Etisalat and du keep hitting right notes with investors
Stocks have been outperforming wider market all through this year with some ease
The DFM index was up by 0.41 per cent at the close of Tuesday's trading, strongly supported by gains in real estate, construction and financial services sectors. The consumer staples sub-sector was down 3.65 per cent, while ADX was down by 0.14 per cent with losses in industrials, consumer services and telecom stocks.
In spite of a challenging year, the UAE telecom sector fared well, with both Etisalat and du trading up. Etisalat with its 22.49 per cent weightage on ADSMI is up by 11.76 per cent, whereas du - which has a 10.04 per cent weightage on DFM index - is up 10.77 per cent.
In control
Latest earnings suggest Etisalat on a better footing. For the first nine months, Etisalat had consolidated revenues of Dh38.6 billion, a modest 0.5 per cent drop from a year ago. The company did manage to improve its overall cost efficiencies and liquidity, with net profits of Dh7 billion, an increase of 3.7 per cent year-on-year.
The free cash flow was at Dh16 billion, from a 5.1 per cent increase. Etisalat also managed to report a 1 per cent rise in aggregate subscribers, with the current base at 149 million.
Bottom-line heft
du, meanwhile, reported an 11 per cent drop in first nine-month revenues to Dh8.34 billion. On the profitability, it had a 7 per cent gain to total Dh1.39 billion. This resulted in an EPS of Dh0.31 for the first nine months, as compared 2019's Dh0.29. For the current year, du had a dividend yield of 6.16 per cent while Etisalat's is at 4.89 per cent.
All in the connectivity
In a move that will likely benefit the UAE telecom sector - as well as consumer experience - the UAE's telecom regulator designated an additional 500 MHz radio spectrum of 6 GHz band for indoor use. The UAE has thus become the first country in the region to provide such additional frequency.
The moves bodes well for the 'new normal' of work-from-home. Release of additional spectrum will allow faster internet experience for the resident population. With the entire world on the cusp of a digital upgrade, increased investment in telecom infrastructure and better network connectivity is the need of the hour.
The move also bodes well for the telecom players as it will allow them to support the IoT (internet of things) movement and smart devices. At the company level too, both are trying to innovate on their own scale.
Etisalat became the first among its peers to employ blockchain-powered HR credentials for employees. The company had acquired cyber security firm Help AG this year. The move allows Etisalat to provide a more robust offering of IoT, cloud computing, AI and Big Data analytics.
In alliance with Smart Dubai, du was recently signed up by Emirates Integrated Accreditation Centre for its cloud computing requirements. It has also partnered other government agencies, including Ministry of Finance and Dubai Land Department, to offer seamless digital experiences.
All of which will keep these telecom stocks ring true with investors...
- Vijay Valecha is Chief Investment Officer at Century Financial.