october 27, 2011 · its shareholders base as of september 30, 2011 reached 12,813. wataniya...

Flash Result Report - Q3 2011

Wataniya Palestine Mobile Telecommunications (WATANIYA) Palestine Stock Exchange

October 27, 2011

Company Background

A Report By Sahem Trading & Investments

Wataniya Palestine Mobile Telecommunications Company is the second mobile operator company to have been licensed in Palestine in partnership with

Qatari Qtel and aims to bring the latest mobile technologies to Palestinian consumers. Wataniya Mobile successfully launched its operations on 1 November

2009, three years after winning a competitive bid for its License, having overcome several challenges during this period, and with extensive support from

Qtel, PIF, and the PNA, the MTIT, the Quartet and other international agencies. Wataniya Mobile’s License authorizes the Company to build and operate a

GSM telecommunications network and provide public mobile voice and data telecommunications services in the West Bank and Gaza. It also gives the

Company the right to establish and operate a 3G network and to provide international telecommunication services through its own international gateway.

Following the allocation of frequencies, Wataniya Mobile launched com-mercial mobile telephony services within the West Bank in November 2009. Wa-

taniya Mobile’s network currently covers 97% of the Palestinian population in the West Bank. The company plans to expand its network in Gaza Strip in

early 2012. The company is aiming to invest around $300 million in Palestine over

the next three years. Its shareholders base as of September 30, 2011 reached

12,813.

Wataniya Mobile’s total subscribers figures reached 433 thousand subscribers as of

September 30, 2011; a growth rate of 43.38% compared to 302 thousand in the

same period of 2010.

Wataniya Mobile is licensed to operate in Gaza, but due to the existing political

situation, Wataniya Mobile has not currently commenced operations there. It is the

intention of Wataniya Mobile’s management to launch in Gaza as soon as practica-

ble.

Ticker Sector Trading

Currency ISIN Free Float

Current

Price

Forward

PE Market Capitalization $

52 Week

high

52 Week

low

WATANIYA Services USD PS5012112072 15.00% 1.17 0.00 301,860,000 1.44 1.16

Major Highlights

Among the most significant achievements for Palestine Investment Fund PIF of 2010

was the successful IPO of 15% of Wataniya Mobile shares. The IPO was 1.50x over-

subscribed and raised Wataniya’s capital to $258 million.

The Palestinian telecommunication market- which maintains a low penetration in the

MENA region - enjoys a growth potential.

This strategic partnership provides technical expertise and procurement benefits with

a leading operator with over 68 million customers in 16 countries (Qtel) and benefits

from local knowledge and expertise of PIF - an $858 million state-owned investment

company.

Shareholder No. of Shares % Holding

Wataniya International FZ

LLc 125,001,000 48.45%

Palestine Investment Fund &

Subsidiaries 94,299,000 36.55%

New Shareholders 38,700,000 15.00%

Total 258,000,000 100.00%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Q3 2010 Q3 2011

G = 43.38%

Wataniya Palestine Mobile Telecommunications (WATANIYA)


Income Statement

WATANIYA’s revenues continued to grow; soaring in Q3 2011 by 123.26%

compared to Q3 2010 to hit $55.15 million, along with the significant increase in

the subscribers base, that was accompanied with a growth in the average

monthly revenue per subscriber from $10.80 in Q3 2010 to $12.90 in Q3 2011.

According to WATANIYA; the company had commenced new sources of reve-

nues related to telecommunications services’ provision to other Palestinian and

regional telecommunications companies.

Accordingly, cost of revenues increased by 29.18% in Q3 2011 to amount

$33.25 million, accounting for 60.29% of the main revenues. Therefore, WA-

TANIYA recorded a positive gross income in Q3 2011, with a very significant

rebound from a gross loss in Q3 2010. Gross income stood at $21.90 million in

Q3 2011, registering a gross margin of 39.71%.

The growth in revenues was accompanied by an increase in the marketing ex-

penses, which also was shown significantly at the end of 2010, attributed to an

increase in campaigns and advertisements. Marketing expenses amounted to

$4.29 million in Q3 2011, up by 43.04% compared to Q3 2010. On the other

hand, general and administrative expenses declined slightly by 4.33% to stand at

$13.05 million.

In consequence, operating profit hit $4.56 million in Q3 2011 opposed to a sever

operating loss of $17.67 million in Q3 2010; operating margin stood at 8.27%.

WATANIYA incurred a non operating item in Q3 2011, including a loss of

$0.01 million from disposal of property and equipment. Also, bad debt allow-

ance increased from $0.08 in Q3 2010 to reach $1.64 million in Q3 2011. On the

other hand, finance costs witnesses an insignificant increase of 1.50% standing

at $7.77 million in Q3 2011, representing interest on loans and interest on non

current liabilities related to the license million in addition to other interest ex-

penses related to loans

Deprecation and amortization expenses stood at $19.20 million in Q3 2011,

including the license amortization expense, leading WATANIYA to report a net

loss in Q3 2011 by $24.97 million but reducing the recorded losses in the corre-

sponding period in 2010 by 42.65%.

Item Q3 2010 Q3 2011 Δ

Revenues 24,702,793 55,150,782 123.26%

Cost of Revenues 25,738,864 33,249,481 29.18%

Gross Income -1,036,071 21,901,301 2213.88%

G&A Expenses 13,637,743 13,047,763 -4.33%

Marketing expenses 3,001,789 4,293,664 43.04%

Operating Income -17,675,603 4,559,874 125.80%

Depreciation and amortization

18,464,497 19,201,547 3.99%

Finance costs 7,659,608 7,774,509 1.50%

Loss from disposal of property and equip-

ment

11,988 14,405 20.16%

Net loss -43,548,332 -24,974,934 42.65%

-50,000,000

-30,000,000

-10,000,000

10,000,000

30,000,000

50,000,000

RevenuesGross IncomeOperating Income

Net Income

Q3 2010 Q3 2011

Balance Sheet

Total assets dropped by 17% in Q3 2011 compared to the end of 2010, to aggre-

gate eat $291.98 million. This decrease was attributed to a major decline in the

current assets, which in turn amounted to $50.34 million down by 53.97%. A

reduction by 65.28% in the cash and cash equivalents was the main reason,

when dropped from $92.19 million in 2010 to $32 million in Q3 2011. Also,

prepaid expenses declined by 10.50% in Q3 2011 to amount $8.62 million, this

figure represents mainly the VAT tax. On the other hand, accounts receivables

increased by 30.87% with the reported growth in revenues, to reach $8.49 mil-

lion in Q3 2011.

Noncurrent assets which contribute by 82.76% to total assets, reported a slight

decrease of 0.33% in Q3 2011, to hit $241.64 million. This semi balance came

within different changes in its classifications. Investments in properties, plants

and equipments declined by 6.59% to reach $64.03 million in Q3 2011, reflect-

ing the company’s investment in the wireless network in addition to its infra-

structures and other items.

Item 2010 Q3 2011 Δ

Current assets 109,353,656 50,340,344 -53.97%

Noncurrent assets 242,452,452 241,642,748 -0.33%

Total assets 351,806,108 291,983,092 -17.00%

Current liabilities 64,518,750 40,885,601 -36.63%

Noncurrent liabilities 124,591,034 113,376,101 -9.00%

Total liabilities 189,109,784 154,261,702 -18.43%

Outstanding Shares 258,000,000 258,000,000 0.00%

Accumulated losses 106,913,676 131,888,610 23.36%

Shareholders' Equity 162,696,324 137,721,390 -15.35%



Intangible assets which represent the investment in license to operate in the West Bank, reflect the amount of $140 million which was paid in August

2008 in addition to the present value of the postponed portion. Following to licence amortization, this investment stood at $161.06 million in Q3 2011

compared to $170.36 million at the end of 2010. On the other hand, Investment in projects in progress increased by 168.21% settling at $5.40 million in

Q3 2011, representing investments in programmes and systems in addition to the network related items. Also, the decline in cash was accompanied by

reclassifying an amount of $9.58 million as restricted cash withdrawals in the noncurrent assets.

Total liabilities declined by 18.43% in Q3 2011, settling at $154.26 million following declines in both current and noncurrent liabilities. Current liabili-

ties stood at $40.88 million in Q3 2011, down by 36.63% from 2010, in effect of varied reductions in accounts payables, deferred revenues, accrued

expenses, payables to related parties in addition other current liabilities. On the other hand, current portion of interest-bearing loans and borrowings re-

ported the same level of the end of 2010 at $15.79 million .

Noncurrent liabilities accounted for 73.50% from total liabilities in Q3 2011, settling at $113.38 million down by 9.00% compared to the end of 2010.

This decline was stimulated by the drop in the interest-bearing loans and borrowings by 21.55% to aggregate at $54.01 million in Q3 2011 compared to

$68.85 million in 2010, while the major constituent to non current liabilities “other items” which reflects the present value of the remaining payment of

“operating in the West Bank license” plus the accumulated interest expenses since attaining the frequencies stood at $57.69 million in Q3 2011, up by

6.15% compared to the end of 2010.

Total shareholders’ equity decreased by 15.35% in Q3 2011, standing at $137.21 million following the reported period losses that led the accumulated

losses to hit $131.89 million as of the end of the first nine months of 2011, increasing by 23.36% from the recorded in 2010.

Financial Ratios

Item Q3 2010 Q3 2011 Δ

EPS -0.256 -0.097 62.21%

BV 0.47 0.53 13.65%

Gross Margin -4.19% 39.71% 1046.84%

Operating Margin -71.55% 8.27% 111.56%

Net Margin -176.29% -45.28% 74.31%

ROaA -15.12% -7.76% 48.68%

ROaE -42.85% -16.63% 61.20%

Current Ratio 1.13 1.23 8.64%

Debt Ratio 72.43% 52.83% -27.06%

Equity ratio 27.57% 47.17% 71.07%

Loans to equity 167.69% 50.68% -69.77%

Loans to assets 46.23% 23.91% -48.29%

Total asset turnover 8.53% 18.89% 121.43%

working capital 4,949,739 9,454,743 91.01%

working capital turnover 499.07% 583.31% 16.88%

WATANIYA reported major changes in all profitability indicators. Gross and

operating margins increased massively in Q3 2011 following the 123% growth

in the company’s revenues; recording positive levels compared to losses in Q3

2010. Also, the reduction in the general, administrative and marketing expenses

contributed to attain a higher operating margin.

Net income related profitability indicators reported negative levels, following

the recorded losses attributed to adding up the amortization and depreciation

expenses which in turn exceeded the G&A&M expenses in Q3 2011 and ac-

counted for 87.67% of the gross income.

Book value increased by 13.65% in Q3 2011 compared to Q3 2010 despite

realizing losses due to the paid in capital increase from $170 million to $258

million through an IPO, but decreased by 15.35% compared to the end of 2010.

WATANIYA reported better short term liquidity position in Q3 2011 com-

pared to Q3 2010, but down significantly compared to the end of 2010 due to

the major drop in cash and cash equivalents despite the reductions in different

commercial payables.

The reduction in the long term loans led to report lower overall debt ratio in Q3

2011 compared to Q3 2010 and the end of 2010, but still considered a high

level compared to its peers.

In consequence, operating liquidity witnessed a significant change in Q3 2011 com-

pared to the opposed period in 2010.



Market Indicators

WATANIYA’s share price decreased by 2.40% at the end of Q3 2011 com-

pared to Q1 of 2011, but increased by 4.27% compared to the end of IH 2011.

Market capitalization stood at $314.76 million., accounting for 52.98% of

total market capitalization of the banking & financial services sector, and

11.24% of PEX’s market capitalization.

The share is trading above its book value and currently recording 228% com-

pared to it.

Since its listing date at the beginning of January 2011, trading volume reached

11.52 million shares until the end of the Q3 2011; recording a turnover rate of

4.47%, and accounting for 36.08% of total traded shares in the banking &

financial services sector, while accounted for 7.91% of the gross trading vol-

ume in the PEX for the period ended at September 30, 2011.

Share's Performance in the First 9 Months 2011

1.05

1.1

1.15

1.2

1.25

1.3

1.35

1.4

1.45

Item Q1 2011 Q2 2011 Q3 2011

Price 1.25 1.17 1.22

P/BV 209.73% 205.26% 228.46%

Market

Capitalization $ 322,500,000 301,860,000 314,760,000

Trading Volume 6,860,422 9,598,296 11,525,046

Turnover 2.66% 3.72% 4.47%

145,655,940

11,525,046

PEX Trading Volume WATANIYA Trading Volume

2,801,337,724

314,760,000

PEX Market Capitalization WATANIYA Market Capitalization



Wataniya Palestine Mobile Telecommunications Financial Highlights (2008-2010) - Appendix

Balance Sheet

Income Statement

Financial Ratios

Item 2008 2009 Δ 2010 Δ

Current assets 11,269,683 25,969,600 130% 109,353,656 321%

Noncurrent assets 214,072,173 260,523,770 22% 242,452,452 -7%

Total assets 225,341,856 286,493,370 27% 351,806,108 23%

Current liabilities 25,937,293 40,243,205 55% 64,518,750 60%

Short term loans - - - 15,788,000 -

Non current liabilities 46,679,400 122,855,167 163% 124,591,034 1%

Long term loans 10,631,579 72,017,342 577% 68,854,305 -4%

Total liabilities 72,616,693 163,098,372 125% 189,109,784 16%

Accumulated losses 17,274,837 46,605,002 170% 106,913,676 129%

Outstanding Shares 170,000,000 170,000,000 0% 258,000,000 52%

Shareholders' Equity 152,725,163 123,394,998 -19% 162,696,324 32%

Item 2008 2009 Δ 2010 Δ

Revenues - 2,074,951 - 38,312,788 1746%

Cost of Revenues - 6,477,637 - 36,206,442 459%

Gross Income - -4,402,686 - 2,106,346 -148%

G&A&M Expenses 8,831,606 15,958,296 81% 23,668,762 48%

Operating Income -8,831,606 -20,360,982 - -21,562,416 -6%

Investment Income - - - - -

Net income -10,722,364 -29,330,165 -174% -56,249,535 -92%

Ratios 2008 2009 Δ 2010 Δ

EPS -0.063 -0.173 -174% -0.218 -74%

BV 0.90 0.73 -19% 0.63 -13%

Gross Margin - -212.18% - 5.50% 103%

Operating Margin - -981.28% - -56.28% 94%

Net Margin - -1413.54% - -146.82% 90%

ROaA -9.39% -11.46% -22% -17.62% -54%

ROaE -13.90% -21.24% -53% -39.32% -85%

Current Ratio 0.43 0.65 49% 1.69 163%

Debt Ratio 32.23% 56.93% 77% 53.75% -6%

Equity ratio 67.77% 43.07% -36% 46.25% 7.4%

loans to equity 6.96% 58.36% 738% 52.02% -11%

loans to assets 4.72% 25.14% 433% 24.06% -4%

Total asset turnover - 0.72% - 10.89% 1404%

working capital -14,667,610 -14,273,605 3% 44,834,906 414%

working capital turn-

over - -14.54% - 85.45% 688%


For further information, please contact the research department at Sahem Trading & Investment Company:

Sahem Trading & Investment Co,

Ramallah, Palestine P.O.Box 2187

Direct line: +970-2-2968830 or +972-2-2968830 [email protected]

DISCLAIMER

Disclaimer: This report is not an offer to buy or sell nor a solicitation to buy or sell any of the securities mentioned within. The information contained in this report were prepared using

information available to the public and sources Sahem Trading & Investment Co believes to be reliable. Sahem Trading & Investment Co does not guarantee the accuracy of the information

contained within this report and accepts no responsibility or liability for losses or damages incurred as a result of investment decisions taken based on information provided or referred to in

this report. Any analysis of historical facts and data is for information purposes only and past performance of any company or security is no guarantee or indication of future results .

Board of Directors

Dr. Mohammad Mustafa - Chairman

Wataniya International FZ - Dr. Nasser Marafih - Vice Chairman

Palestine Investment Fund - Mr. Faisal AlShawwa

Palestine Investment Fund - Mr. Durgham Maraee

Wataniya International FZ - Sh. Mohammed Bin Suhaim Al-Thani

Wataniya International FZ - Mr. Michael Hancock

Wataniya International FZ - Mr. Amer Sunna

mailto:[email protected]

october 27, 2011 · its shareholders base as of september 30, 2011 reached 12,813. wataniya...

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