stc may report strong topline growth in non-core segments in 2021: Itqan Capital

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Saudi Telecom Co. (stc) is expected to report strong topline growth in non-core segments and flattish growth in traditional telecom services in 2021, Itqan Capital said in a new report.

The telco’s continued investment in the Information and communications technology (ICT) and fintech segments and diversification away from traditional telecom services is paying off and reflecting in higher topline growth, the brokerage noted.

The company is likely to see stable low single-digit growth from traditional telecom services as catalysts in the segment currently lie in expansion of 5G and fiber optic services coupled with the recovery in roaming revenues during 2021.

However, it is likely to be partially offset by flat broadband and mobile revenues due to reduced need for virtual communication this year compared to 2020, the report noted.

Margins are likely to be under pressure in the medium term, but will rebound from the low point reported in Q4 2020, Itqan Capital said, expecting a gradual improvement in the long term due to the medium-term high capex requirements in both core and non-core segments.

The brokerage maintained its “Neutral” recommendation for the stock, setting the 52-week target price of SAR 102.10 a share.