reports
- Nauman Khan
- Sarah Albassam
Al Othaim: Q2 23 Company Update
We maintain our Neutral rating on Al Othaim with a revised PT of SAR13.9 (from SAR12.3). We believe A Othaim’s outlook is positive given 1) consumer’s down-trading driven by the rising costs of living and 2) the company’s aggressive store expansion plan which is a key growth catalyst going forward. However, we believe all positives are already priced in. The stock is trading at 2023f P/E and EV/EBITDA of 26.0x and 13.7x vs the global peer group average of 22.9x and 12.2x, respectively. * Agg...
- Nauman Khan
Al Othaim: Q4 22 results analysis – Better results on higher margins
AlOthaim reported a strong set of set of Q4 22 results, with net profit increasing by 31.4% yoy (-73.6% qoq) to SAR197mn. This is higher than the SNB Capital and consensus estimates of SAR159mn and SAR153mn, respectively. Revenues increased by 16.1% yoy (+6.1% qoq) to SAR2.49bn and came in-line with our estimates of SAR2.41bn. We believe the positive variance in earnings is mainly driven by higher gross margins which expanded by 13bps yoy to 25.8% vs our estimates of 24.4%. We believe higher ...
- Nauman Khan
Al Othaim: Q3 22 Results Analysis | Weak results on lower gross margin...
Al-Othaim reported a net income of SAR745mn in Q3 22, which include one-off capital gain of SAR701.2mn from the sale of land in Medina. Adjusted for the one-off, Al-Othaim reported a weak set of Q3 22 results, with a net profit of SAR43.4mn vs a net profit of SAR44.9mn in Q3 21 and SAR46.6 in Q2 22. This is lower than SNB Capital and consensus estimates of SAR52.4mn and SAR51.5mn, respectively. Revenues increased by 17.6% yoy (+4.0% qoq) to SAR2.35bn and were in-line with our our estimates of...
- Nauman Khan
Al Othaim: Q2 22 earnings call summary
FINANCIAL PERFORMANCE * Total revenue increased by 3.8% yoy (-8.4% qoq) to SAR2.25bn in Q2 22, mainly driven by new stores opening. The decline on the sequential basis was due to Ramadan rolling back to Q1 vs Q2 last year. * Gross profits increased by 14.3% yoy (-6.3% qoq) to SAR458mn, while gross margins expanded to 20.1% in Q2 22 vs 19.2% in Q2 21. They were marginally lower than 20.3% recorded in Q1 22. The yoy increase in gross margins was due to lower promotional activity compared...
- Nauman Khan
Al Othaim: Weak results on higher opex and non-opex
AlOthaim reported a weaker than expected set of Q2 22 results, with net profit declining by 2.7% yoy (-48.9% qoq) to SAR46.6mn. This is lower than the SNB Capital and consensus estimates of SAR64.1mn and SAR73.3mn, respectively. Revenues increased by 3.8% yoy (-8.4% qoq) to SAR2.26bn, vs our estimates of SAR2.38bn. We believe the variance in earnings is mainly driven by 1) higher than expected opex due to increased selling costs associated with the new stores, 2) an increase in non-opex drive...
- Nauman Khan
Al Othaim: A key beneficiary of consumers' down-trading
We maintain our Neutral rating on Othaim with a revised PT of SAR123.0. We believe the key growth drivers going forward are 1) the company's store expansion plans and 2) consumers' down trading (due to a high inflationary environment). However, we expect high inflation levels to keep margins under pressure. We factor in an average of 13 new stores per year for Othaim, reach 356 stores by 2024f. The stock is trading at 2022f PE and EV/EBITDA of 26.6x and 12.9x vs the global peer average of 21....
- Nauman Khan
Alothaim: Lowest quarterly net profits on record since Q3 16
AlOthaim reported a weaker than expected set of Q3 21 results with a net income of SAR44.9mn (-26.1% yoy, -6.4% qoq), their lowest quarterly net profits on record since Q3 16. This is lower than the SNB Capital and consensus estimates of SAR58.3mn and SAR57.0mn, respectively. We believe the variance from our estimates is the result of a decline in gross profits which stood at SAR400mn, compared to our estimates of SAR417mn, due to the higher than expected product discounts. As a result, gross...
- Alaa Tolba
- Sahar Shalaby
AOTHAIM AB | A challenging year ahead; Downgrade to Neutral
Stretched valuation, with tough base to beat. Demand on groceries should ease in 2021e, on normalised consumption patterns, further magnified by spending pressures, that triggered market-wide promotions, which started to reflect on Al-Othaim’s 2H20 LFL sales (-5-10%). Yet, we expect Al-Othaim to maintain flat 2021e sales, despite 2020 high base, as expansions resume, while benefiting from trading down activities, due to its clear value proposition (loyalty programme >c75% of sales), with earning...
- Nauman Khan
Alothaim: Fair valuation, remain Neutral
We remain Neutral on Al Othaim with a revised PT of SAR124.2. The revision in PT is due to lower interest rates and higher target multiples. We expect revenues to grow at a CAGR of 4.4% between 2019-2025f, driven by 1) store expansions and 2) higher share of modern trade. The stock trades at 2021f P/E and EV/EBITDA of 26.2x and 13.3x respectively, which reflects all the positives.
- Nauman Khan
Alothaim: Weak Q3 results on lower sales
Al Othaim reported a weaker-than-expected set of Q3 20 results, with net income declining -19.5% yoy to SAR60.7mn. This is lower than NCBC and consensus estimates of SAR85.2mn and SAR95.3mn, respectively. The earnings weakness primarily came from lower than expected sales, which declined -6.4% yoy to SAR1.81bn and were significantly lower than our estimates of SAR2.38bn. However, this was partially offset by expansion in gross margins by +206bps yoy to 22.7%, higher than our estimates of 19.0...
- Dave Nicoski
- Ross LaDuke
Vermilion Int'l Compass: Global Equity Strategy
Major Indexes Testing Resistance Positive news flow surrounding COVID-19 is encouraging on many fronts, notably from a human and economic perspective (e.g., peaking infections/deaths in Italy & Spain, certain European governments making plans to ease lockdowns, and that US death projections were likely overestimated). Still, despite encouraging news and the relief rally in global equities, history tells us that this is a fairly standard bear market rally in terms of its magnitude, making us bel...
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- Dave Nicoski
- Ross LaDuke
Vermilion Int'l Compass: Global Equity Strategy
Global Equities Stumbling Again We continue to believe global equities (ACWI-US) are likely to test the recent low made on March 23, with an undercut of roughly 10% also in the cards. This expectation is supported by price action during prior major waterfall declines in past recessionary periods. It is also worth noting that 15-25% rallies are to be expected within bear markets -- potentially multiple. During 2001-2002 the S&P 500 had two 20-25% rallies, and both ended up failing and breaking t...
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- Alaa Tolba
- Khaled Sadek
Best to outperform as consolidation plays out
Remain buyers as traditional players lose ground. The departure of >1mn expats, along with the unchanged spending outlook, took their toll on Saudi’s grocery sector in 2018 (-2% y-o-y), and weighed on Al-Othaim’s LFL sales growth (-7.5%). We expect the shift towards modern retail to further accelerate in 2019, as smaller expat-run groceries unable to sustain rising opex, likely do not have the infrastructure to implement the VAT (deadline for players with turnover of SAR375k-1mn in Dec-18). We c...
- Alaa Tolba
- Khaled Sadek
Solid expansions, brand loyalty drive displacement
On an expansion spree. Operating in a fragmented market (57% unorganised), coupled with Saudi’s unchanged spending outlook, supports Al-Othaim’s strategy to further extend its aggressive store roll-out, targeting 25 stores p.a., and expand its market share. We remain buyers of Al-Othaim, as it continues to be a play on displacement, despite overlooked cost pressures from expat fees, leaving 2018 clean EPS flat y-o-y (vs. 6% y-o-y for consensus). We raise our 12M TP by c31% to SAR196/share to ref...
- Alaa Tolba
AOTHAIM AB | Sector’s top pick; nationwide expansion on track
Remain buyers as company delivers on expansions. Al-Othaim aims to garner more market share by expanding in Saudi’s underserved areas, displacing unorganised retail (57% of grocery market). We believe this is achievable given the aggressive roll-out of stores y-t-d (27 in Saudi; 16 in Egypt). We, thereby, raise our 12M TP by 25% to SAR150/share to reflect increased 2018 openings and on lower capex/sqm (18 stores in Saudi and 10 in Egypt vs. our previous forecast of 8 and 2, respectively). Upside...
- Imen BEN AHMED
Strong set of Q4 2016 results
Al Othaim delivered a strong quarter. Q4 earnings were at an all-time high (+5.9% to SAR94.5m) backed by a high top-line level record (+24.1% to SAR1.928bn). FY2016 revenues grew up by 18.8% to SAR7.172bn. This evolution was mainly due to the development of the distributor’s network (174 stores: 160 in Saudi Arabia and 14 in Egypt as of Q4 2016). However, the annual gross margin rose by 120 bps to 17.7%.
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- Imen BEN AHMED
Pressure on margins and profit
At end June 2016, Al Othaim’s revenues jumped by 16.8% yoy to SAR3.660bn. The gross margin improved to 16.8% from 14.7% in year ago period. The EBIT increased by 10.2% to SAR101.647m with an almost stable EBIT margin at 2.8%. However, the net income declined by 6.9% yoy to SAR97.308mn due to higher employee expenses (including promotions), and also due to higher transportation and electricity costs. Thus, the net margin losses 70 bps to 2.6%.
- Khaled Sadek
Remain buyers despite market and cost pressures
Overweight despite macro headwinds. We reduce our TP by a marginal 2% on a 2016-20e EBITDA cut of 5% mainly due to slower sales/sqm growth (3% vs. 5% previously) and higher costs. But we remain buyers as Al-Othaim’s positive like-forlike growth is sustainable, in our view, thanks to its loyalty program and defensive sales portfolio, yet at a lower rate (guidance is 5% for 2017). 1H16 revenue growth outpaced the market (17% y-o-y vs. 2% y-o-y for Panda and Farm Superstores), fuelled by additions ...
Solid growth but lower margins
Al Othaim group posted a 14.9% increase in its FY2015 consolidated sales to SAR6.036bn (+18.7% to SAR1.553bn in Q4 2015 revenues). In 2015, the company opened 13 new outlets taking the total number of outlets to 142 vs. 129 in 2014.The retailer’s gross profit improved by 14.6% to SAR998.47m. The gross margin was almost stable at 16.5%. On an annual basis, the EBIT was slightly up by 3.6% to SAR209.77M. Thus, the EBIT margin stood at 2.8% (-50 bps).
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