 33.87% -0.74% Investment Income -1,589,956-16,280, % -9,723, % Net Income 89,179,848 70,335, % 86,336, % Net Margin 30.63% 22.32% % 25.40% 13.78% Financial Ratios Ratios EPS % % BV % % Gross Margin 81.00% 76.00% -6.17% 77.00% 1.32% Operating Margin 34.00% 33.00% -2.94% 33.00% 0.00% Net Margin 31.00% 22.00% % 25.00% 13.64% ROaA 20.19% 14.16% % 15.95% 12.62% ROaE 26.08% 20.57% % 23.25% 13.07% Current Ratio % % Debt Ratio 27.96% 33.90% 21.23% 29.00% % Equity Ratio 72.04% 66.10% -8.24% 71.00% 7.40% Loans to equity 6.24% 20.23% % 13.05% % Loans to assets 4.50% 13.37% % 9.26% % Working Capital 87,766,807 70,553, % 114,322, % Working Capital turnover % % 34.65% % % P/E % % Page 5

6 Board of Directors Sabih Taher Masri- Chairman Arab Supply & Trading Company - Majd Shwaikeh Cario-Amman Bank - Ghiath Munir Sukhtian Palestine Development & Investment - Dr. Farouq A. Zuaiter Arab Bank - Basel Abdel Nabi Al-Maseera International Company - Ma'moon Abu Shahla Management Consulting Services - Walid Najjab Palestine Industrial Estate Development Co. - Sharhabil Al-Zaim Birzeit Pharmaceutical Co. - Talal Nasiruddin Palestine Development & Investment - Leith Muneeb Rashid Al Masri Palestine Development & Investment - Samir Othman Halileh For further information, please contact the research department at Sahem Trading & Investment Company: Sahem Trading & Investment Co, Ramallah, Palestine P.O.Box 2187 Direct line: or Research@sahem-inv.com DISCLAIMER Disclaimer: This report is not an offer to buy or sell nor a solicitation to buy or sell any of the securities mentioned within. The information contained in this report were prepared using information available to the public and sources Sahem Trading & Investment Co believes to be reliable. Sahem Trading & Investment Co does not guarantee the accuracy of the information contained within this report and accepts no responsibility or liability for losses or damages incurred as a result of investment decisions taken based on information provided or referred to in this report. Any analysis of historical facts and data is for information purposes only and past performance of any company or security is no guarantee or indication of future results.