Etisalat board approves Dh7.7b share buy-back

Dubai: Etisalat’s board has approved a share buy-back programme of Dh7.7 billion, a move analysts say may be aimed at boosting return on equity given the underperformance of the company’s shares on the Abu Dhabi Securities Exchange (ADX).

The telecommunications company plans to buy back 5 per cent of the paid-up capital or 434.8 million shares, it said in a statement on the ADX website.

This decision is still subject to shareholder approval at the general assembly meeting to be held on March 21.

“This means the management believes the fair value of the stock is significantly below than the market value,” Tariq Qaqish, managing director of asset management at Menacorp told Gulf News.

Etisalat shares have shed 5 per cent since January 2017, compared to a 24 per cent gain in the Dow Jones Industrial Average.

The Abu Dhabi Securities Exchange general index has gained only 5 per cent.

“Weakness in the local market is not helping companies as some are trading below their book value while the international markets are making new highs every day,” Qaqish said, adding “the idea is for companies to generate higher returns on their equity once they decide to reduce the equity base.”

According to analysts, Etisalat may transfer the shares that are bought back into a treasury account, and it would have an option to either cancel the shares or sell them back on the market within a two year time period as per the law.

Etisalat Group reported an annual profit for 2017 of Dh8.44 billion, up from Dh8.42 billion a year earlier, registering an increase of 0.24 per cent. The consolidated revenue for the group fell by 1.33 per cent to Dh51.66 billion last year compared to Dh52.36 billion a year ago.

Shares of Etisalat, which has a market capitalisation of Dh153.498 billion, closed 2.60 per cent higher to Dh17.75 on Tuesday.