Etisalat shares are undervalued, given the rosy long-term prospects of the UAE company, according to Mena Corp.
Shares in the telecommunications company yesterday closed up by 0.42 per cent on the Abu Dhabi Securities Exchange to Dh9.56 but the research firm yesterday put a target price of Dh9.80 on the stock.
"I don't think we will see a quick growth in the stock. But in the long-term, I like Etisalat's prospects," said Petr Molik, the head of the research division at Mena Corp.
He attributed the positive outlook to recent changes in Etisalat's management and an expected strategic review of the group's operations.
"The overhaul in management for such a big company was quite unprecedented," said Mr Molik. "The market is waiting for a catalyst that will indicate the new direction." Mena Corp expects Etisalat to announce its new strategy early next year and said this marked an opportunity to "boost the international share of revenues and profits by focusing on a handful of the most promising markets".
Foreign ownership of Etisalat shares is not allowed. However, the company has held discussions with the UAE federal Government to lift the ban, a move it argues would boost competition in the sector. That would give another fillip to the company's share price, Mr Molik said.
He said Etisalat was "profitable with superior margins" but its operations outside the UAE had been problematic.
While Etisalat's interests in Egypt and Saudi Arabia are performing well, it has faced problems in other markets.
This year, Etisalat's joint venture in India was among several operators to have their mobile licences revoked in what was one of the subcontinent's largest corporate scandals.
"The international operations are rather a mixed bag," said Mr Molik.
In July, Etisalat reported a turnaround in its financial performance, having posted a net profit of Dh1.9 billion in the second quarter, a rise of 17 per cent on the same period last year.
It had reported declining profits in eight of the previous nine quarters.