4Q14 review: Earnings ahead of SFC estimate; Maintain Buy
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Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
4Q14 review: Earnings ahead of SFC estimate; Maintain Buy
Rating Summary Recommendation
4Q14 net profit ahead of SFC estimate but misses consensus: Othaim reported 4Q14
Buy
Target price (SAR)
133.0
Upside/ (downside)
27%
headline net profit of SAR74m (+6% yoy, +76% qoq) that has beaten SFC estimate by c.6% but missed consensus by c.5%. While revenue of SAR1,341m (+15% yoy, +10% qoq) has
Stock Details
beaten our estimate by c.3%, gross profit/EBITDA/EBIT was c.14%/8%/10% higher than our
Closing price*
forecasts. Consequently EBITDA margin stood at c.7.4% vs. SFC est c.7.0% which we see as a positive. Management commentary suggested that while strong yoy EBIT growth (c.14%) was a function of strong yoy growth in revenues (c.16%), softer yoy net profit growth
SAR
104.5
SAR mn
4,703
Mn
45
52-Week High
SAR
115.2
52-Week Low
SAR
68.0
Market capitalization Shares outstanding
(c.6%) was due to c.SAR3m loss in an affiliate of one of its subsidiaries.
Price chg. (3 months)
New stores hold key to mid-term growth while a fast growing fragmented industry
EPS 2015E
offers opportunities: We see Othaim as a play on KSA organized food & grocery retail
Ticker (Reuters/ Bloomberg)
potential. While the broader industry is growing at a reasonably fast c.8%/year with shopping habits shifting to supermarkets/hypermarkets, the market still remains highly fragmented (unorganized retail c.75% share). This in our view creates a fertile ground for an organized
%
-7.2
SAR
5.24
4001.SE
AOTHAIM AB
*Price as of January 21, 2015 Key Shareholding (%)
player with a solid B/S, strong FCF and extensive distribution network like Othaim to invest in
Al Othaim Holding Co.
growth and increase market share (c.4% now after Panda c.10%). All in all, while we forecast
Abdullah Bin Saleh Ali Al Othaim
2014-16E earnings CAGR of c.14%, investors should closely monitor progress of new stores
Public
(SFC est 8-10/year vs. management guidance of 10-12) as that would account for c.60% of
Source: Tadawul
27.7 6.0 66.3
the earnings growth. Trades at 2015E P/E of 19.9x; maintain Buy: After an impressive c.69% increase in stock price (Tadawul Retail c.33%, Tadawul Consumer c.32%, Tadawul c.-2%) since 2014 beginning, Othaim trades at 2015E P/E of 19.9x (KSA Retail average 19.4x, EM peers 20.9x, DM peers 18.8x), which we think is undemanding, considering Othaim’s industry position and growth prospects. All in all, post publication of 4Q14 results, it seems Othaim’s performance
Key Ratios 2015E
2016E
P/E (x)
19.9
17.3
EV/EBITDA (x)
12.7
11.2
1.9
2.2
Dividend yield (%)
Source: Company, Saudi Fransi Capital analysis
is largely on track with our estimates and we maintain our Buy rating with an unchanged SAR 133/share target price.
Stock price movement vs. TASI
4Q14A
4Q14E
%diff
Cons*
%dev
3Q14
%qoq
4Q13
%yoy
1,341
1,302
3%
1,289
4%
1,225
10%
1,173
16%
252
221
14%
Na
Na
195
29%
231
9%
99
92
8%
Na
Na
64
55%
88
13%
7.4%
7.0%
EBIT
72
66
10%
Na
Na
37
96%
64
14%
Net Profit
74
70
6%
78
-5%
42
76%
70
6%
SAR mn
Revenues
320 270 220
Gross Profit
170
EBITDA margin
Na
5.2%
120 70
7.5%
Jan-13 Jan-13 Mar-13 Apr-13 May-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
EBITDA (est)
Othaim
Tadawul
Source: Tadawul Source: Company, Saudi Fransi Capital analysis, * Bloomberg consensus
Sector Coverage Dipanjan Ray [email protected] +966-11-2826861 AbdulAziz Jawdat [email protected] +966-11-2826856
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price.
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
Contacts RESEARCH & ADVISORY DEPARTMENT [email protected]
SAUDI FRANSI CAPITAL Call Centre 800-125-9999 Website www.sfc.sa
SAUDI FRANSI CAPITAL LLC C.R. 1010231217, PO Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh
Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
Disclaimer This report is prepared by Saudi Fransi Capital (“SFC”), a fully-fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than what he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this report may be reproduced without the written permission of SFC. Neither this report nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.
Saudi Fransi Capital LLC; C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office – Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
4Q14 review: Earnings ahead of SFC estimate; Maintain Buy
Rating Summary Recommendation
4Q14 net profit ahead of SFC estimate but misses consensus: Othaim reported 4Q14
Buy
Target price (SAR)
133.0
Upside/ (downside)
27%
headline net profit of SAR74m (+6% yoy, +76% qoq) that has beaten SFC estimate by c.6% but missed consensus by c.5%. While revenue of SAR1,341m (+15% yoy, +10% qoq) has
Stock Details
beaten our estimate by c.3%, gross profit/EBITDA/EBIT was c.14%/8%/10% higher than our
Closing price*
forecasts. Consequently EBITDA margin stood at c.7.4% vs. SFC est c.7.0% which we see as a positive. Management commentary suggested that while strong yoy EBIT growth (c.14%) was a function of strong yoy growth in revenues (c.16%), softer yoy net profit growth
SAR
104.5
SAR mn
4,703
Mn
45
52-Week High
SAR
115.2
52-Week Low
SAR
68.0
Market capitalization Shares outstanding
(c.6%) was due to c.SAR3m loss in an affiliate of one of its subsidiaries.
Price chg. (3 months)
New stores hold key to mid-term growth while a fast growing fragmented industry
EPS 2015E
offers opportunities: We see Othaim as a play on KSA organized food & grocery retail
Ticker (Reuters/ Bloomberg)
potential. While the broader industry is growing at a reasonably fast c.8%/year with shopping habits shifting to supermarkets/hypermarkets, the market still remains highly fragmented (unorganized retail c.75% share). This in our view creates a fertile ground for an organized
%
-7.2
SAR
5.24
4001.SE
AOTHAIM AB
*Price as of January 21, 2015 Key Shareholding (%)
player with a solid B/S, strong FCF and extensive distribution network like Othaim to invest in
Al Othaim Holding Co.
growth and increase market share (c.4% now after Panda c.10%). All in all, while we forecast
Abdullah Bin Saleh Ali Al Othaim
2014-16E earnings CAGR of c.14%, investors should closely monitor progress of new stores
Public
(SFC est 8-10/year vs. management guidance of 10-12) as that would account for c.60% of
Source: Tadawul
27.7 6.0 66.3
the earnings growth. Trades at 2015E P/E of 19.9x; maintain Buy: After an impressive c.69% increase in stock price (Tadawul Retail c.33%, Tadawul Consumer c.32%, Tadawul c.-2%) since 2014 beginning, Othaim trades at 2015E P/E of 19.9x (KSA Retail average 19.4x, EM peers 20.9x, DM peers 18.8x), which we think is undemanding, considering Othaim’s industry position and growth prospects. All in all, post publication of 4Q14 results, it seems Othaim’s performance
Key Ratios 2015E
2016E
P/E (x)
19.9
17.3
EV/EBITDA (x)
12.7
11.2
1.9
2.2
Dividend yield (%)
Source: Company, Saudi Fransi Capital analysis
is largely on track with our estimates and we maintain our Buy rating with an unchanged SAR 133/share target price.
Stock price movement vs. TASI
4Q14A
4Q14E
%diff
Cons*
%dev
3Q14
%qoq
4Q13
%yoy
1,341
1,302
3%
1,289
4%
1,225
10%
1,173
16%
252
221
14%
Na
Na
195
29%
231
9%
99
92
8%
Na
Na
64
55%
88
13%
7.4%
7.0%
EBIT
72
66
10%
Na
Na
37
96%
64
14%
Net Profit
74
70
6%
78
-5%
42
76%
70
6%
SAR mn
Revenues
320 270 220
Gross Profit
170
EBITDA margin
Na
5.2%
120 70
7.5%
Jan-13 Jan-13 Mar-13 Apr-13 May-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14
EBITDA (est)
Othaim
Tadawul
Source: Tadawul Source: Company, Saudi Fransi Capital analysis, * Bloomberg consensus
Sector Coverage Dipanjan Ray [email protected] +966-11-2826861 AbdulAziz Jawdat [email protected] +966-11-2826856
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price.
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
Contacts RESEARCH & ADVISORY DEPARTMENT [email protected]
SAUDI FRANSI CAPITAL Call Centre 800-125-9999 Website www.sfc.sa
SAUDI FRANSI CAPITAL LLC C.R. 1010231217, PO Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh
Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Abdullah Al Othaim Markets Co. (Othaim) KSA Consumer Sector | 4Q 2014 Preliminary Results | January 22, 2015
Disclaimer This report is prepared by Saudi Fransi Capital (“SFC”), a fully-fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than what he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this report may be reproduced without the written permission of SFC. Neither this report nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.
Saudi Fransi Capital LLC; C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office – Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
