Post on 20-Mar-2018
CFA Institute Research ChallengeHosted by
CFA Society Bahrain
Prepared byAhlia University
Table of ConTenTs
Highlights ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������3
Business Description ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������4Expanding broadband Services ������������������������������������������������������������������������������������������������������������������������������������������������������������������������4Revenue ������������ ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������4Expense �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������4Management �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������4Shareholders ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������4
Industry Overview and Competitive Positioning ����������������������������������������������������������������������������������������������������������������������������5Bahrain Economic Performance �����������������������������������������������������������������������������������������������������������������������������������������������������������������������5Bahrain Telecom Sector overview �������������������������������������������������������������������������������������������������������������������������������������������������������������������5Mobile �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������5Fixed Lines ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������5Broadband ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������6GCC Peer Review analysis �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������6Porters Five Forces Analysis ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������7
Investment Summary ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������8High dividend yield with a steady dividend payout history �����������������������������������������������������������������������������������������������������������8Low debt and strong cash flow generating ����������������������������������������������������������������������������������������������������������������������������������������������8Financial Position �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������8Possible risks ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������8
Valuation �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������9DDM Valuation �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������9Required rate of return (Cost of equity) �������������������������������������������������������������������������������������������������������������������������������������������������������9Terminal Value ��������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������9DCF Valuation ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������9Revenue ���������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������9Capital Expenditure (CAPEX) �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������9Weighted Average Cost of Capital ���������������������������������������������������������������������������������������������������������������������������������������������������������������10Terminal Value �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������10Relative Valuation ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������10Weighting of the models �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������10
Financial Analysis �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������10Revenue estimates �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������10Cost estimates �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������10Debt to equity �����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������11DuPont Analysis �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������11Activity & Liquidity �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������11
Investment Risk ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������12Industry risk ����������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������12Company specific risk ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������12
Appendix �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������13
Refrences �������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������27
3
BASIC InFORmAtIOn
Company : Zain Bahrainticker symbol : ZAINBHPrimary Exchange1- Bahrain Bourse (BHB)target Price : BD 0�262 Current Price : BD 0�202Upside (%) : 29�7%Recommendation : BuyDecision
DAIly StOCk PRICES (BHD) - FIg.1
OVERVIEw
Telecommunication regulatory authority issued an individual mobile telecommunication license to Zain Bahrain on 22nd, April, 2003�
Zain is the second largest telecommunication company in the Kingdom of Bahrain� It had 724,548 subscribers in 2003�Zain has many branches all over the kingdom, almost in all the malls and areas� Recently, Zain launched the 4G LTE Network� As well as, it was the first to launch a nationwide combined EDGE and 3G network in the Middle East in 2003, also, the first to launch mobile TV services in 2004�
Zain provides many products and services; the mobile is having 76�6% of the total revenue, Interconnection 4�2%, Fixed Wireless 10�2% and other product and services 9�1%�
HigHTligHTs
We issue a BUY recommendation with target price BHD0�262 in which it reflects 29�7% upside from current price BHD0�202 on January 15, 2015� Our decision is based on three valuation models: Dividend Discount Model, Discounted Cash Flow Model and Price Relative Model with a weight of 40:40:20�
High dividend yield with a steady dividend payout history:
Compare to other GCC and Global telecom companies, the Dividends pay-out ratio of Zain Bahrain is the highest� Indeed, with a dividend pay-out ratio of approximately 80% and dividend yield of 8%, Zain Bahrain has surpasses the average dividend yield of the GCC telecom companies of 5%�
low debt and strong cash flow generating:
Zain Bahrain has a strong cash flow generation at operation levels along with consistent operating cash flows history� In spite of the fact that Zain Bahrain has spent greatly on its CAPEX and sustains the high dividend payout, Zain has low debt to equity ratio which stand at 43%�
2011 performance :
The revenue was decreasing and the cost of revenue was thehighest among all the years but the DMO was the lowest�
2012 performance :
Was an improbable year in Zain’s history regarding its revenue to fall under the maximum level, while Distribution, marketing at operation expense has increased rapidly� In addition, the cost of revenue started to decrease sharply�
2013 performance :
As a starting of a new year the revenues hit the peak whereas, the Distribution, marketing at operation expense was constantly rising as well as, the cost of revenue was in the process of falling� Moreover, the amortization increased by 2%�
2014 performance :
The ongoing competition for Zain in this year started with both revenues gains and costs to fall down� Nevertheless, the Distribution, marketing at operation expense has reduced again� Despite, the growth of amortization
increased in previous year it began to diminish by 1�1%�
( Source : Bahrain Bourse )
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ZAIn REVEnUES - FIg.2
ZAIn ExPEnSES - FIg.3
mAjOR SHAREHOlDER PAttERn BEFORE IPO - FIg.4
business DesCripTion
Zain Bahrain is the second telecommunication operator lunched in Bahrain, providing Mobile and Fixed telecommunications and internet services� Zain Bahrain was granted the mobile license on April 19, 2003, by Bahrain Telecommunications Regulatory Authority (TRA)� The license term is 15 years with a right to apply to TRA for a renewal�
Expanding broadband Services
Zain provides a very good flexibility in the service, the customer can decide the way of using the telecom system: more data is needed or more talk time� Zain made it possible to go beyond voice services, into mobile data sharing by using the 3G, 3�5G and 4G networks�
Zain have a robust business sector service called BLife , that provide tailor-made solutions for any business� For example, Zain was the first to launch Virtual Private Network for businesses; the teams are linked by Zain and have a cost-effective and efficient communications network�
The first nation-wide WIMAX networks in the world in 2007 and launching the 4G LTE (Long-Term Evolution) network in 2013� This means Zain’s customers are taking advantage of the developments in Bahrain�
Revenue
Zain receives 76�6% of the total revenue from Mobiles, which is the primary source of the revenue� 10�2% is gained from the Fixed Wireless, 4�2% from Interconnection (Calls to other telecommunication companies), while 9�1% is generated from other products and services, such as: selling mobiles, mobile accessories, TVs and others� (Figure 2)
Expense
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization� (Figure 3)
management
The company’s management is led by Mr� Scott Gegenheimer who is the Chief Executive Officer (CEO) of the company� The CEO brings along strong experience in Zain from a number of telecom operators in MENA region and USA� Since inception, Zain management has applied the right competitive strategies which enable it to compete efficiently in Bahrain�
The company’s goal is to be the best mobile telecommunication service provider in the Kingdom of Bahrain, by bringing innovation, quality of coverage and services, and a perfect customer service experience in anytime and anywhere� The company manages to grab a market share of 32�7% of the total mobile subscriber through the launch innovative and new services in the market�
Shareholders
Zain Bahrain is formed as a closed joint stock company by Mobile Telecommunication Company K�S�C (63�00% pre IPO), Shaikh Ahmed Bin Ali Alkalifa (18�52% pre IPO) and other minor shareholders�
Zain Bahrain underwent an IPO on Bahrain Bourse in September 2014, which raised BD 4�8m for 15% of its shares� (Figure 4)
( Source : Zain Bahrain )
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tElECOm REVEnUE - FIg.5
mARkEt mOBIlE SUBSCRIBER - FIg.6
COmPAnIES SUBSCRIBERS - FIg.7
ZAIn SERVICES REVEnUES - FIg.8
inDusTry overview anD CompeTiTive posiTionaing
Bahrain Economic Performance
The Bahraini economy experienced a significant acceleration in its headline growth in 2013 when the Kingdom’s real GDP expanded by 5�3% as compared to 3�4% in 2012� In contrast to the 15�3% pace of expansion in the hydrocarbons sector, Bahrain’s non-oil economy expanded by a fairly modest 3�0%� This growth pattern is likely to be significantly changed this year due to significant decrease in oil price�
Bahrain telecom Sector overview
Kingdom of Bahrain has 20 different companies that provide different services in telecommunication sector, in which it has a gross annual turnover of BHD423 million in year 2013, which it shows an increase by 3�5% from the previous year� The revenues for telecommunication sector counted as 4% from total Gross Domestic Product of Kingdom of Bahrain, in which it equal to 1�31 million from the total 32�79 million� (TRA)
mobile:
Mobile service is the biggest part from the total revenue from telecommunication sector (Figure 5) and it is continuously growing, in 2011 there were 1�7 million subscribers and it increased by 23�5% to reach 2�1 million subscribers� In the end of 2013 the number of subscriber reached to 2�21 with a penetration level of 173%, and the end of the third quarter of 2014 there were 2�41 subscribers with penetration level of 183% that shows a growth of 9�05% in number of subscriber (Figure 6)�
From (Figure 7) we can know that Zain Bahrain has a 32�7% of the total mobile subscriber as it is their market share and they will have approximately 0�788 million subscriber from the total 2�41 at the end of the third quarter of 2014 and the rest will be between Batelco 44% and Viva 23�3% as they are the only mobile operator in Kingdom of Bahrain� In the end of the third quarter of 2014, the percentage of clients who has a prepaid subscription is 79%, the rest is postpaid subscription� (Appendix F)
Zain Basically is losing the subscribers in past few quarters and it explains that Batelco has an advantage from that, in which in the first quarter of 2014 Batelco has 40�9% market share and it increased to reach 44% in the second quarter of 2014, however Zain has a market share of 34�9% in the first quarter of 2014 and it decreased to 32�7% in the second quarter of 2014� This figure explains the change in the market share of the three operators in the past few quarters� (Appendix F)
As it shown the mobile service is large portion of Zain revenue with 78�1% in which it other services have proportion of 21�9%� (Figure 8)
Fixed lines:
Fixed lines recently faces a reduction in revenues, because of the big number of users that switches from using the fixed lines to mobile which it reflects how people are really interested in the change in technology� At the end of the third quarter of 2014 there were approximately 246,000 fixed lines in Bahrain with a penetration of 19% which it depreciates from the last two years�
( Source : TRA )
( Source : TRA )
( Source : Team Calculation )
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BROADBAnD SUBSCRIBERS - FIg.9
mARkEt PROPORtIOn OF BROADBAnD - FIg.10
nEt PROFIt OF PEER COmPAnIES - FIg.11
gCC DEmOgRAPHIC - FIg.12
Broadband:
Broadband services basically is going through a growth since 2012, in the number of subscriber we can notice this growth starting from 2012 which there was almost 1�26 million subscriber, however in 2013 the number of subscriber face a growth of 31% to reach 1�64 million� In the third quarter of 2014 there were 1�84 million subscribers with a growth of 12% and penetration level of 140%� (Figure 9)
Mobile broadband subscribers were represent 91% of the total broadband subscribers in Bahrain in the third quarter of 2014, fixed wired broadband has 3% of the total subscribers and it seems that it is growing in this time because of the deregulation on this part and the attractive pricing policies that Batelco offers� Fixed wireless broadband has 6% from total subscribers� (Figure 10)
gCC peer review analysis
GCC countries growing in telecommunication sector since the end of 2008, in which the economic for those counties is increasing and another main cause is the deregulation in which it makes easier to have more competitors in this sector and at the same time to grow�
The mobile penetration consists of 177% which reflects the growth in population� from an economic point of view we estimate that the growth will be in its peak in Qatar in 2022 because they will host the world cup at that time, the second country that we estimate it will expand its growth is United Arab of Emirates as they have the global event EXPO 2020, in which we can say that in this time that the economic for the GCC countries is expanding as they are part from it� (Figure 12)
In the telecommunication sector we can see that the Saudi Telecommunication Company (STC) has the highest income comparing with other operators in GCC countries with a net income of BHD 994,736 at the end of 2013 as it is increased by 36% comparing with the previous year� Etisalat takes the second place with net income of BHD 726,628 at the end of 2013 where an increase of 5% occurs from 2012� (Figure 11)
On the other hand Zain KSA recorded a net loss of BHD 165,979 making it in the last of the list of GCC telecommunication companies with not a big change comparing with the previous year� Vodafone Qatar takes places directly before Zain KSA with a net loss of BHD 29,700 at end of 2013, however we can see the big jump that it happened by 36�8% in which it decreases it losses amounted by net loss of BHD 46,966 in 2012�
( Source : TRA )
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FORCES AnAlySIS - FIg.13
porTers five forCes analysis
Barging Power of Buyers
Telecommunication companies provide almost same products and services which do not vary much� Therefore, customers have many choices and they are seeking for low price with reliable services� The bargaining power of residential buyers is very high because of low switching cost and availability of the substitute while the bargaining power of business buyers is medium because their products and services are customized� Since residential customer is greater than business customer that make bargaining power of buyers to be high�
Barging Power of Suppliers
In order to provide services telecommunication companies need telecom equipment and devices (broadband switching, mobile handsets, routers, etc�)� We believe that the bargaining power of suppliers is low for two reasons 1) there are many telecom equipment suppliers 2) Zain Group which operate in more than 5 countries is a big buyer
threat of new entrants
The likelihood of new entrants in Bahrain market is low due to 1) Bahrain market is small which has population less than 1�5 million 2) Bahrain already has 3 mobile companies 3) telecommunication required large economies of scale and required hug capital to construct the infrastructure�
threat of substitute (HIgH)
The customer has the choice to choose between Zain and other telecom operators which provide almost the same products and services� In addition, the new rule by the Telecommunications Regulatory Authority (TRA) which allows customers to easily shifts from one Telecom Company to another and keep the same mobile number�
Intensity of competitive rivalry (HIgH)
Bahrain witnesses a heavy competition environment and price war between the three major mobile telecommunications operators (Batelco, Zain, and Viva)� Another competition come non-mobile telecommunications operators such as Menatelecom and Lightspeed which provide a specific service such as Broadband Internet�
(ReFeR To FiguRe 13 FoR A visuAl RepResenTATion)
8
Capex to CFO - FIg.14
Valuation methods
To reach to the target price, we chose to apply three valuation models namely Dividend Discount Model (DDM), Discounted Cash Flow Model (DCF) and relative valuation model in the level of importance of 40:40:20 respectively� Under relative valuation model we applied three multiples (P/E, P/BV, and P/FCFF)�
invesTmenT summary
We issue BUY recommendation on Zain Bahrain with a target price of BD 0�262 this offer 29�7% upside from the current price level of BD 0�202 on January 15, 2015�
High competition in Kingdom of Bahrain makes any of the three operators react fast to the changes that occur in the market� The changes related to technology, introducing offers, new packages, or perhaps lowering prices could have their impact on the company profitability and on the price itself�
High dividend yield with a steady dividend payout history:
Zain Bahrain is among the highest dividend yields companies in comparison to GCC and Global telecom companies�
Zain Bahrain has a dividend payout ratio of approximately 80%� Dividend yield for Zain is around 8% which is higher than the GCC telecom company’s average of 5%�
low debt and strong cash flow generating:
Zain Bahrain has a strong cash flow generation at operation levels along with consistent operating cash flows history�
In spite of the fact that Zain Bahrain has spent greatly on its CAPEX and sustains the high dividend payout, Zain has low debt to equity ratio which stands at 43%� (Figure 14)
Financial Position
We assumed in our projection that Zain Bahrain will have an increase in the revenues equal to 6%, this assumption is based on the growing demand for data usage and growth in fixed and mobile broad band subscribers�
This will lead to increase the ability of generating revenues and maintain a strong financial position� (Appendix A)
Possible risks
Our forecasting and assumption where based on fair competitive environment between the three main players (Zain, Batelco, Viva) any unexpected price war may influence the forecasted variables� Indeed, the forecasted variables may face one of the following risks: regulation, economic, competition, politic, credit and management risk�
( Source : Company Data, Team Estimates )
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DDm - FIg.15
CAPm - FIg.16
valuaTion
To derive our target price for the Zain Bahrain we have followed the dividend discount model (DDM), discounted free cash flow (DCF) and the relative valuation method in the level of importance of 40:40:20 respectively�
DDm Valuation
We applied dividend discount model to evaluate Zain Bahrain common share� This model is suitable as Zain has stable dividend ratios in addition it is considered one of the highest dividend yields in comparison to other companies in the region� Zain has a dividend payout ratio of approximately 80%� Dividend yield for Zain is around 8% which is higher than the regional peer companies’ average of 5%� We used two stages dividend discount model to expect Zain fair value� The first stage include a detailed year to year forecast up to 2019 while we assumed a constant growth rate for the terminal value in stage two� We found that target price is BD� 0�231� (Figure 15)
Required rate of return (Cost of equity)
Cost of equity is 12% and it was calculated through Capital Asset Pricing Model (CAPM) as it is the most common model used to measure the expected return� Risk free rate was 5% based on a 10 years government bond� Two methods have been used to measure beta: industry average of all telecommunication companies as well as market model� Nevertheless, we got the same beta under both methods which was 1�02� Since, we do not have historical prices of Zain we used Batelco historical prices (two years, daily basis) to calculate beta and then adjusted for Zain’s leverage� Market return was 11�3% calculated through the average market return� (Figure 16)
terminal Value
The growth in Zain Bahrain is 2% and it is based on the return on equity which it was 12%; we derived the retention rate 20% from dividend payout ratio� The terminal value discounted by using cost of equity of 12% calculated earlier�
DCF Valuation
We also applied Discounted Cash Flow to the firm (DCF)� Under this model we arrive at a price of BD 0�295 for the fair value of the share� The rationales behind using this model are that Zain Bahrain has a strong cash flow generation at operating level and low debt� The debt to assets for Zain stands at 22�45%� (Appendix H)
Revenue
We estimate that there will be an increase in the revenues equal to 6% due to introducing 4G services in addition to Zweet Up platform which will help increasing the market share� The population of Kingdom of Bahrain is growing by 3% which will affect and increase the number of subscribers� By having the latest technology in the market, Zain will be up to date with customers’ requirements, like the increase in Data usage through apps such as Skype, Viper and Tango, making an alternative of using Voice over IP�
Capital Expenditure (CAPEx)
Zain Bahrain capital expenditure has been high compared to its revenue in the past years and it will persist to next year as well� One of the costly requirements to Zain Bahrain is being up to date with the latest technology because of the competitive market environment�
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DD M Valuation 2014
2015 F
2016 F
2017 F
2018 F
2019 F
Period
1 2 3 4 5
EPS 0.016 0.023 0.025 0.027 0.029 0.031 Dividend payout ratio 80% 80% 80% 80% 80% 80% Dividend per share 0.013 0.018 0.020 0.021 0.023 0.025 Discount factor
0.892 0.796 0.711 0.634 0.566
Terminal Value 0.250
Present Value 0.142 0.016 0.016 0.015 0.015 0.014 Fair Value 0.231
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To derive our target price for the Zain Bahrain we have followed the dividend discount model (DDM), discounted free cash flow (DCF) and the relative valuation method in the level of importance of 40:40:20 respectively.
DD M Valuation
We applied dividend discount model to evaluate Zain Bahrain common share. This model is suitable as Zain has stable dividend ratios in addition it is considered one of the highest dividend yields in comparison to other companies in the region. Zain has a dividend payout ratio of approximately 80%. Dividend yield for Zain is around 8% which is higher than the
We used two stages dividend discount model to expect Zain fair value. The first stage include a detailed year to year forecast up to 2019 while we assumed a constant growth rate for the terminal value in stage two. We found that target price is BD. 0.231. (appendix XX)
Required rate of return (Cost of equity)
Cost of equity is 12% and it was calculated through Capital Asset Pricing Model (CAPM) as it is the most common model used to measure the expected return. Risk free rate was 5% based on a 10 years government bond. Beta is calculated as 1.02, in which we calculated Batelco Beta by using market model and then we adjust it for Zain capital structure. Market return was 11.3% calculated through the average market return. (appendix XX)
Terminal Value
The growth in Zain Bahrain is 2% and it is based on the return on equity which it was 12%; we derived the retention rate 20% from dividend payout ratio. The terminal value discounted by using cost of equity of 12% calculated earlier.
D C F Valuation
We also applied Discounted Cash Flow to the firm (DCF). Under this model we arrive at a price of BD 0.295 for the fair value of the share. The rationales behind using this model are that Zain Bahrain has a strong cash flow generation at operating level and low debt. The debt to assets for Zain stands at 22.45%. (appendix XX)
Revenue
We estimate that there will be increase in the revenues equal to 6% due to introducing 4G services in addition to Zweet Up platform which will help increasing the market share.
Capital Expenditure (C APE X)
Zain Bahrain capital expenditure has been high compared to its revenue in the past years and it will persist to next year as well. One of the costly requirements to Zain Bahrain is being up to date with the latest technology because of the competitive market environment. Due to the continuous technology changes in the market; Zain Bahrain capital expenditure increases over the time. This will result in fluctuations in the free cash flow. As Zain Bahrain has introduced 4G service, we assumed that the capital expenditures will decrease by 5% over the three next years and then there will be another new technology in the market that will lead to increase the capital expenditure by 30%, while a decrease by 5% will be resulted in the following years due to another available technology( ).
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DD M Valuation 2014
2015 F
2016 F
2017 F
2018 F
2019 F
Period
1 2 3 4 5
EPS 0.016 0.023 0.025 0.027 0.029 0.031 Dividend payout ratio 80% 80% 80% 80% 80% 80% Dividend per share 0.013 0.018 0.020 0.021 0.023 0.025 Discount factor
0.892 0.796 0.711 0.634 0.566
Terminal Value 0.250
Present Value 0.142 0.016 0.016 0.015 0.015 0.014 Fair Value 0.231
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To derive our target price for the Zain Bahrain we have followed the dividend discount model (DDM), discounted free cash flow (DCF) and the relative valuation method in the level of importance of 40:40:20 respectively.
DD M Valuation
We applied dividend discount model to evaluate Zain Bahrain common share. This model is suitable as Zain has stable dividend ratios in addition it is considered one of the highest dividend yields in comparison to other companies in the region. Zain has a dividend payout ratio of approximately 80%. Dividend yield for Zain is around 8% which is higher than the
We used two stages dividend discount model to expect Zain fair value. The first stage include a detailed year to year forecast up to 2019 while we assumed a constant growth rate for the terminal value in stage two. We found that target price is BD. 0.231. (appendix XX)
Required rate of return (Cost of equity)
Cost of equity is 12% and it was calculated through Capital Asset Pricing Model (CAPM) as it is the most common model used to measure the expected return. Risk free rate was 5% based on a 10 years government bond. Beta is calculated as 1.02, in which we calculated Batelco Beta by using market model and then we adjust it for Zain capital structure. Market return was 11.3% calculated through the average market return. (appendix XX)
Terminal Value
The growth in Zain Bahrain is 2% and it is based on the return on equity which it was 12%; we derived the retention rate 20% from dividend payout ratio. The terminal value discounted by using cost of equity of 12% calculated earlier.
D C F Valuation
We also applied Discounted Cash Flow to the firm (DCF). Under this model we arrive at a price of BD 0.295 for the fair value of the share. The rationales behind using this model are that Zain Bahrain has a strong cash flow generation at operating level and low debt. The debt to assets for Zain stands at 22.45%. (appendix XX)
Revenue
We estimate that there will be increase in the revenues equal to 6% due to introducing 4G services in addition to Zweet Up platform which will help increasing the market share.
Capital Expenditure (C APE X)
Zain Bahrain capital expenditure has been high compared to its revenue in the past years and it will persist to next year as well. One of the costly requirements to Zain Bahrain is being up to date with the latest technology because of the competitive market environment. Due to the continuous technology changes in the market; Zain Bahrain capital expenditure increases over the time. This will result in fluctuations in the free cash flow. As Zain Bahrain has introduced 4G service, we assumed that the capital expenditures will decrease by 5% over the three next years and then there will be another new technology in the market that will lead to increase the capital expenditure by 30%, while a decrease by 5% will be resulted in the following years due to another available technology( ).
10
wACC - FIg.17
Relative Valuation - FIg.18
models weight - FIg.19
Revenue Estimation - FIg.20
Due to the continuous technology changes in the market; Zain Bahrain capital expenditure increases over the time� This will result in fluctuations in the free cash flow�
As Zain Bahrain has introduced 4G service, we assumed that the capital expenditures will decrease by 5% over the three next years and then there will be another new technology in the market that will lead to increase the capital expenditure by 30%, while a decrease by 5% will be resulted in the following years due to another available technology�
weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7�32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48�31%� Cost of debt equals to 2�9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51�69%� (Figure 17)
terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7�32% with the growth rate of 2%�
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price� Then, we matched each of these ratios with regional telecom companies’ median ratios� The final multiple price has been arrived by applying an average on the fair price arrived by each of the multiples� (Figure 18)� The fair price arrived by the relative valuation method for the Zain is BD 0�263�
weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively� The target price for Zain is BD 0�262 with an expected upside of 29�7%� (Figure 19)
finanCial analysis
Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio�
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers� The total revenue is expected to increase by approximately 6% annually over the five years� At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD� 100,728,350� The sales to asset and sales to fixed asset ratio is expected to increase from 0�61x & 1�25x in 2014 to 0�66 & 1�39 in 2015� (Figure 20)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization�
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Valuation M ethod Weight
Fair Value
Weighted Avg.
DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262
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Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)
Terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom
the fair price arrived by each of the multiples. (appendix XX)
The fair price arrived by the relative valuation method for the Zain is BD 0.263.
Weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)
=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.
Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net
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Valuation M ethod Weight
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DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262
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Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)
Terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom
the fair price arrived by each of the multiples. (appendix XX)
The fair price arrived by the relative valuation method for the Zain is BD 0.263.
Weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)
=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.
Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net
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Valuation M ethod Weight
Fair Value
Weighted Avg.
DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262
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Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)
Terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom
the fair price arrived by each of the multiples. (appendix XX)
The fair price arrived by the relative valuation method for the Zain is BD 0.263.
Weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)
=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.
Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net
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Valuation M ethod Weight
Fair Value
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DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262
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Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)
Terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom
the fair price arrived by each of the multiples. (appendix XX)
The fair price arrived by the relative valuation method for the Zain is BD 0.263.
Weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)
=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.
Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net
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Valuation M ethod Weight
Fair Value
Weighted Avg.
DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262
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Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)
Terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom
the fair price arrived by each of the multiples. (appendix XX)
The fair price arrived by the relative valuation method for the Zain is BD 0.263.
Weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)
=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.
Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net
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Valuation M ethod W eight
Fair Value
Weighted Avg.
DDM Method 40% 0.230 0.092 DCF Method 40% 0.295 0.118 RV Method 20% 0.263 0.0526 Target Price BD 0.262
!
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Weighted Average Cost of Capital
Weighted average cost of capital (WACC) is equal to 7.32% where cost of equity equal 12%, which was calculated using CAPM as mentioned earlier, and the weight of equity equal to 48.31%. Cost of debt equals to 2.9% based on current loan taken by Zain Bahrain, and the weight of debt equal to 51.69% ( ). (appendix XX)
Terminal Value
The terminal value of the forecasted free cash flow takes in consideration the weighted average cost of capital (WACC) 7.32% with the growth rate of 2%.
Relative Valuation
Under this approach we applied three multiples (P/E, P/BV, and P/FCFF) to estimate the value of Zain Bahrain Fair price. Then, we matched each of these ratios with regional telecom
the fair price arrived by each of the multiples. (appendix XX)
The fair price arrived by the relative valuation method for the Zain is BD 0.263.
Weighting of the models
We arrive at our target price for Zain Bahrain following the dividend discount model, discounted free cash flow model and the relative valuation approach in the level of importance of 40:40:20 respectively. The target price for Zain is BD 0.262 with an expected upside of 29.7%. (appendix XX)
=0>+>70+9$">+9K.0.$Zain Bahrain has three important indicators in its financial report: 1) low debt 2) strong cash generation 3) high dividend payout ratio.
Revenue estimates
The primary revenue driver for Zain is the growth in demand for data usage and growth in fixed and mobile broadband subscribers. The total revenue is expected to increase by approximately 6% annually over the five years. At the end of year 2015 the revenue estimate is BD 79,786,280 and by 2019 it will reach BD. 100,728,350. The sales to asset and sales to fixed asset ratio is expected to increase from 0.61x & 1.25x in 2014 to 0.66 & 1.39 in 2015. (appendix XX)
Cost estimates
The four major cost components are cost of goods sold, distribution &marketing and operation expenses, general and administrative expenses, and depreciation and amortization.
Distribution &marketing and operation expenses are critical to the net income. The distribution &marketing and operation expenses as a percentage to total cost stood at 33%. (appendix XX)
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers. The ratios explain the changes occur to the net
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11
Cost Estimates - FIg.21
Debt to equity
Debt to equity ratio is 0% from 2010 to 2012while this ratio reaches 38% in 2013� In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019� Zain Bahrain has important indicators in which it has ratios that reflect the performance, in addition to the investments they made to develop strategies that it will come up with widening the market share and attracting more customers� The ratios explain the changes occur to the net income after applying the depreciation strategies in addition to the Capital expenditure and other recent facts and compare it with past and the forecasted ratios based on the data forecasted in the financial statements� (Appendix e)
DuPont Analysis
Looking at the entire 10 years period, ROE has been significantly decline from 43�7% in 2009 to 16�5% in 2019F� This can be viewed as troublesome when we note that total assets and revenue have increased during the 10 years� Two potential areas that we should investigate are 1) capital structure and 2) expenses� Since decrease in ROA is greater than decrease in ROE, we should be concerned that Zain is increasing its liability sources of funding, thereby increasing its leverage to keep its ROE less effected� This can cause serious problems when Zain has negative net income� Since change in operating profit is greater than change in revenue, we indicate that the degree of operating leverage is high which result in high business risk� Therefore, Zain has high proportion of fixed cost� This can cause serious problems when revenue decreases� (Figure 22)
Activity & liquidity
In most years Zain Bahrain has a positive net working capital, which it reflects, the ability to cover their debt� Zain Bahrain has an average of 98 days in collecting the amounts in account receivable, and average of 538 days to pay their outstanding amounts in account payable, where we can notice that Zain Bahrain is receives the money as fast as possible and pay the outstanding amounts as slow as possible� (Appendix e)
ROE analysis (Fig 22)
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income after applying the depreciation strategies in addition to the Capital expenditure and other recent facts and compare it with past and the forecasted ratios based on the data forecasted in the financial statements.
DuPont Analysis
Looking at the entire 10 years period, ROE has been significantly decline from 43.7% in 2009 to 16.5% in 2019F. This can be viewed as troublesome when we note that total assets and revenue have increased during the 10 years. Two potential areas that we should investigate are 1) capital structure and 2) expenses.
Since decrease in ROA is greater than decrease in ROE, we should be concerned that Zain is increasing its liability sources of funding, thereby increasing its leverage to keep its ROE less effected. This can cause serious problems when Zain has negative net income.
Since change in operating profit is greater than change in revenue, we indicate that the degree of operating leverage is high which result in high business risk. Therefore, Zain has high proportion of fixed cost. This can cause serious problems when revenue decreases. (appendix XX)
Activity & L iquidity
In most years Zain Bahrain has a positive net working capital, which it reflects, the ability to cover their debt. Zain Bahrain has an average of 98 days in collecting the amounts in account receivable, and average of 538 days to pay their outstanding amounts in account payable, where we can notice that Zain Bahrain is receives the money as fast as possible and pay the outstanding amounts as slow as possible.
Capital structure
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. The level of debt increased in 2013 and 2014 because of the improvement they made in the service, in addition to introducing the 4G service. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
8-&4! 9:.! 9:;! <=>! ;,:! .>!$!#+H8 !I#('8 !I!*&8 !I##%8 !I)&'8 #I+(%8$!#*H8 !I#'+8 !I!*#8 !I##$8 !I)$$8 #I+)'8$!#)H8 !I#'%8 !I!))8 !I##!8 !I)!!8 #I+*(8$!#(H8 !I#&(8 !I!)%8 !I#!*8 !I())8 #I++(8$!#'H8 !I#%+8 !I!(+8 !I#!(8 !I(''8 $I!!'8$!#&8 !I#!$8 !I!&+8 !I!*!8 !I(#'8 $I!)&8$!#%8 !I#!$8 !I!'!8 !I!(+8 !I)$*8 $I!$%8$!#$8 !I##+8 !I!)!8 !I!*)8 !I)++8 #I)!%8$!##8 !I$$$8 !I#&(8 !I#(+8 !I*($8 #I'$!8$!#!8 !I%&'8 !I$%$8 !I$&(8 !I+&%8 #I&*)8$!!+8 !I&%)8 !I$+#8 !I%!!8 !I+(*8 #I'!%8
!
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!"#$%&'(!"#$%&'(!)&*&+!,-&$!./*0$&*-/(
10234-!567!"#/*!./*0$&*-/!
income after applying the depreciation strategies in addition to the Capital expenditure and other recent facts and compare it with past and the forecasted ratios based on the data forecasted in the financial statements.
DuPont Analysis
Looking at the entire 10 years period, ROE has been significantly decline from 43.7% in 2009 to 16.5% in 2019F. This can be viewed as troublesome when we note that total assets and revenue have increased during the 10 years. Two potential areas that we should investigate are 1) capital structure and 2) expenses.
Since decrease in ROA is greater than decrease in ROE, we should be concerned that Zain is increasing its liability sources of funding, thereby increasing its leverage to keep its ROE less effected. This can cause serious problems when Zain has negative net income.
Since change in operating profit is greater than change in revenue, we indicate that the degree of operating leverage is high which result in high business risk. Therefore, Zain has high proportion of fixed cost. This can cause serious problems when revenue decreases. (appendix XX)
Activity & L iquidity
In most years Zain Bahrain has a positive net working capital, which it reflects, the ability to cover their debt. Zain Bahrain has an average of 98 days in collecting the amounts in account receivable, and average of 538 days to pay their outstanding amounts in account payable, where we can notice that Zain Bahrain is receives the money as fast as possible and pay the outstanding amounts as slow as possible.
Capital structure
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. The level of debt increased in 2013 and 2014 because of the improvement they made in the service, in addition to introducing the 4G service. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
8-&4! 9:.! 9:;! <=>! ;,:! .>!$!#+H8 !I#('8 !I!*&8 !I##%8 !I)&'8 #I+(%8$!#*H8 !I#'+8 !I!*#8 !I##$8 !I)$$8 #I+)'8$!#)H8 !I#'%8 !I!))8 !I##!8 !I)!!8 #I+*(8$!#(H8 !I#&(8 !I!)%8 !I#!*8 !I())8 #I++(8$!#'H8 !I#%+8 !I!(+8 !I#!(8 !I(''8 $I!!'8$!#&8 !I#!$8 !I!&+8 !I!*!8 !I(#'8 $I!)&8$!#%8 !I#!$8 !I!'!8 !I!(+8 !I)$*8 $I!$%8$!#$8 !I##+8 !I!)!8 !I!*)8 !I)++8 #I)!%8$!##8 !I$$$8 !I#&(8 !I#(+8 !I*($8 #I'$!8$!#!8 !I%&'8 !I$%$8 !I$&(8 !I+&%8 #I&*)8$!!+8 !I&%)8 !I$+#8 !I%!!8 !I+(*8 #I'!%8
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!"#$%&'(!"#$%&'(!)&*&+!,-&$!./*0$&*-/(
10234-!567!"#/*!./*0$&*-/!
income after applying the depreciation strategies in addition to the Capital expenditure and other recent facts and compare it with past and the forecasted ratios based on the data forecasted in the financial statements.
DuPont Analysis
Looking at the entire 10 years period, ROE has been significantly decline from 43.7% in 2009 to 16.5% in 2019F. This can be viewed as troublesome when we note that total assets and revenue have increased during the 10 years. Two potential areas that we should investigate are 1) capital structure and 2) expenses.
Since decrease in ROA is greater than decrease in ROE, we should be concerned that Zain is increasing its liability sources of funding, thereby increasing its leverage to keep its ROE less effected. This can cause serious problems when Zain has negative net income.
Since change in operating profit is greater than change in revenue, we indicate that the degree of operating leverage is high which result in high business risk. Therefore, Zain has high proportion of fixed cost. This can cause serious problems when revenue decreases. (appendix XX)
Activity & L iquidity
In most years Zain Bahrain has a positive net working capital, which it reflects, the ability to cover their debt. Zain Bahrain has an average of 98 days in collecting the amounts in account receivable, and average of 538 days to pay their outstanding amounts in account payable, where we can notice that Zain Bahrain is receives the money as fast as possible and pay the outstanding amounts as slow as possible.
Capital structure
Debt to equity ratio is 0% from 2010 to 2012 while this ratio reaches 38% in 2013. The level of debt increased in 2013 and 2014 because of the improvement they made in the service, in addition to introducing the 4G service. In our estimates debt to equity ratio of Zain decreases from 41% in 2014 to 35% in 2019.
8-&4! 9:.! 9:;! <=>! ;,:! .>!$!#+H8 !I#('8 !I!*&8 !I##%8 !I)&'8 #I+(%8$!#*H8 !I#'+8 !I!*#8 !I##$8 !I)$$8 #I+)'8$!#)H8 !I#'%8 !I!))8 !I##!8 !I)!!8 #I+*(8$!#(H8 !I#&(8 !I!)%8 !I#!*8 !I())8 #I++(8$!#'H8 !I#%+8 !I!(+8 !I#!(8 !I(''8 $I!!'8$!#&8 !I#!$8 !I!&+8 !I!*!8 !I(#'8 $I!)&8$!#%8 !I#!$8 !I!'!8 !I!(+8 !I)$*8 $I!$%8$!#$8 !I##+8 !I!)!8 !I!*)8 !I)++8 #I)!%8$!##8 !I$$$8 !I#&(8 !I#(+8 !I*($8 #I'$!8$!#!8 !I%&'8 !I$%$8 !I$&(8 !I+&%8 #I&*)8$!!+8 !I&%)8 !I$+#8 !I%!!8 !I+(*8 #I'!%8
!
12
invesTmenT risk
inDusTry risk
Regulation risk (RR)
Telecommunication is considered one of the most regulated and monitored industry� Investments may need to be made in regions despite the fact that it may not always be feasible� In addition, the government may prohibit the companies in this industry from offering some products and services for security and other reasons� Because of continuously evolving nature of this industry, the companies might invest into segments and geographies which may have never been tested before because of the industry�
Economic risk (ER)
Bahrain’s economy depends heavily on the production of oil and its product� Almost 60% of Bahrain’s export receipts are contributed by petroleum production and refining� Additionally, petroleum production and refining constitute about 70% of government revenues� A decline in oil prices will likely slow down the economy and cause a budget deficit which may adversely affect companies�
Competition (COR)
The competition environment has the great impact on prices and sales� Bahrain witnesses a heavy competition environment and price war between the three major mobile telecommunications operators (Batelco, Zain, Viva) which may distort the forecasted sales number�
Political risk (PR)
Political difficulties have an impact on the telecom sector� Zain was not an exception; their sales were affected by the Arab spring in 2011, it decreased by 13% in that year� This decrease is the largest in the last five years comparing to (-4% in 2010, -13% in 2011, -5% in 2012, +6% in 2013 and -4% in 2014)�
Company speCifiC risk
Credit risk (CR)
In telecommunication companies products and services are sold on both pre-paid and post- paid (credit) terms� Post-paid terms are exposed to credit risk while pre-paid services are aimed at reducing credit risk�
management risk (mR)
It isn’t doubtable that companies in telecommunication industry are very much technology oriented and competitive� Indeed, the management vision and credibility are the main things that influence the performance of any company� Therefore, in order maintain its business growth; it is important for companies in this industry to formulate the right strategy at the right time�
Risks to target price (RtP)
Both DDM and DCF model relies largely on terminal value� Terminal value is very sensitive to growth rate as well as discount rate� Therefore, various scenarios analysis has been assumed with terminal growth rate in the range of 1% and 3% and WACC of 5�32% and 9�32% for DCF model (for DDM Cost of equity range of 10�06% and 14�06%) the price of the stock would deduce as given in the table below� Those was reflected in which it justify each level of risk�
!"#$#%&'%&()*+&%,)"-+%
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% %8.0-1)(/%N0"9#$%O(#.%
% %>7H?% >7C?% D7H?% D7C?% @7H?%
AB+
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>>7HI?% H7D@Q% H7DJI% H7DCI% H7DII% H7DPQ%>D7HI?% H7D>P% H7DD@% H7D@>% H7D@E% H7DJQ%>@7HI?% H7DHH% H7DHC% H7D>H% H7D>C% H7DDC%>J7HI?% H7>QJ% H7>QE% H7>E@% H7>EE% H7DHJ%
%
%
%
%
%
%
%
%
%
%
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!"#$#%&'%&()*+&%,)"-+%
!"#$%&&'%()*%&+,%-"*./%0./1.2%/(03./4%")%#.0-1)(/%5(/6.7%8.0-1)(/%5(/6.%12%5.04%2.)21#15.%#"%30"9#$%0(#.%(2%9.//%(2%*12:"6)#%0(#.7%8$.0.;"0.<%5(01"62%2:.)(01"2%()(/4212%$(2%=..)%(226-.*%91#$%#.0-1)(/%30"9#$%0(#.%1)%#$.%0()3.%";%>?%()*%@?%()*%AB++%";%C7@D?%()*%E7@D?%;"0%&+,%-"*./%F;"0%&&'%+"2#%";%.G61#4%0()3.%";%>H7HI?%()*%>J7HI?K%#$.%L01:.%";%#$.%2#":M%9"6/*%*.*6:.%(2%315.)%1)%#$.%#(=/.%=./"97%8$"2.%9(2%0.;/.:#.*%1)%(appendix XX) in which it justify each level of risk.
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>>7HI?% H7D@Q% H7DJI% H7DCI% H7DII% H7DPQ%>D7HI?% H7D>P% H7DD@% H7D@>% H7D@E% H7DJQ%>@7HI?% H7DHH% H7DHC% H7D>H% H7D>C% H7DDC%>J7HI?% H7>QJ% H7>QE% H7>E@% H7>EE% H7DHJ%
%
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FIg.21 ( SEnSItIVIty AnAlySIS ) SOURCE : tEAm EStImAtES
13
App
endi
ces:
inco
me
Stat
emen
t 20
09
2010
20
11
2012
20
13
E201
4 E2
015
E201
6 E2
017
E201
8 E2
019
Rev
enue
93
,016
.00
88
,882
.00
77
,021
.00
73
,533
.00
78
,081
.00
75
,270
.08
79,7
86.2
8
84,5
73.4
6
89,6
47.8
7
95,0
26.7
4
100,
728.
35
Cos
t of R
even
ue
(21,
038.
00)
(20,
437.
00)
(22,
108.
00)
(16,
250.
00)
(16,
304.
00)
(15,
126.
00)
(15,
957.
26)
(16,
914.
69)
(17,
929.
57)
(19,
005.
35)
(2
0,14
5.67
)
Gro
ss P
rofit
71
,978
.00
68
,445
.00
54
,913
.00
57
,283
.00
61
,777
.00
60
,144
.08
63,8
29.0
3
67,6
58.7
7
71,7
18.3
0
76,0
21.3
9
80
,582
.68
D
istri
butio
n, m
arke
ting
and
oper
atio
n ex
pens
es
(26,
152.
00)
(25,
309.
00)
(20,
286.
00)
(22,
100.
00)
(24,
597.
00)
(23,
004.
53)
(23,
138.
02)
(24,
526.
30)
(25,
997.
88)
(27,
557.
76)
(2
9,21
1.22
)
Gen
eral
and
adm
inis
trativ
e ex
pens
es
(7,3
12.0
0)
(7,2
55.0
0)
(4,6
01.0
0)
(6,4
92.0
0)
(6,2
25.0
0)
(6,0
83.3
8)
(6
,382
.90)
(6
,765
.88)
(7
,171
.83)
(7
,602
.14)
(8,0
58.2
7)
Dep
reci
atio
n an
d am
ortiz
atio
n
(10,
450.
00)
(14,
175.
00)
(15,
770.
00)
(20,
877.
00)
(24,
320.
00)
(22,
144.
97)
(23,
935.
89)
(25,
372.
04)
(26,
894.
36)
(28,
508.
02)
(3
0,21
8.50
)
Prov
isio
ns fo
r dou
btfu
l deb
ts
(3
88.0
0)
(2
95.0
0)
(2,0
13.0
0)
(1,3
36.0
0)
(1,5
13.0
0)
(1,3
89.1
3)
(1
,595
.73)
(1
,691
.47)
(1
,792
.96)
(1
,900
.53)
(2,0
14.5
7)
Prov
isio
n fo
r inv
ento
ries
(2
4.00
)
(24.
00)
(7
2.00
)
(72.
00)
(1
20.0
0)
(2
11.0
0)
(8
7.76
)
(93.
03)
(9
8.61
)
(104
.53)
(1
10.8
0)
Ope
ratio
n Pr
ofit
27
,652
.00
21
,387
.00
12
,171
.00
6,
406.
00
5,00
2.00
7,
311.
07
8,
688.
73
9,21
0.05
9,
762.
65
10,3
48.4
1
10
,969
.32
Inte
rest
inco
me
343.
00
28
7.00
144.
00
27.0
0
8.
00
40.0
0
42
.40
44
.94
47
.64
50
.50
53.5
3
Oth
er in
com
e
29
7.00
31
.00
489.
00
8.
00
61
0.00
163.
00
167.
55
17
7.60
188.
26
19
9.56
211.
53
Gai
n on
Cur
renc
y re
valu
atio
n
15
5.00
226.
00
24
3.00
176.
00
10
4.00
56
.00
15
9.57
169.
15
17
9.30
190.
05
20
1.46
Oth
er p
rovi
sion
s
-
-
-
-
-
(7
53.0
0)
-
-
-
-
-
Fina
nce
cost
s
(530
.00)
(59.
00)
-
(208
.00)
(321
.00)
(794
.00)
(6
35.2
0)
(4
76.4
0)
(3
17.6
0)
(1
58.8
0)
(7
9.40
)
Prof
it of
the
year
27
,917
.00
21
,872
.00
13
,047
.00
6,
409.
00
5,40
3.00
6,
023.
07
8,
423.
05
9,12
5.35
9,
860.
25
10,6
29.7
2
11
,356
.43
T
otal
Com
preh
ensi
ve in
com
e of
the
year
27
,917
.00
21
,872
.00
13
,047
.00
6,
409.
00
5,40
3.00
6,
023.
07
8,
423.
05
9,12
5.35
9,
860.
25
10,6
29.7
2
11
,356
.43
0.08
72
0.
0684
0.04
08
0.
0200
0.01
69
0.
0164
0.
0229
0.02
48
0.
0268
0.02
89
0.
0309
Bas
ic e
arni
ngs p
er sh
are
(In
Fils
)
872.
00
68
4.00
408.
00
20
0.00
169.
00
75.2
9
105.
29
11
4.07
123.
25
13
2.87
141.
96
ap
pen
Dix
a :
inC
om
e s
TaT
emen
T
14
Bal
ance
S
heet
20
09
2010
20
11
2012
20
13
E20
14
E20
15
E20
16
E20
17
E20
18
E20
19
AS
SE
TS
C
urre
nt A
sset
s
Cas
h an
d B
ank
Bal
ance
s 19
,740
.00
18,0
97.0
0 5,
238.
00
1,76
6.00
3,
156.
00
14,8
78.4
4 15
,384
.75
17,2
12.6
8 15
,372
.07
13,5
55.6
2 11
,188
.27
Acc
ount
s an
d ot
her
rece
ivab
les
25,0
35.0
0 19
,111
.00
21,5
54.0
0 19
,930
.00
20,6
44.0
0 24
,000
.00
21,5
20.4
4 22
,811
.66
24,1
80.3
6 25
,631
.19
27,1
69.0
6
Inve
ntor
ies
2,40
7.00
2,
625.
00
2,60
1.00
1,
595.
00
2,97
1.00
3,
040.
64
3,11
1.91
3,
184.
85
3,25
9.50
3,
335.
90
3,41
4.09
O
ther
s
1,
978.
36
2,58
9.36
3,
199.
36
3,80
8.36
4,
416.
36
Tota
l Cur
rent
Ass
ets
47,1
82.0
0 39
,833
.00
29,3
93.0
0 23
,291
.00
26,7
71.0
0 41
,919
.08
41,9
95.4
5 45
,798
.56
46,0
11.2
9 46
,331
.07
46,1
87.7
8
N
on-C
urre
nt A
sset
s
Pro
perty
Pla
nt a
nd
Equ
ipm
ent
41,1
39.0
0 46
,309
.00
49,8
48.0
0 53
,310
.00
61,3
67.0
0 60
,181
.77
57,2
41.4
2 52
,688
.44
49,9
51.4
1 44
,991
.18
37,9
67.3
8
Inta
ngib
le a
sset
s 7,
754.
00
8,09
6.00
10
,155
.00
15,4
12.0
0 19
,166
.00
20,3
72.2
6 22
,542
.03
26,3
74.6
8 32
,174
.09
40,2
90.6
0 51
,127
.85
Tota
l Non
-Cur
rent
Ass
ets
48,8
93.0
0 54
,405
.00
60,0
03.0
0 68
,722
.00
80,5
33.0
0 80
,554
.03
79,7
83.4
5 79
,063
.12
82,1
25.5
0 85
,281
.78
89,0
95.2
3
Tota
l Ass
ets
96,0
75.0
0 94
,238
.00
89,3
96.0
0 92
,013
.00
107,
304.
00
122,
473.
11
121,
778.
90
124,
861.
67
128,
136.
79
131,
612.
85
135,
283.
01
LIA
BIL
ITIE
S A
ND
E
QU
ITY
Liab
ilitie
s
Cur
rent
Lia
bilit
ies
B
ank
Ove
rdra
ft -
- 83
9.00
9,
271.
00
- -
- -
- -
- A
ccou
nt P
ayab
le a
nd
Acc
rual
s 24
,450
.00
26,4
42.0
0 25
,466
.00
23,6
84.0
0 29
,166
.00
30,2
57.7
3 31
,390
.33
32,5
65.3
3 33
,784
.31
35,0
48.9
1 36
,360
.85
Cur
rent
Por
tion
of te
rm
loan
s 2,
585.
00
- -
- 3,
286.
00
4,56
8.00
4,
568.
00
4,56
8.00
4,
568.
00
4,56
8.00
4,
568.
00
Def
erre
d re
venu
e 4,
377.
00
4,14
4.00
3,
950.
00
4,74
9.00
4,
769.
00
4,84
9.00
4,
930.
34
5,01
3.05
5,
097.
14
5,18
2.65
5,
269.
59
Fina
nce
Leas
e O
blig
atio
ns
127.
00
- -
- -
- -
- -
- -
To
tal C
urre
nt L
iabi
litie
s
31,5
39.0
0 30
,586
.00
30,2
55.0
0 37
,704
.00
37
,221
.00
39,6
74.7
3 40
,888
.68
42,1
46.3
8 43
,449
.45
44
,799
.56
46,1
98.4
4
Non
-Cur
rent
Lia
bilit
ies
N
on-C
urre
nt P
ortio
n of
te
rm lo
ans
311.
00
- -
- 16
,714
.00
19,8
32.0
0 19
,832
.00
19,8
32.0
0 19
,832
.00
19,8
32.0
0 19
,832
.00
Pro
visi
on fo
r em
ploy
ees
end
of s
ervi
ce b
enef
its
317.
00
272.
00
314.
00
273.
00
330.
00
330.
00
330.
00
330.
00
330.
00
330.
00
330.
00
Oth
ers
- -
- -
- 3,
592.
76
To
tal N
on-C
urre
nt
Liab
ilitie
s 62
8.00
27
2.00
31
4.00
27
3.00
17
,044
.00
23,7
54.7
6 20
,162
.00
20,1
62.0
0 20
,162
.00
20,1
62.0
0 20
,162
.00
ap
pen
Dix
b :
ba
lan
Ce
sH
eeT
15
Tota
l Lia
bilit
ies
32,1
67.0
0 30
,858
.00
30,5
69.0
0 37
,977
.00
54,2
65.0
0 63
,429
.49
61,0
50.6
8 62
,308
.38
63,6
11.4
5 64
,961
.56
66,3
60.4
4
E
QU
ITY
Sha
re C
apita
l 32
,000
.00
32,0
00.0
0 32
,000
.00
32,0
00.0
0 32
,000
.00
36,8
00.0
0 36
,800
.00
36,8
00.0
0 36
,800
.00
36,8
00.0
0 36
,800
.00
Sha
re P
rem
ium
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
10
0.00
S
tatu
tory
Res
erve
4,
781.
00
6,96
8.00
8,
272.
00
8,91
3.00
9,
453.
00
9,45
3.00
9,
453.
00
9,45
3.00
9,
453.
00
9,45
3.00
9,
453.
00
Ret
aine
d E
arni
ngs
27,0
27.0
0 24
,312
.00
18,4
55.0
0 13
,023
.00
11,4
86.0
0 12
,690
.61
14,3
75.2
2 16
,200
.29
18,1
72.3
4 20
,298
.29
22,5
69.5
7 To
tal E
quity
63
,908
.00
63,3
80.0
0 58
,827
.00
54,0
36.0
0 53
,039
.00
59,0
43.6
1 60
,728
.22
62,5
53.2
9 64
,525
.34
66,6
51.2
9 68
,922
.57
Tota
l Lia
bilit
ies
and
Equi
ty
96,0
75.0
0 94
,238
.00
89,3
96.0
0 92
,013
.00
107,
304.
00
122,
473.
11
121,
778.
90
124,
861.
67
128,
136.
79
131,
612.
85
135,
283.
01
ap
pen
Dix
b :
ba
lan
Ce
sH
eeT
16
Cas
h Fl
ow
2009
20
10
2011
20
12
2013
E2
014
E201
5 E2
016
E201
7 E2
018
E201
9 C
ash
Flow
s Fr
om O
pera
ting
Act
iviti
es
Prof
it fo
r The
Yea
r
27
,917
.00
21
,872
.00
13
,047
.00
6,
409.
00
5,40
3.00
6,
023.
07
8,42
3.05
9,
125.
35
9,86
0.25
10
,629
.72
11
,356
.43
A
djus
tmen
t For
:
Dep
reci
atio
n an
d A
mor
tizat
ion
10
,450
.00
14
,175
.00
15
,770
.00
20
,877
.00
24
,320
.00
22
,144
.97
23,
935.
89
25,3
72.0
4
26,8
94.3
6
28,5
08.0
2
30,2
18.5
0
Gai
n on
dis
posa
l of P
rope
rty,
Pla
nt
and
Equi
pmen
t -
-
(359
.00)
-
-
(4
0.00
)
-
-
-
-
-
Insu
ranc
e C
laim
-
-
-
-
(470
.00)
-
-
-
-
-
-
Prov
isio
n fo
r Dou
btfu
l Deb
ts a
nd
Slow
mov
ing
Inve
ntor
ies
41
2.00
319.
00
2,08
5.00
1,
408.
00
1,63
3.00
-
-
-
-
-
-
Fina
nce
Cos
ts
53
0.00
59
.00
-
208.
00
32
1.00
-
-
-
-
-
-
Inte
rest
inco
me
(343
.00)
(287
.00)
(144
.00)
(2
7.00
)
(8
.00)
-
-
-
-
-
-
Prov
isio
n fo
r em
ploy
ees
end
of
serv
ice
bene
fits
89.0
0
15
0.00
81
.00
78
.00
62
.00
-
-
-
-
-
-
Loss
on
Prop
erty
, Pla
nt a
nd
Equi
pmen
t writ
ten
off
-
-
-
-
65.0
0
-
-
-
-
-
-
O
pera
ting
Prof
it be
fore
wor
king
C
apita
l cha
nges
39
,055
.00
36
,288
.00
30
,480
.00
28
,953
.00
31
,326
.00
31
,196
.04
32,
358.
94
34,4
97.3
8
36,7
54.6
1
39,1
37.7
4
41,5
74.9
4
(Incr
ease
)/Dec
reas
e in
acc
ount
s nd
ot
her r
ecei
vabl
es
(2,3
69.0
0)
6,22
5.00
(4
,426
.00)
288.
00
(1,7
57.0
0)
(5,0
33.0
0)
(2,4
79.5
6)
(1,2
91.2
3)
(1,3
68.7
0)
(1,4
50.8
2)
(1,5
37.8
7)
(incr
ease
)/Dec
reas
e in
Inve
ntor
ies
(6
40.0
0)
(2
42.0
0)
(48.
00)
93
4.00
(1
,496
.00)
(6
9.64
)
(71.
27)
(7
2.94
)
(74.
65)
(7
6.40
)
(78.
19)
(incr
ease
)/Dec
reas
e in
acc
ount
s Pa
yabl
e an
d ac
crua
ls
(2
87.0
0)
1,78
8.00
(1
,064
.00)
(1
,866
.00)
5,
420.
00
(1,6
77.0
0)
1,13
2.60
1,
175.
00
1,21
8.98
1,
264.
61
1,31
1.94
(In
crea
se)/D
ecre
ase
in d
efer
red
reve
nue
1,
498.
00
(2
33.0
0)
(1
94.0
0)
79
9.00
20
.00
80
.00
81.
34
82.7
1
84.0
9
85.5
0
86.9
4
Cas
h G
ener
ated
from
Ope
ratin
g A
ctiv
ities
37
,257
.00
43
,826
.00
24
,748
.00
29
,108
.00
33
,513
.00
24
,678
.04
31,
022.
04
34,3
90.9
2
36,6
14.3
3
38,9
60.6
3
41,3
57.7
5
Paym
ent o
f em
ploy
ees
end
of s
ervi
ce
bene
fits
(3
5.00
)
(103
.00)
(3
9.00
)
(119
.00)
(5
.00)
(1
2.00
)
(12.
00)
(1
2.00
)
(12.
00)
(1
2.00
)
(12.
00)
Net
Cas
h fr
om O
pera
ting
Act
iviti
es
37,2
22.0
0
43,7
23.0
0
24,7
09.0
0
28,9
89.0
0
33,5
08.0
0
24,6
66.0
4
3
1,01
0.04
34
,378
.92
36
,602
.33
38
,948
.63
41
,345
.75
ap
pen
Dix
C :
sTa
Tem
enT
of
Ca
sH
flo
w
17
Cas
h Fl
ow F
rom
Inve
stin
g A
ctiv
ities
Purc
hase
of P
rope
rty,
Pla
nt a
nd
Equi
pmen
t
(9
,522
.00)
(1
5,18
2.00
) (1
3,82
4.00
) (1
3,23
0.00
) (1
8,87
5.00
) (1
1,62
8.00
) (1
1,04
6.60
) (1
0,71
5.20
) (1
3,92
9.76
) (1
3,23
3.27
) (1
2,83
6.28
) Pr
ocee
ds fr
om d
ispo
sal o
f Pr
oper
ty, p
lant
and
equ
ipm
ent
3.00
-
-
-
-
-
Inte
rest
Rec
eive
d
32
8.00
273.
00
14
4.00
27
.00
8.00
9.00
10
.00
11
.00
12
.00
13
.00
14
.00
Incr
ease
in In
teng
ible
Ass
ets
(4
,190
.00)
(5
,087
.00)
(7
,215
.00)
(1
6,36
6.00
) (1
7,32
1.00
) (1
0,53
8.00
) (1
2,11
8.70
) (1
3,93
6.51
) (1
6,02
6.98
) (1
8,43
1.03
) (2
1,19
5.68
) N
et C
ash
Use
d in
Inv
estin
g A
ctiv
ities
(1
3,38
4.00
) (1
9,99
6.00
) (2
0,89
5.00
) (2
9,56
9.00
) (3
6,18
8.00
) (2
2,15
4.00
) (2
3,15
5.30
) (2
4,64
0.71
) (2
9,94
4.74
) (3
1,65
1.30
) (3
4,01
7.96
)
C
ash
flow
s fr
om F
inan
cial
A
ctiv
ities
Inte
rest
Pai
d
(4
91.0
0)
(59.
00)
-
(2
08.0
0)
(2
91.0
0)
(5
00.0
0)
(6
10.0
0)
(6
10.0
0)
(6
10.0
0)
(6
10.0
0)
(6
10.0
0)
Div
iden
d Pa
id
(15,
920.
00)
(22,
288.
00)
(17,
512.
00)
(11,
116.
00)
(6,3
68.0
0)
(4,8
18.4
6)
(6,7
38.4
4)
(7,3
00.2
8)
(7,8
88.2
0)
(8,5
03.7
8)
(9,0
85.1
5)
Term
loan
(7
,590
.00)
(2
,585
.00)
-
-
20
,000
.00
4,
888.
00
-
-
-
IPO
4,80
0.00
-
Rep
aym
ent o
f Cap
ital e
lem
ent o
f fin
ance
leas
e
(1
44.0
0)
(4
38.0
0)
-
-
-
-
-
-
-
-
-
N
et C
ash
(use
d in
)/ Fr
om
Fina
ncia
l Act
iviti
es
(24,
145.
00)
(25,
370.
00)
(17,
512.
00)
(11,
324.
00)
13,3
41.0
0
9,21
0.40
(7
,348
.44)
(7
,910
.28)
(8
,498
.20)
(9
,113
.78)
(9
,695
.15)
N
et (d
ecre
ase)
/Incr
ease
in c
ash
and
cash
equ
ival
ents
(307
.00)
(1
,643
.00)
(1
3,69
8.00
) (1
1,90
4.00
)
10
,661
.00
11
,722
.44
506.
30
1,82
7.94
(1
,840
.61)
(1
,816
.45)
(2
,367
.35)
C
ash
and
Cas
h Eq
uiva
lent
s at
be
ginn
ing
of th
e Ye
ar
20,0
47.0
0
19,7
40.0
0
18,0
97.0
0
4,39
9.00
(7
,505
.00)
3,
156.
00
14,8
78.4
4
15,3
84.7
5
17,2
12.6
8
15,3
72.0
7
13,5
55.6
2
Cas
h an
d C
ash
equi
vale
nts
at
end
of th
e Ye
ar
19,7
40.0
0
18,0
97.0
0
4,39
9.00
(7
,505
.00)
3,
156.
00
14,8
78.4
4
15,3
84.7
5
17,2
12.6
8
15,3
72.0
7
13,5
55.6
2
11,1
88.2
7
ap
pen
Dix
C :
sTa
Tem
enT
of
Ca
sH
flo
w
18
H
isto
rical
P
roje
cted
2012
20
13
2014
20
15
2016
20
17
2018
20
19
Net
Inco
me
to
com
mon
6,40
9.00
5,
403.
00
6,02
3.07
8,
423.
05
9,12
5.35
9,
860.
25
10,6
29.7
2 11
,356
.43
Gro
wth
-51%
-1
6%
11%
40
%
8%
8%
8%
7%
Payo
ut ra
tio
80
%
80%
80
%
80%
80
%
80%
80
%
80%
EP
S
20
0.00
16
9.00
0.
075
0.10
5 0.
114
0.12
3 0.
133
0.14
2 EP
S G
row
th ra
te
-5
1%
-16%
-1
00%
-1
00%
-1
00%
-1
00%
-1
00%
-1
00%
D
ivid
ends
11,1
16,0
00.0
0 6,
368,
000.
00
4,81
8,45
8.87
6,
738,
440.
15
7,30
0,27
6.15
7,
888,
199.
92
8,50
3,77
6.72
9,
085,
145.
72
Per s
hare
0.
3474
0.
1990
0.
0602
0.
0842
0.
0913
0.
0986
0.
1063
0.
1136
ap
pen
Dix
D :
Div
iDen
D C
as
H f
low
19
Liqu
idity
Rat
ios:
20
09
2010
20
11
2012
20
13
2014
F 20
15F
2016
F 20
17F
2018
F 20
19F
Cur
rent
Rat
io
1.50
1.
30
0.97
0.
62
0.72
1.
06
1.03
1.
09
1.06
1.
03
1.00
Q
uick
Rat
io
1.42
1.
22
0.89
0.
58
0.64
0.
98
0.95
1.
01
0.98
0.
96
0.93
A
ltman
Z S
core
7.
18
6.44
4.
94
2.79
2.
28
3.04
3.
18
3.34
3.
32
3.30
3.
26
Acc
ount
s R
ecei
vabl
e to
Tot
al A
sset
s 0.
26
0.20
0.
24
0.22
0.
19
0.20
0.
18
0.18
0.
19
0.19
0.
20
Inve
ntor
y to
Tot
al A
sset
s 0.
03
0.03
0.
03
0.02
0.
03
0.02
0.
03
0.03
0.
03
0.03
0.
03
Long
-Ter
m L
iabi
litie
s to
Tot
al A
sset
s 0.
003
0.00
0 0.
000
0.00
0 0.
156
0.16
2 0.
163
0.15
9 0.
155
0.15
1 0.
147
Sal
es to
Tot
al A
sset
s 0.
97
0.94
0.
86
0.80
0.
73
0.61
0.
66
0.68
0.
70
0.72
0.
74
Act
ivity
Rat
ios:
Acc
ount
s R
ecei
vabl
e Tu
rnov
er
3.72
4.
65
3.57
3.
69
3.78
3.
14
3.71
3.
71
3.71
3.
71
3.71
D
ays
Sal
es in
Rec
eiva
bles
98
.24
78.4
8 10
2.14
98
.93
96.5
0 11
6.38
98
.45
98.4
5 98
.45
98.4
5 98
.45
Inve
ntor
y Tu
rnov
er
38.6
4 33
.86
29.6
1 46
.10
26.2
8 24
.75
25.6
4 26
.55
27.5
0 28
.49
29.5
0 D
ays
Cos
t of S
ales
in In
vent
ory
41.7
6 46
.88
42.9
4 35
.83
66.5
1 73
.37
71.1
8 68
.73
66.3
6 64
.07
61.8
6 A
ccou
nts
Pay
able
Tur
nove
r
Day
s C
ost o
f Sal
es in
Pay
able
s 42
4.20
47
2.25
42
0.44
53
1.98
65
2.94
73
0.14
71
8.01
70
2.72
68
7.76
67
3.12
65
8.79
O
pera
ting
Cyc
le D
ays
56.4
8 31
.60
59.2
0 63
.10
29.9
9 43
.01
27.2
7 29
.72
32.0
9 34
.38
36.5
9 S
ales
to A
sset
s 0.
97
0.94
0.
86
0.80
0.
73
0.61
0.
66
0.68
0.
70
0.72
0.
74
Sal
es to
Net
Fix
ed A
sset
s 2.
26
1.92
1.
55
1.38
1.
27
1.25
1.
39
1.61
1.
79
2.11
2.
65
Per
cent
Dep
reci
atio
n E
xpen
se to
Fix
ed
Ass
ets
25%
31
%
32%
39
%
40%
37
%
42%
48
%
54%
63
%
80%
P
erce
nt A
ccum
ulat
ed D
epre
ciat
ion
to
Fixe
d A
sset
s
Net
Fix
ed A
sset
s to
Equ
ity
0.64
0.
73
0.85
0.
99
1.16
1.
02
0.94
0.
84
0.77
0.
68
0.55
Pr
ofita
bilit
y R
atio
s:
P
erce
nt G
ross
Pro
fit
77%
77
%
71%
78
%
79%
80
%
80%
80
%
80%
80
%
80%
P
erce
nt P
rofit
Mar
gin
on S
ales
30
%
25%
17
%
9%
7%
8%
11%
11
%
11%
11
%
11%
P
erce
nt R
ate
of R
etur
n on
Ass
ets
29%
23
%
15%
7%
5%
5%
7%
7%
8%
8%
8%
P
erce
nt R
ate
of R
etur
n on
Equ
ity
44%
35
%
22%
12
%
10%
10
%
14%
15
%
15%
16
%
16%
P
rice
Ear
ning
s R
atio
Ear
ning
s P
er S
hare
C
over
age
Rat
ios:
Deb
t to
Equ
ity
0.
05
-
-
-
0.
38
0.41
0.40
0.
39
0.38
0.
37
0.
35
ap
pen
Dix
e :
fin
an
Cia
l r
aT
ios
20
Ope
rato
r N
atio
nal F
ix
Inte
rnat
iona
l Cal
ls
Mob
ile
Inte
rnet
Le
ased
Lin
e O
ther
Dat
a Se
rvic
e
2Con
nect
X
X
X X
X A
scen
tech
Tel
ecom
s
X
X
B
atel
co
X X
X X
X X
Bah
rain
Inte
rnet
Exc
hang
e
X B
T So
lutio
ns L
TD
X
EQU
AN
T EG
N B
V
X
Etis
alco
m
X X
X
X
Gat
eway
Gul
f
X
G
reen
isis
(Bah
rain
Bro
adba
nd)
X
Kal
am T
elec
oms
X X
X
X
Ligh
t Spe
ed
X X
X
X
Men
a Te
leco
ms
X X
X
X X
Mov
ing
Gul
f
X
N
orth
Sta
r
X
X X
N
uete
l Com
mun
icat
ions
X
X
X X
R
apid
Tel
ecom
s X
X
X X
G
ulf E
lect
roni
c Ta
was
ul C
o.
X
Via
clou
d
X
V
iva
Bah
rain
X X
X X
Za
in B
ahra
in
X X
X X
X
ap
pen
Dix
f :
Tel
eCo
mm
un
iCa
Tio
n in
ba
Hr
ain
21
M
kt C
ap
($))
R
ev.
($
B
L)
EBID
A
Mar
gin
NPM
D
ebt/
Equi
ty
Cap
ex /
Sale
s R
OE
RO
A
EV/
EBIT
DA
P/
E P/
FC
F P/
BV
P/
S D
iv.
Yie
ld
Bah
rain
Tel
ecom
1.
4 1.
0 33
%
12%
41
%
12%
9%
5%
5.
2 12
.0
6.8
1.0
1.0
7%
Emira
tes T
el
7.6
2.9
39%
18
%
56%
12
%
27%
13
%
6.3
14.1
11
.1
3.9
2.5
3%
Etih
ad E
tisal
at
18.9
6.
7 36
%
27%
45
%
15%
30
%
16%
8.
7 10
.7
49.0
3.
0 2.
8 6%
Etis
alat
26
.5
10.2
33
%
19%
14
%
12%
16
%
9%
7.8
13.2
14
.0
2.4
2.5
6%
Nat
iona
l Mob
ile
3.3
2.6
36%
9%
21
%
19%
9%
5%
3.
7 11
.6
14.2
1.
1 1.
1 7%
Oor
edoo
13
.2
9.4
43%
8%
13
0%
22%
10
%
3%
5.4
16.8
19
.4
1.7
1.3
3%
Saud
i Tel
ecom
33
.2
12.2
40
%
22%
15
%
16%
19
%
10%
6.
4 13
.5
11.3
2.
4 3.
0 4%
Vod
afon
e Q
atar
2.
8 0.
5 19
%
-15%
18
%
24%
-5
%
-4%
39
.3
0.0
0.0
1.7
1.7
0%
Zain
Kuw
ait
9.8
4.4
43%
17
%
43%
14
%
13%
7%
6.
2 12
.0
10.1
1.
8 2.
1 7%
MEA
N
13.0
5.
5 36
%
13%
43
%
16%
14
%
7%
9.9
11.5
15
.1
2.1
2.0
5%
MED
IAN
9.
8 4.
4 36
%
17%
41
%
15%
13
%
7%
6.3
12.0
11
.3
1.8
2.1
6%
Zai
n B
ahra
in
0.19
0.
21
40%
7%
43
%
24%
10
%
5%
4.29
12
.30
8.74
1.
26
0.99
8%
ap
pen
Dix
g :
Tel
eCo
mm
un
iCa
Tio
n in
gC
C
22
ap
pen
Dix
H :
va
lua
Tio
n T
ab
les
D
CF
Val
uatio
n 20
14
2015
F
2016
F
2017
F
2018
F
2019
F
Perio
d
1 2
3 4
5 N
et In
com
e be
fore
inte
rest
(E
BI)
68
17.0
7 90
58.2
5 96
01.7
5 10
177.
85
1078
8.52
11
435.
83
Add
: Non
Cas
h C
hang
es
2214
4.97
23
935.
89
2537
2.04
26
894.
36
2850
8.02
30
218.
50
Less
: Cha
nge
in W
C
6699
.64
1336
.89
106.
47
140.
28
177.
11
217.
18
Less
: Net
Cap
ex
2215
4.00
23
155.
30
2464
0.71
29
944.
74
3165
1.30
34
017.
96
FCFF
10
8.40
85
01.9
4 10
226.
61
6987
.19
7468
.13
7419
.20
Dis
coun
t fac
tor
0.
9318
0.
8682
0.
8089
0.
7537
0.
7023
Te
rmin
al V
alue
14
2124
.13
Pr
esen
t Val
ue
9980
9.27
79
21.7
1 88
78.3
6 56
52.0
3 56
28.7
8 52
10.2
7 Fi
rm V
alue
13
3100
.42
M
V o
f deb
t
24,
400.
00
Eq
uity
Val
ue =
Firm
Val
ue
- MV
of D
ebt
10
8,70
0.42
# of
Sha
res
36
8,00
0
Fair
Val
ue
0.29
5
w
eigh
t W
eigh
t co
st
Cos
t of
equi
ty
48.3
1%
12.0
6%
Cos
t of
debt
51
.69%
2.
90%
WA
CC
7.
32%
Cos
t of E
quity
Ris
k fr
ee ra
te
5%
Bet
a 1.
02
Mar
ket P
rem
ium
6.
9 C
ost o
f Equ
ity
12%
C
ost o
f Deb
t 7.
32
Cos
t of E
quity
12
%
Wei
ght o
f Equ
ity
48.3
1%
Wei
ght o
f Deb
t 51
.69%
W
AC
C
7.32
E
quity
D
ebt
Cap
ital
Mar
ket V
alue
$
16,1
60,0
00.0
0 $
17
,289
,451
.88
$
33
,449
,451
.88
Wei
ght i
n C
ost o
f Cap
ital
48.3
1%
51.6
9%
100.
00%
Cos
t of C
ompo
nent
12
.06%
2.
90%
7.
32%
23
ap
pen
Dix
i : r
egr
ess
ion
R
egre
ssio
n St
atis
tics
Mul
tiple
R
0.31
2170
97
R S
quar
e 0.
0974
5071
5 A
djus
ted
R
Squa
re
0.08
5087
026
Stan
dard
Err
or
0.04
3393
298
Obs
erva
tions
75
AN
OV
A
df
S
S
MS
F
Sig
nific
ance
F
Reg
ress
ion
1 0.
0148
4165
4 0.
0148
417
7.88
2009
6 0.
0063
996
Res
idua
l 73
0.
1374
5742
0.
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Tele
com
mun
icat
ion
is c
onsi
dere
d on
e of
the
mos
t reg
ulat
ed a
nd m
onito
red
indu
stry
. In
vest
men
ts m
ay n
eed
to b
e m
ade
in re
gion
s de
spite
the
fact
that
it m
ay n
ot a
lway
s be
feas
ible
. In
add
ition
, the
gov
ernm
ent m
ay p
rohi
bit t
he c
ompa
nies
in th
is in
dust
ry fr
om o
ffer
ing
som
e pr
oduc
ts a
nd s
ervi
ces
for s
ecur
ity a
nd o
ther
reas
ons.
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ause
of c
ontin
uous
ly e
volv
ing
natu
re
of th
is in
dust
ry, t
he c
ompa
nies
mig
ht in
vest
into
seg
men
ts a
nd g
eogr
aphi
es w
hich
may
hav
e ne
ver b
een
test
ed b
efor
e be
caus
e of
the
indu
stry
.
Tele
com
mun
icat
ion
is a
hea
vily
regu
late
d an
d cl
osel
y m
onito
red
indu
stry
. Inv
estm
ents
may
ne
ed to
be
mad
e in
regi
ons
whi
ch m
ay n
ot a
lway
s be
via
ble.
The
com
pani
es c
an a
lso
be
refr
aine
d fr
om o
ffer
ing
som
e pr
oduc
ts a
nd s
ervi
ces
for s
ecur
ity a
nd o
ther
reas
ons.
Due
to th
e in
dust
ry c
onst
antly
evo
lvin
g th
e co
mpa
nies
run
a ris
k of
hea
vy in
vest
men
ts in
to s
egm
ents
and
ge
ogra
phie
s w
hich
may
hav
e ne
ver b
een
test
ed b
efor
e.
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rain
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onom
y de
pend
s he
avily
on
the
prod
uctio
n of
oil
and
its p
rodu
ct. A
lmos
t 60%
of
Bah
rain
's ex
port
rece
ipts
are
con
tribu
ted
by p
etro
leum
pro
duct
ion
and
refin
ing.
Add
ition
ally
, pe
trole
um p
rodu
ctio
n an
d re
finin
g co
nstit
ute
abou
t 70%
of g
over
nmen
t rev
enue
s. A
dec
line
in
oil p
rices
will
like
ly s
low
dow
n th
e ec
onom
y an
d ca
use
a bu
dget
def
icit
whi
ch m
ay a
dver
sely
af
fect
com
pani
es.
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com
petit
ion
envi
ronm
ent h
as th
e gr
eat i
mpa
ct o
n pr
ices
and
sal
es. B
ahra
in w
itnes
ses
a he
avy
com
petit
ion
envi
ronm
ent a
nd p
rice
war
bet
wee
n th
e th
ree
maj
or m
obile
te
leco
mm
unic
atio
ns o
pera
tors
(Bat
elco
, Zai
n, V
iva)
whi
ch m
ay d
isto
rt th
e fo
reca
sted
sal
es
num
ber.
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pRo
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MAT
Rix
25
ap
pen
Dix
J :
sw
oT
an
aly
sis
wea
kn
ess
ess
Tr
egT
Hs
Hig
h St
uff T
urno
ver:
can
hur
t th
e fra
mew
ork
of Z
ain
and
thei
r ab
ility
1�
to
kee
p up
the
rac
e w
ith t
he o
ther
com
petit
ors�
For
the
rea
son
that
sw
appi
ng o
f pre
ciou
s st
aff is
act
ually
cos
tly fo
r any
cor
pora
tion�
Onl
ine
pres
ence
: Th
e on
line
busi
ness
pl
ays
an
impo
rtan
t ro
le
in
2�
pres
entin
g th
e in
form
atio
n an
d se
lling
the
pro
duct
s in
the
mar
ket�
A
fragi
le o
nlin
e m
arke
t can
be
the
outc
ome
for o
ppor
tuni
ties
lost
� w
hile
its
a c
ompl
ex a
nd h
ard
soft
war
e to
impr
ove
in it
s qu
ality
, whi
ch le
ads
to a
lot
of e
ffort
an
d tim
e co
nsum
ing
wel
ling
to d
o th
e be
st f
or it
s cu
stom
ers�
Wea
k R&
D:
poor
R&D
dep
artm
ent c
an m
ake
the
mov
emen
t of g
row
th
3�
slow
er fo
r Za
in t
o be
an
inve
ntiv
e se
ctor
, bes
ide
its o
ther
com
petit
ors
whi
ch w
ill le
ad Z
ain
to fa
ce a
long
ter
m n
egat
ive
impa
ct c
ausi
ng it
by
dedu
ctin
g fro
m th
e en
tity
valu
e�
Tarn
ishe
d Re
puta
tion:
is s
tain
ed o
f the
bra
nd n
ame
of Z
ain
in th
e ey
e of
4�
th
e co
nsum
ers�
Cust
omer
ser
vice
s: W
eak
cust
omer
ser
vice
pro
vide
d by
the
em
ploy
ees
5�
may
dam
age
Zain
repu
tatio
n in
the
mar
ket
and
caus
es t
he c
onsu
mer
s to
esc
ape
to o
ther
com
petit
ors,
bein
g th
em m
ore
resp
onde
nt f
or
thei
r ne
eds�
Mor
e th
an t
hat,
this
file
d ha
s a
rem
arka
ble
impa
ct o
n th
e pr
esen
ce o
f any
cor
pora
tion�
Lack
of S
cale
: re
fers
whe
n Za
in`s
cos
t pe
r un
it of
out
put
is v
ery
high
, 6�
ca
usin
g it
to a
n in
crea
se in
its
volu
me,
whi
le m
aint
aini
ng th
e sa
me
leve
l of
qua
lity�
Cost
Str
uctu
re:
Basi
cally
sho
ws
the
high
cos
ts o
f Za
in p
rodu
cts
and
7�
serv
ices
am
ong
othe
r com
petit
ors�
Stro
ng M
anag
emen
t: w
ith a
str
ong
man
agem
ent Z
ain
coul
d re
ach
and
1�
keep
up
with
its
pote
ntia
l cus
tom
ers
Inno
vativ
e cu
lture
: hel
ps Z
ain
to g
ener
ate
uniq
ue p
rodu
cts
and
serv
ices
2�
th
at m
ight
fac
e th
e ne
ed o
f th
e co
nsum
ers
as it
con
side
rs a
s a
shor
t te
rm p
ositi
ve im
pres
sion
whi
ch w
ill b
e ad
ded
to th
e va
lue
to a
n in
crea
se
in th
e en
tity
profi
t�
Bran
d na
me:
pla
ys a
n im
port
ant
role
tha
t se
eks
the
atte
ntio
n to
3�
co
nsum
ers
and
give
s th
em t
he c
apab
ility
to
char
ge s
uper
ior
pric
es o
n th
eir
prod
ucts
and
ser
vice
s si
nce
the
cons
umer
s se
t an
ext
ra v
alue
to
the
bran
d na
me
whi
ch w
ill c
ause
to
a de
clin
e in
the
cos
ts le
adin
g to
m
ore
profi
t for
the
entit
y�
Pric
ing
Pow
er: c
onsu
mer
s are
usu
ally
opp
osed
to th
e ra
isin
g in
the
pric
e 4�
by
shi
ftin
g to
oth
er a
ltern
ativ
es p
rodu
cts,
alth
ough
Zai
n ha
s th
e pr
icin
g po
wer
, its
cus
tom
ers
will
kee
p on
usi
ng th
eir p
rodu
cts
and
serv
ices
� As
a Re
sult,
Zai
n ha
s th
e ab
ility
to a
ccus
e its
con
sum
ers
with
a c
ontin
uous
ly
rise
in th
eir p
rices
�
Cost
Adv
anta
ge: l
ower
cos
ts p
rovi
ded
for t
he p
rodu
cts
and
serv
ices
will
5�
be
cau
sing
to
a gi
ant
proc
eeds
for
Zain
� Be
side
s th
at, i
t ca
n le
ad t
o a
huge
cha
lleng
e co
mpe
titio
n on
pric
e be
twee
n th
e co
mpe
titor
s�
Fina
ncia
l lev
erag
e: It
per
mits
Zai
n to
util
ize
thei
r inc
ome
stat
emen
t and
6�
ba
lanc
e sh
eet
to e
nlar
ge t
heir
busi
ness
fra
mew
ork
as w
ell a
s to
rai
se
thei
r pro
fit� M
oreo
ver,
the
finan
cial
leve
rage
has
a m
assi
ve im
pact
on
the
corp
orat
ion
as a
who
le�
Ass
et le
vera
ge: e
nabl
e Za
in C
ompa
ny to
use
thei
r mos
t use
ful o
pera
tiona
l 7�
as
sets
for t
he d
evel
opin
g of
the
ir Bu
sine
ss a
nd im
prov
ing
thei
r mar
ket
shar
e be
side
thei
r com
petit
ors�
26
ap
pen
Dix
J :
sw
oT
an
aly
sis
TH
rea
Ts
op
po
rT
un
iTie
s
Polit
ical
Ris
k: p
oliti
cal
issu
es i
s th
e m
ain
fact
or o
f in
crea
sing
Zai
n ris
k 1�
w
hich
is b
eyon
d th
e co
nsta
ntly
cha
nges
in r
ules
and
reg
ulat
ion
that
se
t by
the
gov
ernm
ent,
lead
ing
to n
egat
ivel
y eff
ect
on Z
ain`
s bu
sine
ss
fram
e w
hich
lead
s to
redu
ce in
its
profi
t�
Bad
econ
omy:
bad
eco
nom
y ca
n m
assi
vely
effe
ct t
he c
apab
ility
of
2�
Zain
`s g
aini
ng a
nd m
aint
aini
ng p
oten
tial c
usto
mer
s, le
adin
g to
a h
uge
loss
in p
rofit
s�
Mat
ure
Mar
ket:
In Z
ain`
s ca
se o
f is
sue
it’s
a co
mpe
titiv
e ar
ea t
hat
3�
com
pete
s in
with
oth
ers,
whi
ch p
ushe
s th
em t
o in
crea
se t
heir
pric
e sh
are
in o
rder
to
grow
in t
he m
arke
t� M
anag
ing
all t
his
will
be
diffi
cult
and
cost
ly�
Vola
tile
Curr
enci
es:
by h
avin
g vo
latil
e cu
rren
cies
Zai
n w
ill b
e fa
cing
4�
in
vest
men
t di
fficu
lties
, bec
ause
exp
ense
s an
d re
venu
es c
hang
es w
ill
turn
up
and
dow
n qu
ickl
y�
Inte
nse
Com
petit
ion:
Int
ense
com
petit
ion
can
redu
ce Z
ain’
s in
com
e,
5�
beca
use
othe
r com
petit
ors c
an a
ttra
ct c
onsu
mer
s in
diffe
rent
way
s with
th
eir o
wn
enha
nced
pro
duct
s�
Gov
ernm
ent
Regu
latio
n: A
s w
e m
entio
ned
earli
er t
he n
ew c
omin
g 6�
ch
ange
s in
rul
es, r
egul
atio
ns a
nd s
tand
ards
can
neg
ativ
ely
effec
t on
Za
in p
rofit
for t
he s
hort
and
long
run�
Subs
titut
e Pr
oduc
t: av
aila
bilit
y of
alte
rnat
ive
prod
ucts
aga
inst
Zai
n`s
7�
good
s w
ould
har
m it
s ab
ility
to in
crea
se th
eir p
rices
� For
the
reas
on th
at,
cons
umer
s can
eas
ily sw
ap b
etw
een
the
good
s and
serv
ices
for a
noth
er
com
pani
es�
New
ser
vice
s: co
min
g up
with
new
ser
vice
s on
ce a
nd a
whi
le w
ill h
elp
1�
Zain
to c
ontin
uous
ly fa
ce it
s cu
stom
ers
need
� The
se s
ervi
ces
can
caus
e an
exp
and
in Z
ain`
s bu
sine
ss fr
ame
wor
k�
Onl
ine
Mar
ket:
havi
ng a
n on
line
mar
ket
will
incr
ease
the
cap
abili
ty o
f 2�
Za
in to
sig
nific
antly
dev
elop
thei
r bus
ines
s� M
oreo
ver,
Zain
is c
apab
le to
m
arke
t its
goo
ds a
nd s
ervi
ces
to a
larg
er n
umbe
r of
aud
ienc
es fo
r le
ss
cost
s an
d ex
pens
es�
Inno
vatio
n: s
uper
ior
inno
vatio
n ca
n co
me
up w
ith p
rodu
cing
uni
que
3�
prod
ucts
and
ser
vice
s to
mee
t the
dai
ly n
ew n
eeds
of c
usto
mer
s�
New
Tec
hnol
ogy:
co
min
g up
with
a n
ew a
nd c
reat
ive
way
of
usin
g 4�
te
chno
logy
hel
ps Z
ain
to f
ace
thei
r da
ily c
usto
mer
s’ ne
eds
on a
dai
ly
basi
s by
kee
ping
up
impr
ovin
g of
thei
r pro
duct
s an
d se
rvic
es�
Als
o, b
y ha
ving
hea
vily
usa
ge o
f tec
hnol
ogy
gene
rate
s com
petit
ive
obst
acle
s for
ot
her c
ompa
nies
�
Emer
ging
Mar
kets
: em
ergi
ng m
arke
ts a
re f
ast
spee
d ar
eas
of g
row
ing
5�
over
the
wor
ld t
hat
enab
les
Zain
`s t
o ra
pidl
y ex
pand
the
ir em
ergi
ng
Mar
kets
, whi
ch w
ill le
ave
a po
sitiv
e st
amp
of in
fluen
ce o
n th
e co
rpor
atio
n en
tity
to in
crea
se th
eir v
alue
�
27
referenCes
http://www�tradingeconomics�com/bahrain/gdp -
www�bh�zain�com -
http://www�bh�zain�com/en/ipo-site/Documents/Zain-IPO-Prospectus-E�pdf www�bloomberg�com -
www�bloomberg�com -
http://www�tra�org�bh -
http://www�globalresearch�ca/search?q=Zain+Bahrain -
https://www�kw�zain�com/kw/af/home�do?lang=en -
www�wikiwealth�com/swot-analysis:zain -
http://www�globalinv�net/contentdisp�asp?pageId=329 -
http://www�zawya�com/ -
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Compensation of the author(s) of this report is not based on investment banking revenue�Position as a officer or director:The author(s), or a member of their household, does not serve as an officer, director or advisory board member of the subject company�
market making:
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Disclaimer:
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