EUR 60.35 For Business Accounts Only

MABANEE KK | Saudi expansion compliments local recovery story

All eyes on Avenues Riyadh. 2022 is shaping up as a big capex year for Avenues Riyadh, set to be the city’s largest super regional mall. We expect Mabanee’s market cap to start reflecting the valuation of Avenues Riyadh, as construction milestones are achieved. The mall’s valuation represents c1.3x the current market cap and 48% of our TP, which carries 157% upside. Excluding Avenues Riyadh, our TP implies c23% upside, with the trading discount-to-NAV at 2x the two-year historical average.

Play on improving local macro picture. Mabanee is well positioned to capitalise on Kuwait’s recovering spending pattern. Consumers have strongly emerged from the COVID-19 pandemic, as evident in robust retail lending and PoS figures, overcoming inflationary pressures. Higher oil prices should further delay the passing of reforms, implying limited risks from these on the health of consumer spending.

Operational low-hanging fruits. Occupancy rates across Mabanee’s mall and hotel operations have been nicely recovering/expanding since last year (3pp gap to pre-COVID occupancy levels for Avenues Kuwait). We expect this to continue, as the easing of movement restrictions reflects on spending and travel trends. Mall footfall and hotel occupancy rates should support one another, given the linkage between Mabanee’s mall and hotel establishments in both Kuwait and Bahrain.

Pressure on leverage, FCF is for good cause. In line with accelerated construction in Riyadh, loan drawdowns will commence in 2022. This will double Mabanee’s net debt-to-equity by end-2024e, on our figures. CFO will continue to be healthy, on solid and stable operations elsewhere. Avenues Riyadh lends medium-term growth to an otherwise largely mature story. It gives exposure to the region’s highest potential consumption story on Saudisation, social changes, and Vision 2030 policies.