Saudi Airlines Catering Co

Transcription

Food Service – Industrial
CATERING AB: Saudi Arabia
12 May 2015
Rating
OVERWEIGHT
Target price
SAR195.0 (19.6% upside)
Current price
SAR163.0
Omar Al-Mohamdy
Analyst, Research Department
Tel +966 11 2119238, almohamdyo@alrajhi-capital.com
Key themes & implications
Given the expected increase in Saudia’s fleet, Hajj
pilgrims and rising disposable income in Saudi
Arabia, SACC is fundamentally well positioned to
continue its dominance in the catering space.
Furthermore, SACC is planning to ramp up its
presence in the non-airline catering market, which
will serve as the main catalyst for growth. We
revise our target price to SAR195 and upgrade to
Overweight rating as the upside potential is more
than 10%.
Valuation
12/15E
12/16E
12/17E
P/E (x)
12/14A
22.2
19.9
16.8
14.6
P/B (x)
11.8
11.1
10.1
8.9
EV/EBITDA (x)
21.3
18.7
15.6
13.3
Dividend Yield
3.8%
4.1%
4.7%
5.1%
Source: Company data, Al Rajhi Capital
Performance
Price Close
Relative to TADAWUL FF (RHS)
134.0
210.0
128.3
200.0
122.6
190.0
116.9
180.0
111.1
170.0
105.4
160.0
99.7
150.0
94.0
RSI10
220.0
70
30
-10
04/14
07/14
10/14
01/15
Source: Bloomberg, Company data, Al Rajhi Capital
Company summary
SACC is the largest airline catering company in
Saudi Arabia with around 95% market share.
Although it mainly caters to Saudia flights it also
has other local and international carriers as its
clients. SACC also manages AlFursan Lounges on
behalf of Saudia and the Sky Sales business.
Saudia is the largest shareholder with 35.7%,
Strategic Catering Company LLC 33.33%, and the
rest is owned by the public.
Upgrade to OW: Solid Fundamentals
Saudi Airlines Catering Company (SACC) published its detailed Q1 2015
financial results, which were in line with our estimates. The airline segment’s
revenue grew 11% y-o-y, while the non-airline segment’s revenue jumped 51%
y-o-y. This confirms the management’s strategy to diversify away from the
airline industry into non-airline activities. The company is expected to further
diversify by catering to religious tourists and has bagged several remote-site
catering contracts. Thus, we expect the non-airline segment to report doubledigit growth over the next few years. Given the expected increase in Saudia’s
fleet, religious tourists, and rising disposable income in Saudi Arabia it is
fundamentally well positioned to continue its dominance in the catering space.
The company has solid financials with high cash, no debt, high margins, and
low capex. We revise our target price to SAR195 and upgrade to Overweight
rating as the upside potential is more than 10%.
Q1 result: Strong in-line numbers: SACC’s revenue of SAR560.3mn (+13% yo-y) was in line with our estimate of SAR551mn. The company reported a net
profit of SAR167.4mn (+3.5% y-o-y), largely in line with our estimate of
SAR171mn. The revenue growth was mainly driven by the strong performance of
its non-airline business (+51% y-o-y). However, given the low margin nature of
the non-airline segment the gross profit slightly decreased (-0.4% y-o-y). Clean
net profit stood at SAR176.4mn (+9.1% y-o-y).
Outlook for Q2: We believe the second quarter will be impacted by the major
sandstorm that hit the Gulf region, resulting in delay and cancellation of several
flights. However, we do not expect the impact to be significant as most flights
were rescheduled. Despite this, we expect revenues to grow by 16% y-o-y, and
net profit to grow by a healthy 13% y-o-y (~SAR186mn).
Investment themes intact: a) Focus on increasing capacity: SACC will open its
fourth production tunnel in Riyadh this year, which will scale up capacity to
36mn meals per year. b) Stable and exceptionally strong financials: cash-rich
company with no debt, along with excellent liquidity and profitability ratios. c)
High dividends: DPS for 2015 is expected to be SAR7.25, implying a yield of
~4%. d) Fundamentally strong: we expect rising disposable income, fastincreasing population, and the increase in religious tourists to be the core
drivers for SACC’s growth. The management’s efforts to ramp up SACC’s
presence in the non-airline market will also help to reduce its dependence on the
airline industry e) Assured future: The GACA’s initiatives to expand into major
international and regional airports will act as a catalyst for SACC’s growth.
Valuation and risks: SACC currently trades at a 2015E P/E ratio of 20.1x vs
21.9x for peers. We think the high PE is justified due to the above average
profitability and high growth business. We have revised our estimates and
accordingly we have revised our target price to SAR195, implying a ~19.6%
potential upside and upgrade to Overweight rating. We have arrived at our
target price giving equal weightage to DCF and relative valuations. However, any
downturn in Hajj activities will affect our valuation and hence our target price.
Period End (SAR)
12/13A
12/14A
12/15E
12/16E
12/17E
Revenue (mn)
1,867
2,136
2,485
2,902
3,321
Revenue Growth
Gross profit margin
EBITDA margin
10.7%
37.1%
29.9%
14.4%
36.3%
30.4%
16.3%
35.9%
29.4%
16.8%
36.4%
30.1%
14.4%
36.8%
30.5%
Net profit margin
30.5%
EPS
6.94
EPS Growth
ROE
51.3%
ROCE
42.9%
Capex/Sales
1.3%
30.6%
7.97
14.9%
54.9%
46.9%
5.2%
29.3%
8.86
11.1%
57.4%
49.4%
4.0%
29.6%
10.49
18.3%
62.7%
53.9%
3.5%
29.9%
12.12
15.5%
65.0%
55.7%
3.0%
Disclosures Please refer to the important disclosures at the back of this report.
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1
12 May 2015
Recent developments
Major sandstorm to slightly impact Q2
A major sandstorm had hit Riyadh and the Gulf region on April 2, 2015. The visibility was low
and as a result many flights were either cancelled or delayed. This development is expected to
leave a negative effect on the Q2 results. However, we think that the magnitude of the effect
will be negligible as most of the flights were rescheduled.
Dividend approved for Q1 2015
The company announced a dividend of SAR1.75 (Q1 2014: SAR1.5) per share for Q1 2015,
amounting to a total payment of SAR143.5mn. Based on this, the stock is trading at an annual
dividend yield of ~4%. In 2014, the company had paid a total dividend of SAR6.75 per share,
amounting to a total payment of SAR553.5mn.
Building a residential complex
SACC has announced its project for the residential complex in Dahban at Jeddah province
with an estimated cost of SAR200mn. The project will be financed from the company’s
operating cash flow and is expected to be completed on December 31, 2017. The complex will
be used in accommodating staff and renting out non-employees, which will have a positive
impact on the company given the lower rent cost and higher other revenue.
Investment themes
Airline industry
The airline industry has been growing rapidly in the past and according to the International
Air Transport Association (IATA), it is expected to grow at a CAGR of 6.9% over 2013-2017.
Saudi Arabian Airlines (Saudia) is the biggest domestic airline in Saudi Arabia, with 92%
market share (8% Nasair). As per the management estimate, the company enjoys ~95%
market share in the airline catering market with an exclusive catering contract with Saudia.
SACC will benefit from the passenger growth as around 90% of its revenue comes from the
airline industry.
1.
Capacity increased: In 2014, SACC had opened its third production tunnel in
Riyadh which increased its capacity to 27mn meals. The company plans a fourth
production tunnel in 2015, which will take its capacity to 36mn meals per year. This
new capacity is mainly to support the rising demand from airlines as well as to cater
to Hajj and Umrah pilgrims. The company is planning to open a new catering unit in
Medina in 2015.
2.
Large dividend player: Strong cash flow from operations and low capex
requirements enable the company to pay high dividends to its shareholders. SACC’s
policy is to maintain a dividend payout in the range of 60-80%. With a dividend
yield of ~ 4%, SACC is one of the best dividend-paying companies in the market.
SACC had paid SAR6.75 per share last year with a payout ratio of 84.6%. We have
included the company in our dividend portfolio.
3.
Summer and Hajj: SACC witnesses higher sales in the summer as well as during the
Hajj period – for 2015 this will be in Q2 and Q3. The increasing number of Hajj
pilgrims will serve as a catalyst for SACC’s growth, as it tries to cater to religious
tourists not only as airline passengers, but also while they are carrying out Hajj
activities.
4.
Strong increase in religious tourists: Fundamentally, we expect strong growth in
airline passengers driven by various factors such as preference of flying over driving,
increase in religious tourism owing to the expansion in Makkah and Medina, large
proportion of expatriates, etc. Apart from this, a fast growing economy will see an
increase in the airline usage, which will help SACC.
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12 May 2015
5.
Airline expansions: More importantly, the General Authority of Civil Aviation’s
(GACA) initiatives to expand into international and regional airports will have a
huge impact on SACC. King Khalid International Airport in Riyadh (KKIA) is
expected to absorb 35.5 million passengers per year in 2017. The airport currently
has the capacity to handle 18.5 million passengers (a CAGR of 24.3% over 20142017). King Abdulaziz International Airport in Jeddah (KAIA) is planning to expand
from 26.5 million to 43 million passengers a year in 2017 (a CAGR of 17.5% over
2014-2017). These will lead to an increase in flights serviced by SACC, thus boosting
its top-line.
Non-airline industry
SACC has been diversifying its business to reduce its dependence on airline activities by
entering into allied sectors such as non-airline catering and laundry services. Contrary to
airline catering where SACC enjoys a monopolistic arrangement with Saudia, the non-airline
catering market is highly competitive and fragmented with many players such as Tamimi
Global Company, Gulf Catering Company, and Saudi Catering & Contracting Company.
Although the market has lower margins and many entry barriers, SACC intends to diversify
its top-line by targeting companies that operate in remote sites and cater to Hajj tourists and
hospitals. We expect a high growth in this segment.
Business Model
SACC has mainly two business segments – airline and non-airline. The airline segment (90%
of its revenues in 2014) consists of in-flight catering, Sky Sales, and AlFursan lounges, while
the non-airline segment (remaining 10%) provides catering service to different companies
and laundry services. SACC is the largest airline catering company in Saudi Arabia with
around 95% market share. Although it mainly caters to Saudia flights it also has other local
and international carriers as its clients. Saudia, which is the national carrier of Saudi Arabia,
commands ~ 92% market share (of domestic air traffic). Saudia currently operates a fleet of
117 planes and expects to double this number in 7 years. Moreover, Saudia is the largest
shareholder of SACC with 35.7% ownership and also its biggest client.
Figure 1 Segmental forecast
100%
90%
4%
3%
3%
10%
80%
3%
3%
2%
2%
2%
2%
1%
1%
4%
3%
7%
4%
8%
4%
9%
10%
11%
11%
12%
12%
10%
5%
10%
5%
10%
6%
6%
10%
7%
8%
10%
9%
9%
9%
9%
5%
70%
60%
50%
40%
80%
77%
77%
75%
74.3%
73%
72%
71%
70%
70%
2012
2013
2014
2015
2016
2017
2018
2019
2020
30%
20%
10%
0%
2011
In-flight catering rev
Sky sales rev
Business lounge rev
Non-airlines rev
Other rev
In-Flight Catering
The in-flight catering segment (75% of its total revenue in 2014) provides a full range of
services such as menu-planning & costing, meal preparation, delivery of meals, beverages and
supplies to the aircraft. Saudia uses the full range of services, while other airlines use these
services only partially.
The company prepares these meals in its central production unit (CPU), which is located at
the King Khalid International Airport in Riyadh (KKIA). They receive the raw materials, cook
the meals, and then store it in freezers for up to 18 months. The company then sends these
meals to various catering units (CUs) located at the King Abdulaziz International Airport in
3
12 May 2015
Jeddah (KAIA), King Fahad International Airport in Dammam (KFIA), Prince Mohammed
Bin Abdulaziz International Airport in Madina (PMIA) and Cairo International Airport.
These meals can then be reheated whenever required. This ensures that the company can
deliver meals even during Ramadan and Hajj periods when the demand is high.
The company’s raw materials are supplied by different suppliers. SACC has a policy to
diversify among its vendors, and maintains two to three alternative sources for each product.
These products include water, juices, fish, meat, prawns, eggs, vegetables, rice, and flour.
AlBerri United Food Company, Siraj Medher, Astra Farms, and Halwani Brothers are the
main suppliers. We think this segment will continue to be the main source of revenue,
contributing around 74% to its top-line with a growth of 14% in 2015.
Sky Sales
Saudia and SACC had entered into an agreement in 2007, which gave the latter an exclusive
right to sell retail products on all Saudia flights. Sky Sales are operating on Saudia flights as
well as on NAS Flights. This segment had generated around 10% of SACC’s revenue in 2014
and we expect it to remain the same in 2015.
SACC purchase Sky Sales products directly from suppliers on a “sale or return basis”. Some of
these products are exclusively provided to SACC for a certain period of time. The catalogue is
prepared by the company and is updated around three times a year.
AlFursan Lounges
Saudia was granted a license by the General Authority for Civil Aviation (GACA) to operate
the AlFursan Lounges in all the international Airports in the Kingdom (i.e. KAIA, KFIA, KKIA
and PMIA) to serve the passengers of Saudia. The AlFursan Lounges at KAIA, KFIA, KKIA
and PMIA are operated by SACC on behalf of Saudia. This segment generated around 4% of
its total revenue in 2014 with a growth rate of 36%. Fees collected from airlines are based on
the number of passengers that use these lounges. The economy class passengers that
otherwise do not have access to the AlFursan Lounges can access by paying a fee. The services
provided at AlFursan Lounges include private seating & dining areas, hot & cold food and
internet connectivity. We expect the AlFursan lounges segment to continue its high growth
with a 30% increase in 2015.
Non-airline Business
Although this segment is small relative to the main business (around 10% of its total revenue
in 2014), and has lower margins than airline catering, the non-airline segment has lately
turned out to be significant for the company. By trying to capitalize on its catering market
expertise, existing production lines, and economies of scale, SACC’s management is working
toward diversifying the company’s revenue stream. The management’s main goal is to target
new clients in remote areas and Hajj & Umrah tourists. The company has been successful
adding new contracts in 2014 with a client retention rate of 98%. We think that the nonairline segment will see high growth over the next few years, with an estimated growth of
30% in 2015.
4
12 May 2015
Extremely stable financial performance
SACC’s revenues have grown at steady double-digit rates over the past. Total revenue growth
stood at 15.2%, 10.7%, and 14.4% in 2012, 2013, and 2014 respectively. However, the gross
margin has been under pressure as the revenue contribution from the lower margin
businesses such as Sky Sales, airline equipment, and non-airline catering has increased.
However, the operating margin has improved by 50bps from 29.2% in 2013 to 29.7% in 2014
because of lower personal costs and general & administrative expenses.
Figure 2 Operating profit
Figure 3 Total revenue
1,600
30.5%
5,000.0
4,500.0
1,400
30.0%
4,000.0
Title:
Source:
20%
Please fill in the values above to have them entered in your report
16%
18%
1,200
29.5%
1,000
800
29.0%
600
28.5%
3,500.0
14%
3,000.0
12%
2,500.0
10%
2,000.0
8%
1,500.0
6%
1,000.0
4%
500.0
2%
400
28.0%
200
0
27.5%
2011
2012
2013
2014
2015
Operating profit
2016
2017
2018
2019
-
0%
2020
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
operating margin
Total rev
growth
In addition, SACC’s net profit margin has been increasing gradually – it stood at 28.9%,
30.5% and 30.6% in the last three years. We expect the company to maintain its net
profitability at around 30%. As a result of this exceptional profitability, the return on equity is
55% and the return on assets is 36%. Even the liquidity ratios are good, with the current ratio
and quick ratio at 3.1 and 3 respectively. Notably, the receivables (mainly from Saudia) are
around 31% of the total assets with a collection period of more than 70 days.
With regard to its cash flow, cash flow from operations (CFO) has been declining in the past
couple of years (SAR786mn, SAR500mn, and SAR487mn in the past three years). The
decline in CFO was because of the high amount that Saudia had paid to SACC in 2012.
Nevertheless, SACC is expected to continue generating high CFO. Furthermore, the capex
was 1.2%, 1.3%, 5.2% of sales in 2012, 2013, and 2014 respectively. The high capex in 2014
was mainly due to the construction of the new catering unit at Medina’s new airport. We
assume that the company will maintain its capex at 2% of sales in the long run. Additionally,
SACC funds its capex through internal sources due to its strong CFO. Thus, with strong CFO
and low capex requirements, we believe SACC will be able to pay generous dividends. The
company’s dividend policy is to pay 60-80% of net income. With a dividend yield of ~ 4%,
SACC is one of the top dividend-paying companies in the Saudi market.
Figure 4 Cash Flow
1,000.0
900.0
876
844
786
800.0
737
658
700.0
584
600.0
500
467
500.0
487
399
400.0
300.0
261
214
162
200.0
100.0
109
59
100
20
2011
2012
2013
2014
(100.0)
CFO
CFI
-3
2015
2016
CFF
5
12 May 2015
Key opportunities
SACC’s competitive strengths ensure the stability of its business. The strong relationship with
Saudia and the fact that the airline catering market is characterized as a monopolistic market
with high entry barriers will help maintain its dominant position. Moreover, the company’s
high cash flow enables it to maintain a high payout ratio.
The General Authority for Civil Aviation (GACA) announced that Qatar Airways and Gulf Air
have been selected as the new airlines companies to operate domestic and international
flights from and to Saudi Arabia. For SACC, this is an opportunity to raise its airline market
share since it has the capability to serve these carriers.
Valuation and risks
Our fair price of SAR195 is based on a 50%-50% weight for DCF and relative valuations. This
implies an upside potential of ~19.6%. We have assigned an Overweight rating as the upside
potential is more than 10%.
For DCF we have incorporated the future developments in both the airline and non-airline
markets for the next ten years. We have used a WACC of 9% and a terminal growth rate of
3%. Based on the DCF, we arrive at a fair value of SAR213.
For relative valuation we use a forward earnings multiple of 21.9x (based on its peers). We
also adjust the net income as the company reports net income without deducting Zakat and
income tax. Therefore, to compare the company with its peers we use the net income post
zakat and income tax. Based on our relative valuation, we have a fair price of SAR178.
Risks to our valuation
•
Decrease in the number of Hajj pilgrims will affect SACC’s airline and non-airline
divisions, thus our valuation. However, it is unlikely that this will happen.
•
We are expecting a high growth in the non-airline cater business. However, if the
management finds difficulty in signing any new non-airline catering contracts this
can affect our valuation.
•
The airline industry is characterized by cyclicality. So during bad economic times
with low disposable income, the airline industry will suffer and consequently SACC’s
profitability will be hit.
•
SACC has just extended its contract with Saudia until December 31, 2019. The
termination of the contract will severely affect the company.
•
Food prices have been declining over the last couple of years; if it bounces back this
can increase costs and put the margins under pressure.
6
12 May 2015
Income Statement (SARmn)
Revenue
Cost of Goods Sold
Gross Profit
12/13A
12/14A
12/15E
12/16E
1,867
2,136
2,485
2,902
12/17E
3,321
(1,176)
(1,361)
(1,592)
(1,844)
(2,098)
1,058
1,223
692
775
893
S.G. & A. Costs
(146)
(141)
(186)
(218)
(249)
Operating EBIT
546
633
707
840
974
Government Charges
Cash Operating Costs
(1,309)
(1,487)
(1,755)
(2,030)
(2,307)
EBITDA
559
649
730
872
Depreciation and Amortisation
(13)
(15)
(23)
(32)
1,014
(40)
Operating Profit
546
633
707
840
974
Net financing income/(costs)
-
-
-
-
-
-
-
-
-
-
Forex and Related Gains
Provisions
Other Income
24
21
20
20
20
Net Profit Before Taxes
569
654
727
860
994
Taxes
-
-
-
-
-
Other Expenses
Minority Interests
Net profit available to shareholders
569
654
727
860
994
(451)
(554)
(596)
(688)
(745)
12/13A
12/14A
12/15E
12/16E
12/17E
82.00
82.00
82.00
82.00
82.00
CFPS (SAR)
7.10
8.16
9.14
10.88
12.61
EPS (SAR)
6.94
7.97
8.86
10.49
12.12
DPS (SAR)
5.50
6.75
7.27
8.39
9.09
Dividends
Transfer to Capital Reserve
Adjusted Shares Out (mn)
Growth
12/13A
12/14A
12/15E
12/16E
12/17E
Revenue Growth
10.7%
14.4%
16.3%
16.8%
14.4%
Gross Profit Growth
10.2%
11.9%
15.3%
18.4%
15.6%
EBITDA Growth
7.4%
16.1%
12.5%
19.5%
16.3%
Operating Profit Growth
7.7%
16.0%
11.6%
18.9%
15.9%
16.9%
14.9%
11.1%
18.3%
15.5%
14.9%
11.1%
18.3%
15.5%
Net Profit Growth
EPS Growth
Margins
12/13A
12/14A
12/15E
12/16E
12/17E
Gross profit margin
37.1%
36.3%
35.9%
36.4%
36.8%
EBITDA margin
29.9%
30.4%
29.4%
30.1%
30.5%
Operating Margin
29.2%
29.7%
28.4%
28.9%
29.3%
Pretax profit margin
30.5%
30.6%
29.3%
29.6%
29.9%
Net profit margin
30.5%
30.6%
29.3%
29.6%
29.9%
12/13A
12/14A
12/15E
12/16E
12/17E
42.9%
46.9%
49.4%
53.9%
55.7%
ROIC
1379.1%
504.5%
172.9%
201.8%
188.3%
ROE
Other Ratios
ROCE
51.3%
54.9%
57.4%
62.7%
65.0%
Effective Tax Rate
0.0%
0.0%
0.0%
0.0%
0.0%
Capex/Sales
1.3%
5.2%
4.0%
3.5%
3.0%
Dividend Payout Ratio
79.2%
84.6%
82.0%
80.0%
75.0%
Valuation Measures
12/13A
12/14A
12/15E
12/16E
12/17E
P/E (x)
25.4
22.2
19.9
16.8
14.6
P/CF (x)
24.9
21.6
19.3
16.2
14.0
P/B (x)
12.5
11.8
11.1
10.1
8.9
7.3
6.5
5.5
4.7
4.1
24.3
21.3
18.7
15.6
13.3
24.9
21.8
19.3
16.2
13.9
108.3
33.8
32.8
26.3
21.9
3.8%
4.1%
4.7%
5.1%
EV/Sales (x)
EV/EBITDA (x)
EV/EBIT (x)
EV/IC (x)
Dividend Yield
3.1%
7
12 May 2015
Balance Sheet (SARmn)
12/15E
12/16E
12/17E
893
677
851
878
967
Current Receivables
57
85
99
116
133
Inventories
77
87
99
116
133
424
623
671
784
897
1,451
1,471
1,721
1,894
2,129
Cash and Cash Equivalents
Other current assets
Total Current Assets
Fixed Assets
12/13A
12/14A
98
192
268
337
397
140
140
40
40
40
Other Intangible Assets
-
-
Total Other Assets
-
Total Non-current Assets
Investments
Goodwill
Total Assets
Short Term Debt
-
-
-
10
10
10
10
238
342
318
388
447
1,689
1,813
2,039
2,282
2,576
-
-
-
-
-
Trade Payables
Dividends Payable
3
4
14
37
52
Total Current Liabilities
418
464
608
723
829
Long-Term Debt
-
-
-
-
-
Other LT Payables
112
124
124
124
124
Other Current Liabilities
Provisions
-
-
-
-
-
Total Non-current Liabilities
112
124
124
124
124
Paid-up share capital
820
820
820
820
820
Total Reserves
339
406
487
615
803
Total Shareholders' Equity
1,159
1,226
1,307
1,435
1,623
Total Equity
1,159
1,226
1,307
1,435
1,623
Total Liabilities & Shareholders' Equity
1,689
1,813
2,039
2,282
2,576
12/17E
Minority interests
Ratios
12/13A
12/14A
12/15E
12/16E
Net Debt (SARmn)
(893)
(677)
(851)
(878)
(967)
Net Debt/EBITDA (x)
(1.60)
(1.04)
(1.17)
(1.01)
(0.95)
-77.1%
-55.2%
-65.1%
-61.2%
-59.6%
14.13
14.95
15.94
17.50
19.79
12/13A
12/14A
Net Debt to Equity
EBITDA Interest Cover (x)
BVPS (SAR)
Cashflow Statement (SARmn)
12/15E
12/16E
12/17E
569
654
727
860
994
Depreciation & Amortisation
13
15
23
32
40
Decrease in Working Capital
(87)
(192)
58
(54)
(54)
Net Income before Tax & Minority Interest
Other Operating Cashflow
-
-
Cashflow from Operations
495
477
(24)
(112)
Capital Expenditure
New Investments
Others
Cashflow from investing activities
Net Operating Cashflow
Dividends paid to ordinary shareholders
(140)
2
(162)
-
7
22
13
815
860
993
(99)
(102)
(100)
100
3
(109)
4
4
-
1
(101)
1
(99)
333
368
819
759
894
(449)
(553)
(585)
(665)
(731)
Proceeds from issue of shares
Effects of Exchange Rates on Cash
Other Financing Cashflow
Cashflow from financing activities
Total cash generated
Cash at beginning of period
Implied cash at end of year
Ratios
Capex/Sales
(43)
(44)
(60)
(67)
(75)
(492)
(597)
(645)
(732)
(806)
(159)
(228)
174
27
88
1,022
893
677
851
878
863
665
851
878
967
12/13A
12/14A
12/15E
12/16E
12/17E
1.3%
5.2%
4.0%
3.5%
3.0%
8
12 May 2015
Disclaimer and additional disclosures for Equity Research
Disclaimer
This research document has been prepared by Al Rajhi Capital Company (“Al Rajhi Capital”) of Riyadh, Saudi Arabia. It has been prepared
for the general use of Al Rajhi Capital’s clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or
manner, without the express written consent of Al Rajhi Capital. Receipt and review of this research document constitute your agreement
not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this document prior to
public disclosure of such information by Al Rajhi Capital. The information contained was obtained from various public sources believed to be
reliable but we do not guarantee its accuracy. Al Rajhi Capital makes no representations or warranties (express or implied) regarding the
data and information provided and Al Rajhi Capital does not represent that the information content of this document is complete, or free
from any error, not misleading, or fit for any particular purpose. This research document provides general information only. Neither the
information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment
products related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account
the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document.
Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or
investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may
not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that the price or value
of such securities and investments may rise or fall. Fluctuations in exchange rates could have adverse effects on the value of or price of, or
income derived from, certain investments. Accordingly, investors may receive back less than originally invested. Al Rajhi Capital or its
officers or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related
investments, including long or short positions in securities, warrants, futures, options, derivatives, or other financial instruments. Al Rajhi
Capital or its affiliates may from time to time perform investment banking or other services for, solicit investment banking or other business
from, any company mentioned in this research document. Al Rajhi Capital, together with its affiliates and employees, shall not be liable for
any direct, indirect or consequential loss or damages that may arise, directly or indirectly, from any use of the information contained in this
research document.
This research document and any recommendations contained are subject to change without prior notice. Al Rajhi Capital assumes no
responsibility to update the information in this research document. Neither the whole nor any part of this research document may be altered,
duplicated, transmitted or distributed in any form or by any means. This research document is not directed to, or intended for distribution to
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Additional disclosures
1. Explanation of Al Rajhi Capital’s rating system
Al Rajhi Capital uses a three-tier rating system based on absolute upside or downside potential for all stocks under its coverage
except financial stocks and those few other companies not compliant with Islamic Shariah law:
"Overweight": Our target price is more than 10% above the current share price, and we expect the share price to reach the target
on a 6-9 month time horizon.
"Neutral": We expect the share price to settle at a level between 10% below the current share price and 10% above the current
share price on a 6-9 month time horizon.
"Underweight": Our target price is more than 10% below the current share price, and we expect the share price to reach the target
on a 6-9 month time horizon.
2. Definitions
"Time horizon": Our analysts make recommendations on a 6-9 month time horizon. In other words, they expect a given stock to reach
their target price within that time.
"Fair value": We estimate fair value per share for every stock we cover. This is normally based on widely accepted methods
appropriate to the stock or sector under consideration, e.g. DCF (discounted cash flow) or SoTP (sum of the parts) analysis.
"Target price": This may be identical to estimated fair value per share, but is not necessarily the same. There may be very good
reasons why a share price is unlikely to reach fair value within our time horizon. In such a case we set a target price which differs
from estimated fair value per share, and explain our reasons for doing so.
Please note that the achievement of any price target may be impeded by general market and economic trends and other external
factors, or if a company’s profits or operating performance exceed or fall short of our expectations.
Contact us
Pritish Devassy, CFA
Senior Research Analyst
Tel : +966 11 211 9370
Email: devassyp@alrajhi-capital.com
Al Rajhi Capital is licensed by the Saudi Arabian Capital Market Authority, License No. 07068/37.
9

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