The financial projections of Saudi Telecom Company (STC) are developed for the next three fiscal years including 2019, 2020, and 2021 on an annual basis. The company’s stock symbol is STC, and its last reported financial statements were for the year ended on December 31, 2018. The financial projections are prepared by calculating the growth rates of different elements of the three financial statements including balance sheet, cash flow statement, and income statement based on the last three-year data including 2016, 2017, and 2018 (Saudi Telecom Company – consolidated financial statements 2017; STC – condensed consolidated financial statements 2018).
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In this financial modeling, annual growth rates are used for estimating the financials of each year. For this purpose, simple annualized rates were used, and in some cases, average growth rates were also used. The projected income statements are developed by estimating the revenue growth rate and the proportion of costs and expenses to the company’s sales. The annual values of assets, liabilities, and equity are estimated as the closing values of the year. The company’s total assets are projected based on the historical growth rate, and other financial elements are estimated based on their proportion to assets. Similarly, annual operating, financing, and investing cash flows are calculated, and the net change in cash is reported as the sum of the three types of cash flow. The current stock price of STC is SAR107.6 (Saudi Telecom Co. – overview 2019), and it is noted that the future estimated price will range between SAR90 and SAR95.
It is indicated that the net profit of the company is expected to increase in 2019 and then decline in 2020 and 2021. The netbook value is estimated to decrease in 2019 and then increase in the next two years. Moreover, the cash flow statement shows that the company will have negative net cash flow in the first two quarters of 2019 and then there will be positive cash flows. The company’s cash position is expected to improve in the next years. The sensitivity analysis has been carried out based on different growth rates of revenue, gross profit margin, SG&A expenses, and other income. It is estimated that the company will remain profitable in all three scenarios that are base, best, and weak.
Saudi Telecom Co. – overview 2019, Web.
Saudi Telecom Company – consolidated financial statements 2017, Web.
STC – condensed consolidated financial statements 2018, Web.