Palestine Telecommunications (PALTEL) · 2013. 12. 11. · Equity Report 2013, (Trading Currency JD) Palestine Telecommunications “PALTEL” Report’s Summary Symbol: PALTEL Currency:

Research Team

Dr. Lubna Ghosheh / Mohammad Khalili

Palestine Telecommunications

(PALTEL)

September 30, 2013

Equity Report 2013, (Trading Currency JD)

Palestine Telecommunications “PALTEL”

Table of Contents:

Summary……………………………………...………………..3

PALTEL Overview:

Brief…………………………………….………………...…….4

Board of Directors…………………………………….…..........5

PALTEL Group’s Investment in Associates…………...….…....6

Ownership Structure……………………………………………7

PALTEL Group Companies…………………………………….8

Trading Summary……………………………………...………12

Financial Analysis:

Financial Summary…………………………………………….14

B/S Analysis……………………………………………………15

I/S Analysis…………………………………………………….18

DuPont Analysis………………………………………………..21

Dividend Policy……………………………………………..…24

Key Financial Indicators……………………………………….25

Bibliography……………………………………………………27

Disclaimer………………………………………………………28

2Page|



Report’s Summary

Symbol: PALTEL

Currency: JD

Key Info 30-06-2013

Close Price 4.80

Highest Close Price 5.30

Lowest Close Price 4.64

Number of Shares Traded 6,762,597

Value of Shares Traded ($) 48,085,720

Market Cap 631,800,000

Market Ratios 30-06-2013

EPS 0.344

P/E 7.69

B.V 3.34

P/B.V 1.44

ROA 7.70%

ROE 10.32%

PALTEL Stock Trading 1/2013-7/2013

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

4.34.44.54.64.74.84.9

55.15.25.35.4

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Trade Volume Close Price

Highlights

PALTEL Group total assets decreased by 4.48% at the end of the first half 2013, reaching

588.9 million JD, total liabilities decreased by 5.38% reaching 149.5 million JD at the end of the

first half of 2013, total equity decreased by 4.17% at the end of the first half of 2013, reaching

439.4 million JD compared to 458.6 million JD at the end of 2012, retained earnings decreased to

266 million JD by the end of the first half of 2013.

PALTEL Group revenues reached 182,956,000 JD by the end of the first half of 2013,

compared to 182,716,000 JD by the end of the first half of 2012, increasing by 0.13%. Net Profit

after tax increased by 9.54% during the first half of 2013, compared with the same period of

2012. Moreover, Earnings Per Share (EPS) increased from 0.314 JD during the first half of 2012

to 0.344 JD during the same period of 2013.

In valuating PALTEL Group the Free Cash Flows to Equity model (FCFE), P/E, and

P/B.V, and P/C.F were used, our target price for PALTEL Group is 6.02 JD, 18% higher than the

close price on 22/9/2013, 5.10 JD.

3Page|



Brief:

PALTEL Group started its operations in Palestine with Palestine Telecommunications

Company (PALTEL), which has been established in 1995 as a public shareholding

company in Palestine. It started its operations on January 1st, 1997, with paid-in capital

of 45 million JD as an operator and provider of all types of telecommunication services

including local and international telephone services, internet, data communication,

mobile, value-added services, pay phones, and next generation services in addition to

creating the backbone for other related telecom services.

The company’s paid-in capital was increased to 67.5 million JD in 1999, and in 2005 the

General Assembly approved 1:2 stock dividends which helped to increase the paid-in

capital from 67.5 million JD to 101.25 million JD. On March 25, 2006, PALTEL held its

General Assembly meeting and they approved the distribution of 30% stock dividend,

which raised the capital from 101.25 million JD to 131.625 million JD. PALTEL Group’s

stock (PALTEL) has been listed on Palestine Exchange (PEX) on May 6th, 1997. The

company has a high percentage of 60% of free float, where investors can purchase and

trade the stock in the open market. PALTEL became a member of the S&P-AFE 40 of

the union of Arab Exchanges and a member of the Dow Jones-FEAS 50 of the Euro

Asian Exchanges, giving PALTEL’s stock both regional and international visibility.

PALTEL is considered the largest national employer among its peers in the private

sector, with a diversified base of shareholders (individuals, companies, institutions,

Palestinian investment committees and legal bodies) with over than 7,000 shareholders.

The market capitalization of PALTEL Group’s Stock, the leading share among the listed

companies in Palestine Exchange (PEX), represents 32.3% of the total market cap as on

30.06.2013. A new operator has joined the market which is WATANIYA Mobile (the

new main competitor for Jawwal) that was launched in November 2009.

During its years of operation, PALTEL Group has experienced strong growth in its net

operating revenues and in its core business operations in terms of mobile and data

services. The Group has enjoyed a reliable and consistent history of dividends

distribution over the past years with an upward trend; to reach 45% dividends percentage

of the par value distributed for 2012, exceeding all the other listed companies on

Palestine Exchange (PEX).

4Page|



Board of Directors:

Chairman: Mr. Sabih Taher Masri

Board Members:

Arab Supply & Trading Company Mr. Ammar Aker

Cario-Amman Bank Dr. Farouq A. Zuaiter

Palestine Development & Investment Co. Mr. Sharhabil Al-Zaim

Arab Bank Mr. Basel Abdel Nabi

Al-Maseera International Company Mr. Ma'moon Abu Shahla

GMS holdings Co. Mr.Ghaiath Sukhtian

Birzeit Pharmaceutical Co. Mr. Talal Nasiruddin

Palestine Development & Investment Co. Mr. Leith Muneeb Rashid Al Masri

Palestine Development & Investment Co. Mr. Samir Othman Halileh

Aswaq for Investment Portfolios L.L.C. Mr. Bassem Abd Alhaleem

Executive Management: (PALTEL Group)

Ammar Aker Chief Executive Officer

Salameh Kalil Chief Financial Officer

Kamal Ratrout Chief Technical Officer

Mahmod Yasin Chief Strategic Planning Officer

Imad Laham Public Relations Senior Director

Waleed Ftieha Supply Chain Senior Director

Sameer Masri Human Resources Director

Mazen Najjar Chief Internal Auditor

Khalil Hamad Secretary of the Board of Directors

Hatem Al Natsheh Regulation Affairs Director

Fareeda Diab Director of Investor Relations

Khaled Hijjeh Planning And Quality Assurance Director

Neda Morrar International Corporate Affairs Director

5Page|



6Page|

PALTEL Group’s Investment in Associates:

2012 2011

CompanyCountry of

incorporationPercentage

Value

( In thousands JD)Percentage

Value

(In thousands JD)

VTEL Holding

Company

United Arab

Emirates25.3% 22,334 25.3% 27,834

PALAQAR For

Real Estate Dev.

& Management

Co.

Palestine - - 40.3% 690

Jericho Gate For

real estate

Investment

Palestine 50% 15,956 50% 15,600

Shareholders for more than 5% of the group capital

2012 2011

Name

Number of shares

Owned in

PALTEL

PercentageNumber of shares

Owned in PALTELPercentage

PADICO 40,086,874 30.46% 40,400,374 30.69%

Palestine Investment Fund (PIF) 11,156,498 8.48% 11,000,000 8.36%



7Page|

Ownership Structure:

Major Shareholders

Name Number of Shares Percentage

Palestine Development & Investment (PADICO) 40,092,975 30.46%

Palestine Investment Fund (PIF) 11,161,800 8.48%

Arab Bank Investments - ARBK 5,975,775 4.54%

Cairo Amman Bank - CABK 5,462,438 4.15%

Rasmala Investment Bank 3,211,650 2.44%

PADICO, 30.46%

Palestine Investment Fund

, 8.48%

Free Float, 61.06%



8Page|

PALTEL Group Companies:

• Palestine Telecommunications Co. (PALTEL)

Palestine Telecommunications Co. (PALTEL) was established in 1995 as a public

shareholding company in Palestine. It started its operations on January 1st, 1997, with

paid-in capital of 45 million JD as an operator and provider of all types of

telecommunication services.

Key Performance Indicators:

• Fixed line subscribers grew at 1.4% from the end of 2012 to reach 402 thousand lines

by the end of the first half of 2013.

• The Average Monthly Revenue Per Subscriber reached 13.57 JD/subscriber at the end

of the first half of 2013, compared with 13.61 JD/subscriber at the end of 2012,

decreased by 0.3%.

358

371363

385

396402

330

340

350

360

370

380

390

400

410

2008 2009 2010 2011 2012 1st H 2013

Number of Fixed Lines

(Thousands)

•Number of ADSL subscribers reached 203 thousand by the end of the first half of

2013, with a growth rate of 9.6% in comparison to the end of 2012.



9Page|

7292

108

156185

203

0

50

100

150

200

250

2008 2009 2010 2011 2012 1st H 2013

Number of ADSL Subscribers

(Thousands)

• Palestine Cellular Communications Co. (Jawwal)

Jawwal was established in 1999 as the first cellular company in Palestine, the company is

fully owned by PALTEL’s Group; it has obtained its license from Palestinian National

Authority in 1996. Jawwal’s market share formed 79% of the Palestinian market at the

end of 2012.

Key Performance Indicators:

• Jawwal subscribers have reached 2.62 million by the end of the first half of 2013,

increased by 1.6% in comparison with the end of 2012.

1.31

1.8

2.252.42

2.58 2.62

0

0.5

1

1.5

2

2.5

3

2008 2009 2010 2011 2012 1st H 2013

Number of Jawwal subscribers

(millions)



10Page|

• The Average Monthly Revenue Per Subscriber decreased by 5.1% to reach 8.7

JD/subscriber in the first half of 2013, compared with 9.2 JD/subscriber by the end of

2012.

13.712.6

10.5 10.49.2

0

2

4

6

8

10

12

14

16

2008 2009 2010 2011 2012

The Average Monthly Revenue Per Subscriber

• Hadara Investment Company (Hadara)

Hadara Technologies was established in 2005 through the acquisition and merging of the

main four internet services providers. Hadara provides Internet Access & Connectivity,

Business Networking Services and Hosting Services.

• Reach Communication Services Co. (Reach)

Reach company was established on the first quarter of 2009, it’s the first Contact Center

in Palestine. Reach accommodates all the group’s call centers for all its operations fixed,

mobile, and data services in one integrated center. The center serves the group customers

more efficiently but also attracts other customers desiring to benefit from a new host of

services in customer care services and optimal answering of queries and Telemarketing,

Tele sales, Quick phone surveys, and opinion polls, Data banks and Information guides

and services.



11Page|

• Hulul IT Company (Hulul)

Hulul offers a well-balanced portfolio of turnkey solutions across information,

communication and technologies. Hulul aims to serve and support PALTEL Group

companies from supporting technical systems for fixed-line, mobile and Internet and

support programs in addition to a variety of companies’ applications and managing the

database management systems as well as technical services. Hulul has begun operating

on July 1st, 2006.

• Palmedia for Multimedia Services Co. (Palmedia)

Palmedia was established in 2005, it provides multi-media and marketing

communications services. 75% of its shares are owned by the Palestine

Telecommunications Company PALTEL, and the 25% is owned by JAWWAL.



12Page|

Trading Summary:

4.34.44.54.64.74.84.955.15.25.35.4

435440445450455460465470475480

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13

Al Quds Index PALTEL

2008 2009 2010 2011 2012

1st H

2013

Number of shares

Subscribed 131,625,000 131,625,000 131,625,000 131,625,000 131,625,000 131,625,000

Market Capitalization

(USD) 650,227,500 676,552,500 694,980,000 696,296,250 677,868,750 631,800,000

Number of Traded

Shares 50671360 19,622,320 23,510,626 18,191,089 13,731,826 6,762,597

Value of Traded

Shares486,248,619 160,963,837 176,774,739 133,403,099 100,263,578 48,085,720

Highest Trading Price 8.24 6.55 5.82 5.55 5.58 5.30

Lowest Trading Price 4.21 4.50 5.04 4.95 4.40 4.64

Close Price 4.94 5.14 5.28 5.29 5.15 4.80

Turnover Ratio 38.50% 14.91% 17.86% 13.82% 10.43% 5.14%



13Page|

0.00

100,000,000.00

200,000,000.00

300,000,000.00

400,000,000.00

500,000,000.00

600,000,000.00

2008 2009 2010 2011 2012 1st H 2013

Value of Traded Shares

580,000,000

600,000,000

620,000,000

640,000,000

660,000,000

680,000,000

700,000,000

720,000,000

2008 2009 2010 2011 2012 1st H 2013

Market Capitalization (USD)

486,248,619.00

160,963,837 176,774,739133,403,099

100,263,578

48,085,720

4.94

5.14

5.28 5.29

5.15

4.80

4.50

4.60

4.70

4.80

4.90

5.00

5.10

5.20

5.30

5.40

0.00

100,000,000.00

200,000,000.00

300,000,000.00

400,000,000.00

500,000,000.00

600,000,000.00

2008 2009 2010 2011 2012 1st H 2013

Number of Traded Shares Close Price

38.50%

14.91%17.86%

13.82%10.43%

5.14%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

2008 2009 2010 2011 2012 1st H 2013

Turnover Ratio

8.24

6.555.82 5.55 5.58 5.30

4.21 4.50 5.04 4.954.40 4.64

0.00

2.00

4.00

6.00

8.00

10.00

2008 2009 2010 2011 2012 1st H 2013

Highest Trading Price Lowest Trading Price



14Page|

Financial Summary:

Currency : JD 2008 2009 2010 2011 2012

(Financial Ratio's)

Return on Assets (ROA) 19.31% 13.24% 15.66% 15.79% 13.32%

Return on Equity (ROE) 26.80% 20.03% 22.06% 21.17% 17.91%

Earnings Per Share (EPS) 67.75% 53.44% 65.59% 68.94% 62.40%

Gross Profit Margin (GPM) 78.65% 75.94% 76.69% 77.84% 77.56%

Net Profit Margin (NPM) 29.82% 22.32% 25.52% 24.49% 22.45%

Total Assests Turnover (TAT) 64.74% 59.31% 61.37% 64.47% 59.34%

Retained Earnings/Paid In Capital 1.17 1.31 1.61 1.90 2.13

Book Value(B.V) 2.53 2.67 2.97 3.26 3.48

P/B.V 1.95 1.93 1.78 1.62 1.48

P/E 7.29 9.62 8.05 7.67 8.25

Total Debt/Total Equity 0.39 0.51 0.41 0.34 0.34

Total Debt/Total Assets 0.28 0.34 0.29 0.25 0.26

Equity Multiplier 1.39 1.51 1.41 1.34 1.34

Net working capital 87,767,000 70,553,001 114,288,000 93,879,000 60,597,000

Current Ratio 1.85 1.65 2.15 1.95 1.50

(Summary Of Financial Position Items)

Total Assets 461,950,000 531,270,001 551,261,000 574,842,000 616,521,000

Total Liabilities 129,162,000 180,085,000 159,887,000 146,112,000 157,948,000

Owners' Equity 332,788,000 351,185,000 391,374,000 428,730,000 458,573,000

Current assets 190,637,000 178,360,001 213,260,000 192,609,000 182,304,000

Account receivables 63,156,000 63,313,000 69,642,000 73,963,000 89,500,000

Inventory 6,347,000 11,271,000 8,926,000 6,592,000 8,881,000

Noncurrent assets 271,313,000 352,910,000 338,001,000 382,233,000 434,217,000

Current Liabilities 102,870,000 107,807,000 98,972,000 98,730,000 121,707,000

Accounts Payable 41,144,000 31,245,000 34,623,000 32,414,000 41,907,000

Non Current Liabilities 26,292,000 72,278,000 60,915,000 47,382,000 36,241,000

Paid in capital 131,625,000 131,625,000 131,625,000 131,625,000 131,625,000

Retained earnings 154,451,000 172,136,000 212,403,000 250,497,000 279,979,000

(Summary Of Income Statements Items)

Revenues 299,064,000 315,092,000 338,300,000 370,605,000 365,852,000

Cost of the services (63,842,000) (75,817,000) (78,858,000) (82,128,000) (82,095,000)

Gross Profit 235,222,000 239,275,000 259,442,000 288,477,000 283,757,000

Administrative and operating expenses (136,779,000) (134,920,000) (147,692,000) (161,036,000) (171,698,000)

Loss from investments (1,590,000) (16,280,000) (9,723,000) (18,169,000) (6,845,000)

Net Profit After Tax 89,180,000 70,335,000 86,336,000 90,744,000 82,132,000

(Summary Of Cash Flow Items)

Net Cash Flows From Operating Activates137,260,000 111,726,000 143,056,000 167,828,000 149,093,000

Net Cash Flows Used In Investing Activates(29,690,000) (120,859,000) (68,277,000) (106,267,000) (100,595,000)

Net Cash Flows From Financing Activates(59,936,000) (4,492,000) (68,261,000) (67,897,000) (66,482,000)

Increase (decrease) In Cash & Cash

Equivalents47,634,000 (13,625,000) 6,518,000 (6,336,000) (17,984,000)



15Page|

Financial Analysis

Balance Sheet Analysis:

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

2008 2009 2010 2011 2012 1st H 2013

Total Assets

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

2008 2009 2010 2011 2012 1st H 2013

Current assets

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

2008 2009 2010 2011 2012 1st H 2013

Total non current assets

Assets:

PALTEL Group total assets decreased

by 4.48% (27,626,000 JD) by the end of

the first half of 2013 reaching

588,895,000 JD, compared to

616,521,000 JD by the end of 2012. This

decrease was mainly due to the decrease

in the current assets which decreased by

13.76% to reach 157,225,000 JD by the

end of the first half of 2013 compared to

182,304,000 JD by the end of 2012.

The reason for the declining in current

assets was mainly due to the decrease in

accounts receivables, which decreased

by 18.52% amounted to 72,926,000 JD

by the end of the first half of

2013, compared to 89,500,000 JD by the

end of 2012, and due to the decrease in

cash and cash equivalents which reached

28,407,000 JD by the end of the first

half of 2013, compared to 46,213,000

JD by the end of 2012, decreasing by

38.53%.

It’s worth mentioning that PALTEL

Group investment in associates reached



JD by the end of 2012, decreasing by

11.26%. It should be noted that financial

assets available for sale increased by

4.55% (3,852,000 JD) amounted to


half of 2013, in comparison to

84,718,000 JD by the end of 2012.



Page| 16

Liabilities:

PALTEL Group total liabilities decreased

by 5.38% (8,491,000 JD) reaching



JD by the end of 2012. This decrease was

mainly due to the decrease in current

liabilities, more specifically in accounts

payable which decreased to 33,540,000

JD by the end of the first half of 2013,

compared to 41,907,000 JD by the end of

2012. It should be noted that other

current liabilities increased by 7.28%

amounted to 64,612,000 JD by the end of

the first half of 2013.

0

20,000,000

40,000,000

60,000,000

80,000,000

2008 2009 2010 2011 2012 1st H 2013

Total Non-current Liabilities

0 20,000,000 40,000,000 60,000,000 80,000,000

100,000,000 120,000,000 140,000,000 160,000,000 180,000,000 200,000,000

2008 2009 2010 2011 2012 1st H 2013

Total Liabilities

0

50,000,000

100,000,000

150,000,000

2008 2009 2010 2011 2012 1st H 2013

Total current liabilities



17Page|

Owner’s Equity:

PALTEL Group total shareholder’s equity decreased by 4.17% (19,135,000 JD) to reach

439,438,000 JD by the end of the first half of 2013, compared to 458,573,000 JD by the

end of 2012. This decrease was mainly due to the decrease in retained earnings, which

decreased by 13,890,000 JD, to reach 266,089,000 JD by the end of the first half of 2013,

where the reason for this declining in retained earnings was mainly due to the distribution

of cash dividends of 59,231,000 JD.

Available-for-sale reserve also played an important role in the declining of shareholder’s

equity, reaching 5,836,000 JD by the end of the first half of 2013, compared to 593,000

JD by the end of 2012, increasing by 5,243,000 JD.

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

2008 2009 2010 2011 2012 1st H 2013

Owner’s Equity

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

2008 2009 2010 2011 2012 1st H 2013

Retained earnings



18Page|

Income Statement Analysis:

Revenues & Gross Profit:

PALTEL Group operating revenues reached 182,956,000 JD by the end of the first half of

2013, compared to 182,716,000 JD during the same period in 2012, increasing (slight

increase by 0.13%). This increase in operating revenues was mainly due to the increase in

the digital services revenues, which increased by 29.5% in comparison to the first half of

2012, this increase was also due to the increase in fixed line communications revenues,

which increased by 9.8% in comparison to the first half of 2012, while wireless

communications revenues and media revenues decreased. The average growth rate in

PALTEL Group operating revenues was 5.25% for the last five years.

299,064,000 315,092,000

338,300,000 370,605,000 365,852,000

182,716,000 182,956,000

0

100,000,000

200,000,000

300,000,000

400,000,000

2008 2009 2010 2011 2012 1st H 20121st H 2013

Revenues (JD)

Operating Sectors (JD)

1st H 2013Fixed-Lines

Wireless

Communications

(JAWWAL)

Digital

ServicesMedia Total

Revenues 41,567,000 129,552,000 11,174,000 663,000 182,956,000

% of Total Revenues 22.7% 70.8% 6.1% 0.4% 100%



19Page|

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

Fixed-Lines Wireless Communications

(JAWWAL)

Digital Services Media

Revenues by sectos 1st H 2012 Revenues by sectos 1st H 2013

Fixed-Lines22.72%

Wireless Communications

(JAWWAL)70.81% Digital Services

6.11%

Media0.36%

Revenues Per Sectors (JD)

Total Services costs decreased by 8.76% to reach 37,913,000 JD by the end of the first

half of 2013, compared with 41,555,000 JD by the end of the first half of 2012, therefore

PALTEL Gross Profit (Operating Profit) increased by 2.75%. This increase was reflected

in the improvement shown in gross profit margins as it went up from 77.26% to 79.28%.



20Page|

Total Expenses & Net Profit:

PATEL Group operating and administrative expenses increased by 4.82% (3,981,000 JD)

during the first half of 2013, compared to the same period of 2012. It should be noted

that loss from investments amounted to 566,000 JD by the end of the first half of 2013,

in comparison to 3,518,000 JD by the end of the first half of 2012, its worth mentioning

that this loss is affected by share of associates and the change in fair value of financial

assets held for trading.

PALTEl Group’s net profit went up from 41,392,000 JD during the first half of 2012, to

45,341,000 JD during the same period of 2013, increasing 9.54%. This increase in net

profit reflected positively in EPS as It went up from 0.314 JD during the first half of

2012 to 0.344 during the first half of 2013.

89,180,000

70,335,000

86,336,000 90,744,000

82,132,000

41,392,000

45,341,000

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

90,000,000

100,000,000

2008 2009 2010 2011 2012 1st H 20121st H 2013

Net Profit



21Page|

DuPont Analysis

DuPont method was used to analyze PALTEL Group’s ROE.

This method breaks the ROE into three parts:

ROE = ROA * Equity multiplier

ROE = (Net Profit Margin * Total Assets turnover) * Equity multiplier

Net Profit Margin = Net Profit / Sales (measures operating efficiency)

Total Asset’s Turnover = Sales / Total Assets (measures efficiency in using assets)

Equity Multiplier = Total Assets / Total Equity or 1+ (liability / O.E) (measures financial leverage)

2008 2009 2010 2011 2012

5 Yrs.

Average

Change

Net Profit 89,180,000 70,335,000 86,336,000 90,744,000 82,132,000 -0.69%

Revenues 299,064,000 315,092,000 338,300,000 370,605,000 365,852,000 5.25%

Total Assets 461,950,000 531,270,001 551,261,000 574,842,000 616,521,000 7.57%

Total Liabilities 129,162,000 180,085,000 159,887,000 146,112,000 157,948,000 6.92%

Total Equity 332,788,000 351,185,000 391,374,000 428,730,000 458,573,000 8.37%

Return on Assets (ROA) 19.31% 13.24% 15.66% 15.79% 13.32% -6.98%

Return on Equity (ROE) 26.80% 20.03% 22.06% 21.17% 17.91% -8.64%

Net Profit Margin (NPM) 29.82% 22.32% 25.52% 24.49% 22.45% -5.80%

Total Assets Turnover

(TAT)64.74% 59.31% 61.37% 64.47% 59.34% -1.95%

Equity Multiplier 1.39 1.51 1.41 1.34 1.34 -0.61%



22Page|

• PALTEL Group’s ROE is decreasing, the trend is moving downward, with an average

change of 8.64% for the last five year. This decrease in the ROE was mainly due to the

decrease in Net Profit Margin (average decrease of 5.80% for the last five years), and

due to the decrease in Total Assets Turnover (average decrease of 1.95% for the last five

years), and also due to the decrease in Equity Multiplier (average decrease of 0.61% for

the last five years).

• Net Profit Margin (NPM) components witnessed an average decrease of 0.69% for

PALTEL Group’s net profit, and average increase of 5.25% for revenues for the last five

years, which led to a total decrease in NPM.

• It should be noticed that the decrease in Total Assets Turnover (TAT) was due to the

reason that the average increase in total assets by 7.57% for the last five years was

higher than the average increase in revenues, this difference led to a total decrease in

total assets turnover.

• Equity Multiplier also affected the downtrend in the ROE; this decrease in equity

multiplier was mainly due to the fact that the average increase in total equity was higher

than the average increase in total liabilities for the last five years.

ROE = NPM * TAT * E.M

19.31%

13.24%15.66% 15.79%

13.32%

26.80%

20.03%22.06% 21.17%

17.91%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2008 2009 2010 2011 2012

Return on Assets (ROA) Return on Equity (ROE)



23Page|

64.74%

59.31%

61.37%

64.47%

59.34%

56.00%

58.00%

60.00%

62.00%

64.00%

66.00%

2008 2009 2010 2011 2012

Total Assests Turnover (TAT)

1.39

1.51

1.41

1.34 1.34

1.25

1.30

1.35

1.40

1.45

1.50

1.55

2008 2009 2010 2011 2012

Equity Multiplier

29.82%

22.32%25.52% 24.49%

22.45%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

2008 2009 2010 2011 2012

Net Profit Margin (NPM)



24Page|

Dividend Policy:

2008 2009 2010 2011 2012

Earnings Per Share 0.678 0.534 0.656 0.689 0.624

Cash Dividends 40% 35% 40% 40% 45%

Stock Dividends - - - - -

Payout Ratio 0.590 0.655 0.610 0.580 0.721

Retention Ratio 0.410 0.345 0.390 0.420 0.279

Dividend Yield Return (DYR%) 8.11% 7.09% 7.78% 7.58% 8.51%

0.5900.655 0.610 0.580

0.721

0.4100.345 0.390 0.420

0.279

0.000

0.200

0.400

0.600

0.800

2008 2009 2010 2011 2012

Payout Ratio Retention Ratio

8.11%7.09%

7.78% 7.58%8.51%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

2008 2009 2010 2011 2012

Dividend Yield Return (DYR%)

The Dividend Yield was calculated based on the initial price of each year.



25Page|

Key Financial Indicators:

Financial Ratios related to the Balance Sheet:

2008 2009 2010 2011 2012 1st H 2013

Retained Earnings/Paid In

Capital1.17 1.31 1.61 1.90 2.13 2.02

Book Value(B.V) 2.53 2.67 2.97 3.26 3.48 3.34

P/B.V 1.95 1.93 1.78 1.62 1.48 1.44

P/E 7.29 9.62 8.05 7.67 8.25 7.69

Total Debt/Total Equity 38.81% 51.28% 40.85% 34.08% 34.44% 34.01%

Total Debt/Total Assets 27.96% 33.90% 29.00% 25.42% 25.62% 25.38%

Equity Multiplier 1.39 1.51 1.41 1.34 1.34 1.34

Net working capital 87,767,000 70,553,001 114,288,000 93,879,000 60,597,000 43,583,000

Current Ratio 1.85 1.65 2.15 1.95 1.50 1.38

7.29

9.628.05 7.67 8.25 7.69

0.00

2.00

4.00

6.00

8.00

10.00

12.00

2008 2009 2010 2011 2012 1st H 2013

P/E

2.53 2.672.97

3.263.48 3.34

0.000.501.001.502.002.503.003.504.00

2008 2009 2010 2011 2012 1st H 2013

Book Value(B.V)

87,767,00070,553,001

114,288,000

93,879,000

60,597,00043,583,000

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

2008 2009 2010 2011 2012 1st H 2013

Net working capital

1.851.65

2.151.95

1.50 1.38

0.00

0.50

1.00

1.50

2.00

2.50

2008 2009 2010 2011 2012 1st H 2013

Current Ratio



26Page|

Financial Ratios related to the Income Statement:

2008 2009 2010 2011 20121st H

2012

1st H

2013

Return on Assets (ROA) 19.31% 13.24% 15.66% 15.79% 13.32% 7.17% 7.70%

Return on Equity (ROE) 26.80% 20.03% 22.06% 21.17% 17.91% 10.00% 10.32%

Earnings Per Share (EPS) 0.678 0.534 0.656 0.689 0.624 0.314 0.344

Gross Profit Margin

(GPM)78.65% 75.94% 76.69% 77.84% 77.56% 77.26% 79.28%

Net Profit Margin (NPM) 29.82% 22.32% 25.52% 24.49% 22.45% 22.65% 24.78%

Total Assets Turnover

(TAT)64.74% 59.31% 61.37% 64.47% 59.34% 31.65% 31.07%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

2008 2009 2010 2011 2012

Gross Profit Margin (GPM)

Net Profit Margin (NPM)

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2008 2009 2010 2011 2012

Return on Assets (ROA)

Return on Equity (ROE)

0.678

0.534

0.656 0.6890.624

0.000

0.100

0.200

0.300

0.400

0.500

0.600

0.700

0.800

2008 2009 2010 2011 2012

Earnings Per Share (EPS)

64.74%

59.31%

61.37%

64.47%

59.34%

56.00%57.00%58.00%59.00%60.00%61.00%62.00%63.00%64.00%65.00%66.00%

2008 2009 2010 2011 2012

Total Assests Turnover (TAT)



27Page|

Bibliography:

• PALTEL Annual Reports (2008,2009,2010,2011,2012,6/2013)

• www.paltel.ps

• www.pex.ps

• www.pma.ps

• Ross et.al, 2005, Corporate Finance, 7 th edition: Mc Graw Hill.

• Ross et .al, 2008, Modern financial Management, 8th ed : Mc Graw-Hill.

• Gitman, 2009, Principles of Managerial Finance, 9th edition: Addison P.569

• Thomas, 2007, "Modern Econometrics", Addison Wesley

http://www.paltel.ps/

http://www.paltel.ps/

http://www.pex.ps/

http://www.pex.ps/

http://www.pma.ps/

http://www.pma.ps/



28Page|

Disclaimer:

This report was prepared by the research team at United Securities for the purposes of

providing information only, and should not be considered as advice or recommendation

in investment areas, it’s not allowed under any circumstances to re-print, publish, copy,

or distribute this document in any way without the prior written confirmation of the

Company.

The information and opinions contained in this document have been published in good

faith and from reliable sources, but the company is not responsible for the accuracy of

information contained below. There are risks in all types of investment, that for United

or its employees do not bear any responsibility for any losses or damage that may arise

from relaying on some or all of the information contained in this report.

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