Commitment To 5G And Fiber Optics Will Expand B2B And Wholesale Market Potential In Oman

Key Takeaways

• Continued investment in 5G and fiber optics infrastructure could boost revenue growth in B2B and international wholesale markets.
  
• Focus on cost efficiency and high-margin business lines is expected to improve net margins and profitability.
  
• Increased competition and declining mobile performance threaten revenue growth, while network expansion costs may stress financial flexibility and elevate debt levels.

Catalysts

Develops, operates, and maintains mobile and fixed telecommunications services in the Sultanate of Oman.

• Continued investment in digital transformation and infrastructure, including 5G and fiber optics, suggests potential for revenue growth in B2B and international wholesale markets.
  
• Strategic focus on cost efficiency programs and high-margin business lines like international wholesale and data centers is expected to improve net margins and overall profitability.
  
• Expansion of data center occupancy and growth in cloud services through data2cloud could significantly enhance revenue and margins, benefiting earnings.
  
• The commitment to strengthening the 5G network and fixed-line offerings may drive higher ARPU and customer retention, positively impacting revenue and long-term earnings.
  
• Management's focus on cost control and operational efficiencies, alongside favorable economic indicators in Oman, may lead to improved earnings and strengthened financials.

Omani Qatari Telecommunications Company SAOG Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Omani Qatari Telecommunications Company SAOG's revenue will decrease by 0.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.7% today to 5.3% in 3 years time.
• Analysts expect earnings to reach OMR 13.5 million (and earnings per share of OMR 0.02) by about April 2028, up from OMR 11.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.2x on those 2028 earnings, up from 9.2x today. This future PE is greater than the current PE for the OM Wireless Telecom industry at 9.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 21.0%, as per the Simply Wall St company report.

Omani Qatari Telecommunications Company SAOG Future Earnings Per Share Growth

Risks

• The company's revenue showed a year-on-year decline of 2.9% due to lower mobile segment performance, indicating potential challenges in sustaining revenue growth. [Revenue]
  
• There is continued pressure on the mobile side and a decline in ARPU (Average Revenue Per User), which could affect the company's ability to maintain margins. [Net Margins]
  
• Vodafone's transition to its own network from using Ooredoo's network could lead to a further decline in fixed and wholesale revenue streams, adding uncertainty to future earnings. [Earnings]
  
• Increased competition in the telecom market, with several operators serving a small population, might further pressure core business lines and could impact profitability. [Net Margins]
  
• The increase in capital expenditures for expanding the network, particularly in 5G and other infrastructure projects, might lead to higher debt levels and stress the company's cash flow and financial flexibility. [Earnings]

Valuation

• The analysts have a consensus price target of OMR0.318 for Omani Qatari Telecommunications Company SAOG based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of OMR0.38, and the most bearish reporting a price target of just OMR0.24.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be OMR257.0 million, earnings will come to OMR13.5 million, and it would be trading on a PE ratio of 27.2x, assuming you use a discount rate of 21.0%.
• Given the current share price of OMR0.16, the analyst price target of OMR0.32 is 48.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.