Saudi Arabia’s Mobily Jumps Most Since 2008 as Trading Resumes

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Etihad Etisalat Co., the Saudi Arabian telecom operator that has lost more than half its market value since October, climbed the most in more than six years after overhauling top management and restating financial results.

Mobily, as the company is known, surged 9.9 percent, the most since November 2008, to 38.70 riyals at the close in Riyadh. The shares were suspended Feb. 25 as the market regulato sought an explanation for a discrepancy in the company's 2014 results. The stock was the biggest gainer on the benchmark Tadawul All Share Index, which rose 0.6 percent.

Since its shares were halted from trading, Mobily restated its fourth-quarter loss to 3.4 billion riyals ($907 million), compared with a previously announced figure of 2.28 billion riyals, and said it expects to break a covenant on its loans. It also ousted Chief Executive Officer Khalid Omar Al Kaf and appointed Suliman bin Abdulrahman Al-Gwaiz as chairman to replace Abdulaziz Saleh Alsaghyir.

“The skeletons are out of the closet as investors think everything bad that has to be declared has been declared,” Sebastien Henin, who oversees $100 million as head of asset management at The National Investor in Abu Dhabi, said by phone. “Investors now expect some sort of clean up to put Mobily back on track.”

Breaking Covenant

The volume of shares traded was almost nine times the three-month daily average. Mobily’s 14-day relative strength index climbed to 55, the highest since Jan. 18, from about 30 last week. A level below 30 indicates to some analysts that securities have fallen too far.

The Riyadh-based operator said March 3 it expects to breach the net debt-to-earnings before interest, taxes, depreciation and amortization agreement on its long-term financing. The management is “confident” that discussions with the lenders to reset the covenant will be successful and the company doesn’t expect difficulties in future financing repayments and costs, it said in a statement. HSBC Holdings Plc is advising Mobily on the talks with the banks, three people familiar with matter told Bloomberg last week.

“There is now visibility on a possible breach of covenants and negotiations with the banks, hence the positive move today,” Henin said.

Mobily has lost about $8.5 billion of its market value since the beginning of November, when the regulator started a probe into possible violations related to its results. Alsaghyir’s personal company sold more than 9 million shares in Mobily last year, according to information posted on the Saudi Stock Exchange website. The bourse didn’t specify when the shares were sold.

Mobily, an affiliate of Emirates Telecommunications Corp. of the United Arab Emirates, said Feb. 25 it won’t pay a dividend for the fourth quarter. It’s the second-worst performing stock among 169 Saudi equities so far this year, according to data compiled by Bloomberg.