Savola Group Close to fair value - Al Rajhi Capital

Savola Group Company
Food-Diversified –Industrial
28 March 2012
We are expecting revenues for
2012 to reach SAR27.8mn
Income Statement (SARmn) 12/10A 12/11A 12/12E 12/13E 12/14E
Revenue 20,985 25,196 27,833 30,726 33,587
Cost of Goods Sold (17,614) (21,225) (23,357) (25,578) (28,104)
Gross Profit 3,370 3,971 4,475 5,148 5,483
Government Charges
S.G. & A. Costs (2,485) (2,707) (3,062) (3,533) (3,695)
Operating EBIT 886 1,263 1,414 1,615 1,788
Cash Operating Costs (19,286) (23,374) (25,756) (28,382) (31,003)
EBITDA 1,699 1,822 2,076 2,344 2,583
Depreciation and Amortisation (813) (558) (662) (729) (795)
Operating Profit 886 1,263 1,414 1,615 1,788
Net financing income/(costs) (218) (317) (388) (376) (376)
Forex and Related Gains - - - - -
Provisions - - - - -
Other Income 782 690 926 798 934
Other Expenses (284) (35) - - -
Net Profit Before Taxes 1,166 1,601 1,951 2,037 2,347
Taxes (140) (132) (190) (199) (219)
Minority Interests (139) (266) (336) (377) (446)
Net profit available to shareholders 887 1,202 1,426 1,461 1,682
Dividends (625) (650) (650) (650) (673)
Transfer to Capital Reserve - - - - -
We assume a dividend payout
ratio above 40% for the next
three year
We are expecting net profit
growth of 18.6% this year
We expect improvement in
retail and sugar margins to
boost overall margins
12/10A 12/11A 12/12E 12/13E 12/14E
Adjusted Shares Out (mn) 500.0 500.0 500.0 500.0 500.0
CFPS (SAR) 3.68 4.05 4.85 5.13 5.85
EPS (SAR) 1.773 2.405 2.852 2.922 3.364
DPS (SAR) 1.250 1.300 1.300 1.300 1.346
Growth 12/10A 12/11A 12/12E 12/13E 12/14E
Revenue Growth 17.1% 20.1% 10.5% 10.4% 9.3%
Gross Profit Growth 8.5% 17.8% 12.7% 15.0% 6.5%
EBITDA Growth 19.6% 7.2% 14.0% 12.9% 10.2%
Operating Profit Growth -6.3% 42.6% 11.9% 14.2% 10.8%
Net Profit Growth -6.8% 35.6% 18.6% 2.5% 15.1%
EPS Growth -6.8% 35.6% 18.6% 2.5% 15.1%
Margins 12/10A 12/11A 12/12E 12/13E 12/14E
Gross profit margin 16.1% 15.8% 16.1% 16.8% 16.3%
EBITDA margin 8.1% 7.2% 7.5% 7.6% 7.7%
Operating Margin 4.2% 5.0% 5.1% 5.3% 5.3%
Pretax profit margin 5.6% 6.4% 7.0% 6.6% 7.0%
Net profit margin 4.2% 4.8% 5.1% 4.8% 5.0%
Other Ratios 12/10A 12/11A 12/12E 12/13E 12/14E
ROCE 8.1% 10.6% 10.6% 11.1% 11.2%
ROIC 10.5% 17.2% 14.6% 16.9% 18.7%
ROE 12.7% 16.3% 17.6% 16.5% 17.2%
Effective Tax Rate 12.0% 8.2% 9.7% 9.8% 9.3%
Capex/Sales 2.3% 4.1% 3.8% 4.7% 4.8%
Dividend Payout Ratio 70.5% 54.1% 45.6% 44.5% 40.0%
Savola trades on a forward PE
of 12.1
Valuation Measures 12/10A 12/11A 12/12E 12/13E 12/14E
P/E (x) 19.5 14.3 12.1 11.8 10.3
P/CF (x) 9.4 8.5 7.1 6.7 5.9
P/B (x) 2.5 2.2 2.0 1.9 1.7
EV/Sales (x) 0.8 0.7 0.6 0.5 0.5
EV/EBITDA (x) 9.3 9.3 7.8 6.6 6.2
EV/EBIT (x) 17.8 13.5 11.4 9.6 9.0
EV/IC (x) 2.3 1.9 1.9 1.8 1.5
Dividend Yield 3.6% 3.8% 3.8% 3.8% 3.9%
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report. 16