Saudi Airlines Catering Company - Gulfbase
Catering Agriculture & Food Industries Sector CATERING AB - 6004.SE July 20, 2016
Saudi Airlines Catering Company Recommendation
Overweight
Fair Value (SAR)
00.911
Price as of July 19, 2016
.495.
Expected Return
6592%
Tadawul Symbol
6004.SE
Company Data 52 Week High (SAR)
171.50
52 Week Low (SAR)
82.00
YTD Change
-21.7%
3-Month Average Volume (Thousand Shares)
75
Market Cap. (SAR Million)
7,830
Market Cap. (USD Million)
2,088
Outstanding Shares (Million Shares)
82
Major Shareholders ( > 5% ) Saudi Arabian Airlines Corporation
04951%
Strategic Catering Company
64920%
52-week Stock Price Movement Catering
Agriculture and Food
Tadawul Index
110
100 90
Q2 2016
Saudi Airlines Catering Company (SACC) unveiled its interim financial results of Q2 2016 reporting bottom line of SAR 145.1 million tumbling 17.5% from 175.8 in Q2 2015 missing our estimates and analysts’ consensus of SAR 152 million and SAR 154 million, respectively, thus concluding the first half of 2016 at SAR 286.7 million versus SAR 343.3 million in H1 2015 slumping 16.5%. Revenues growth decelerated in Q2 2016 to 0.9%, thus the top line hit SAR 570.3 million versus SAR 565.2 million in Q2 2015 as revenues of the in-flight catering segment fell by 3%. The segment contributes around 70% of total revenues. In addition, revenues of the non-flight catering segment dwindled by 11%, thus contributing 8% of total revenues. In contrast, sales from retail and business lounge segments skyrocketed 21% and 29%, respectively, with the segments constituting 19% of total revenues. As for the first half of 2016, top line surged 0.4% coming in at SAR 1,130 million compared to SAR 1,126 million in the comparable period of 2015 fueled by a drop of 3% in in-flight catering revenues. Sales from retail and business lounges segments recorded substantial growth of 21% and 28%, respectively. Non-flight segment posted a decline of 10% compared to the first half of 2015. Operating income languished at SAR 143.4 million in Q2 2016 compared to SAR 162.8 million in the same period of last year slipping 11.9%, thus H1 operating income reached SAR 282.9 million plummeting 12.9% compared to the same period of last year with Q2 2015 boosted by reversal of doubtful debt provisions.
80 70
60 50
Source: Tadawul
Quarterly Sales (SAR mn) and ROS Sales
ROS
700
40%
600
35%
500
30%
400
25%
300
20%
200
15%
100
10%
0
The results of SACC came short of our estimate of SAR 152 million owing to the slump in revenue from in-flight catering, rising labor costs and rent expenses which added more pressure on SACC profits. It is noteworthy that revenues in 2015 were enhanced by the royal decrees to pay extra two monthly salaries which lured more demand for flights during that period. In light of Q2 results, we have updated our model, thus we expect top line of SAR 2.3 billion and bottom line of SAR 621 million in 2016. The model yielded a fair value of SAR 119 per share, thus we assign an “overweight” recommendation.
5%
FY - Ending December Source: Company Filings, Albilad Capital Research Estimates Turki Fadaak Research & Advisory Manager [email protected] Saeed I. Alghamdi Financial Analyst [email protected]
EV/EBITDA
2014A
2015A
2016E
2017F
11.11
10.97
10.63
9.85
EV/Sales
3.28
3.22
3.15
2.75
P/E
12.78
12.25
11.97
11.23
Dividend Yield
7.1%
7.3%
7.3%
7.3%
P/BV
6.39
5.94
6.37
5.46
P/Revenue Revenue Growth
3.67
3.46
3.35
2.94
14.4%
5.8%
3.3%
14.1%
Source: Company Filings, Albilad Capital Research Estimates
1
Catering Agriculture & Food Industries Sector CATERING AB - 6004.SE
July 20, 2016 Income Statement (SAR mn)
2013A
2014A
2015A
2016E
2017F
Total Revenues
1,867
2,136
2,261
2,335
2,664
COGS
1,160
1,361
1,436
1,505
1,747
SG&A
146
123
131
138
172
Provisions
24
21
30
EBITDA
538
631
664
692
745
EBITDA Margin
29%
30%
29%
30%
28%
Depreciation and Amortization
15
18
25
38
47
NAI
522
613
639
654
697
ROS
28%
29%
28%
28%
26%
Balance Sheet (SAR mn)
2013A
2014A
2015A
2016E
2017F
Cash and marketable securities
893
677
304
224
252
Accounts Receivables
57
85
103
115
131
-
-
205
206
206
Inventory
77
87
142
112
153
Others
424
619
580
661
734
Total ST Assets
1,451
1,468
1,335
1,319
1,476
Net Fixed Assets
98
191
458
543
629
Others
140
150
55
57
57
Total LT Assets
238
342
513
599
685
1,689
1,809
1,848
1,918
2,161
Accounts Payable
146
162
194
175
201
Accrued Expenses
269
241
137
160
173
3
56
54
207
207
Total ST Liabilities
418
460
384
542
581
Noncurrent Liabilities
112
124
146
146
146
Equity
1,159
1,226
1,318
1,230
1,435
Total Liabilities and Equity
1,689
1,809
1,848
1,918
2,161
2013A
2014A
2015A
2016E
2017F
Investments
Total Assets
Others
Cash Flow (SAR mn) Cash flow from Operations
411
585
480
4..
208
Cash flow from Financing
)525(
)485(
)424(
)442(
)555(
Cash flow from Investing
)026(
)01.(
)088(
)060(
)000(
Change in Cash
)06.(
)612(
)056(
)81(
65
Source: Company Filings, Albilad Capital Research Estimates
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
2
Catering Agriculture & Food Industries Sector CATERING AB - 6004.SE
July 20, 2016
Albilad Capital Rating Methodology Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover, the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set and the possibility of ascent/descent. Overweight:
The Target share price exceeds the current share price by ≥ 10%.
Neutral:
The Target share price is either more or less than the current share price by < 10%.
Underweight:
The Target share price is less than the current share price by ≥ 10%.
To be Revised:
No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting for more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital Research.
Albilad Capital Client Services E-mail: Tel:
[email protected] +966-11-203-9888
Toll-free: 800-116-0001
Research & Advisory
E-mail: [email protected] Tel: +966-11-290-6250 Website: www.albilad-capital.com/en/research
Brokerage
Asset Management E-mail: Tel:
[email protected] +966-11-290-6280
E-mail: Tel:
[email protected] +966-11-290-6230
Investment Banking E-mail: Tel:
[email protected] +966-11-290-6256
Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report.
3
Saudi Airlines Catering Company Recommendation
Overweight
Fair Value (SAR)
00.911
Price as of July 19, 2016
.495.
Expected Return
6592%
Tadawul Symbol
6004.SE
Company Data 52 Week High (SAR)
171.50
52 Week Low (SAR)
82.00
YTD Change
-21.7%
3-Month Average Volume (Thousand Shares)
75
Market Cap. (SAR Million)
7,830
Market Cap. (USD Million)
2,088
Outstanding Shares (Million Shares)
82
Major Shareholders ( > 5% ) Saudi Arabian Airlines Corporation
04951%
Strategic Catering Company
64920%
52-week Stock Price Movement Catering
Agriculture and Food
Tadawul Index
110
100 90
Q2 2016
Saudi Airlines Catering Company (SACC) unveiled its interim financial results of Q2 2016 reporting bottom line of SAR 145.1 million tumbling 17.5% from 175.8 in Q2 2015 missing our estimates and analysts’ consensus of SAR 152 million and SAR 154 million, respectively, thus concluding the first half of 2016 at SAR 286.7 million versus SAR 343.3 million in H1 2015 slumping 16.5%. Revenues growth decelerated in Q2 2016 to 0.9%, thus the top line hit SAR 570.3 million versus SAR 565.2 million in Q2 2015 as revenues of the in-flight catering segment fell by 3%. The segment contributes around 70% of total revenues. In addition, revenues of the non-flight catering segment dwindled by 11%, thus contributing 8% of total revenues. In contrast, sales from retail and business lounge segments skyrocketed 21% and 29%, respectively, with the segments constituting 19% of total revenues. As for the first half of 2016, top line surged 0.4% coming in at SAR 1,130 million compared to SAR 1,126 million in the comparable period of 2015 fueled by a drop of 3% in in-flight catering revenues. Sales from retail and business lounges segments recorded substantial growth of 21% and 28%, respectively. Non-flight segment posted a decline of 10% compared to the first half of 2015. Operating income languished at SAR 143.4 million in Q2 2016 compared to SAR 162.8 million in the same period of last year slipping 11.9%, thus H1 operating income reached SAR 282.9 million plummeting 12.9% compared to the same period of last year with Q2 2015 boosted by reversal of doubtful debt provisions.
80 70
60 50
Source: Tadawul
Quarterly Sales (SAR mn) and ROS Sales
ROS
700
40%
600
35%
500
30%
400
25%
300
20%
200
15%
100
10%
0
The results of SACC came short of our estimate of SAR 152 million owing to the slump in revenue from in-flight catering, rising labor costs and rent expenses which added more pressure on SACC profits. It is noteworthy that revenues in 2015 were enhanced by the royal decrees to pay extra two monthly salaries which lured more demand for flights during that period. In light of Q2 results, we have updated our model, thus we expect top line of SAR 2.3 billion and bottom line of SAR 621 million in 2016. The model yielded a fair value of SAR 119 per share, thus we assign an “overweight” recommendation.
5%
FY - Ending December Source: Company Filings, Albilad Capital Research Estimates Turki Fadaak Research & Advisory Manager [email protected] Saeed I. Alghamdi Financial Analyst [email protected]
EV/EBITDA
2014A
2015A
2016E
2017F
11.11
10.97
10.63
9.85
EV/Sales
3.28
3.22
3.15
2.75
P/E
12.78
12.25
11.97
11.23
Dividend Yield
7.1%
7.3%
7.3%
7.3%
P/BV
6.39
5.94
6.37
5.46
P/Revenue Revenue Growth
3.67
3.46
3.35
2.94
14.4%
5.8%
3.3%
14.1%
Source: Company Filings, Albilad Capital Research Estimates
1
Catering Agriculture & Food Industries Sector CATERING AB - 6004.SE
July 20, 2016 Income Statement (SAR mn)
2013A
2014A
2015A
2016E
2017F
Total Revenues
1,867
2,136
2,261
2,335
2,664
COGS
1,160
1,361
1,436
1,505
1,747
SG&A
146
123
131
138
172
Provisions
24
21
30
EBITDA
538
631
664
692
745
EBITDA Margin
29%
30%
29%
30%
28%
Depreciation and Amortization
15
18
25
38
47
NAI
522
613
639
654
697
ROS
28%
29%
28%
28%
26%
Balance Sheet (SAR mn)
2013A
2014A
2015A
2016E
2017F
Cash and marketable securities
893
677
304
224
252
Accounts Receivables
57
85
103
115
131
-
-
205
206
206
Inventory
77
87
142
112
153
Others
424
619
580
661
734
Total ST Assets
1,451
1,468
1,335
1,319
1,476
Net Fixed Assets
98
191
458
543
629
Others
140
150
55
57
57
Total LT Assets
238
342
513
599
685
1,689
1,809
1,848
1,918
2,161
Accounts Payable
146
162
194
175
201
Accrued Expenses
269
241
137
160
173
3
56
54
207
207
Total ST Liabilities
418
460
384
542
581
Noncurrent Liabilities
112
124
146
146
146
Equity
1,159
1,226
1,318
1,230
1,435
Total Liabilities and Equity
1,689
1,809
1,848
1,918
2,161
2013A
2014A
2015A
2016E
2017F
Investments
Total Assets
Others
Cash Flow (SAR mn) Cash flow from Operations
411
585
480
4..
208
Cash flow from Financing
)525(
)485(
)424(
)442(
)555(
Cash flow from Investing
)026(
)01.(
)088(
)060(
)000(
Change in Cash
)06.(
)612(
)056(
)81(
65
Source: Company Filings, Albilad Capital Research Estimates
Presentation of financial statements may differ from the company’s presentation. However, there is no impact on the final results.
2
Catering Agriculture & Food Industries Sector CATERING AB - 6004.SE
July 20, 2016
Albilad Capital Rating Methodology Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover, the evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set and the possibility of ascent/descent. Overweight:
The Target share price exceeds the current share price by ≥ 10%.
Neutral:
The Target share price is either more or less than the current share price by < 10%.
Underweight:
The Target share price is less than the current share price by ≥ 10%.
To be Revised:
No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting for more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital Research.
Albilad Capital Client Services E-mail: Tel:
[email protected] +966-11-203-9888
Toll-free: 800-116-0001
Research & Advisory
E-mail: [email protected] Tel: +966-11-290-6250 Website: www.albilad-capital.com/en/research
Brokerage
Asset Management E-mail: Tel:
[email protected] +966-11-290-6280
E-mail: Tel:
[email protected] +966-11-290-6230
Investment Banking E-mail: Tel:
[email protected] +966-11-290-6256
Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report.
3
