U Capital – Oman Telecommunications Company (OTEL) – 4Q23 Result Review

Issue Date: 11 March 2024

Revenue increased by 7% YoY, in line with our expectations                                                                                                                                                                                         

For 4Q23, OmanTel recorded a YoY revenue growth of 7% to reach OMR 750.2mn, in line with our expectation of OMR 774mn. For FY23, revenue grew 10% YoY to OMR 2,942.7mn driven by strong revenue performance by Zain group (+10.9%) as well as the domestic market (+7.3%). The domestic revenue growth has mainly come from wholesale transit voice revenue and device revenue. Retail revenue growth is contributed by mobile postpaid revenue and fixed broadband revenue which increased by 10.2% and 4.2% respectively. 


4Q23 EBITDA slipped YoY and QoQ basis, in line with our expectations                                                                                                       

For 4Q23, the company’s EBITDA dropped by 6% YoY to OMR 259.0mn, in line with our expectations of OMR 271mn. Net profit dropped 23% YoY and 21% QoQ to OMR 64.6mn, which missed our expectations of OMR 89.7mn. For FY23, the company’s EBITDA grew by 4.1% to OMR 1,039.8mn while net profit increased by 13.1% to OMR 315.5mn. For Oman business, EBITDA and net income decreased by 1% and 26% on YoY basis to reach OMR 168.6mn and OMR 63.3mn, respectively, during FY23. Excluding the gain on Tower sale in FY22, the company managed to register a net income growth of ~10% in FY23 due to stable EBITDA and reduced finance cost. For FY23, Zain group recorded a 5.2% rise in EBITDA and 30.1% growth in net profit.


Maintaining an “Accumulate” rating on the stock                                                                                                                                                                    

We believe contribution from Zain will continue to drive OTEL’s revenues followed by fixed-line broadband and wholesale segment. Also, we expect further upside from ZOI as it will increase the utilization of the company’s assets, reduce the cost base, and open other incremental revenue streams for the company. The completion of Tower sales in KSA and Iraq has helped the company in creating value and efficiencies for the group. Also, the key operations in Iraq, Jordan, and Kuwait are expected to deliver growth in the coming years. Accordingly, we maintain an Accumulate rating on the stock with a previous target price of OMR 1.156.                                                                                                                                                                                                                                                                                                                               


OmanTel is trading at 2024e P/E of 10.4x, representing a 1% discount compared to the historical average P/E of 10.5x. Additionally, EV/EBITDA multiple of 4.4x, based on our FY23 estimate, which represents a 10% discount compared to the historical average EV/EBITDA of 4.9x.