Retail Sector Report - Al Rajhi Capital

Abdullah Al Othaim Markets
Retail
05 January 2013
Corporate summary Share information Valuation
Abdullah Al Othaim Markets is the
second-largest grocery retailer in Saudi
Arabia with a market capitalization of
$US0.5bn. The company is an
extension of Saleh Al-Othaim company,
which was founded in 1957. Alothaim
operates around 108 stores which sell
food products & supplies, household
equipments, electrical and mechanical
equipments, cooked and non-cooked
catering services and other products at
wholesale and retail level. Furthermore,
Al-Othaim owns private labels such as
HALEY, Proof, SHERR, and REX.
Market cap (SAR/US$) 1.851bn / 0.493bn
52-week range 80.50 - 102.5
Daily avg volume (US$)
0.532mn
Shares outstanding
22.50mn
Free float (est) 66%
Performance: 1M 3M 12M
Absolute 0.3% -7.1% -16.5%
Relative to index -4.2% -6.9% -22.8%
Major Shareholder:
Alothaim company 27.6%
Abdullah Saleh Alothaim 6.0%
Source: Bloomberg, Al Rajhi Capital
Period End 12/11A 12/12A 12/13E 12/14E
Revenue (SARmn) 4,091 4,326 4,592 5,090
EBITDA (SARmn) 233 234 294 325
Net Profit (SARmn) 150 152 171 196
EPS (SAR) 6.67 6.77 7.61 8.69
DPS (SAR) - 3.50 3.50 3.65
EPS Growth -7.3% 1.5% 12.4% 14.2%
EV/EBITDA (x) 7.3 7.1 5.7 5.1
P/E (x) 12.2 12.0 10.7 9.4
P/B (x) 3.4 2.7 2.4 2.1
Dividend Yield 0.0% 4.3% 4.3% 4.5%
Source: Company data, Al Rajhi Capital
Expectations for Q4 2012
Marginal improvement
We expect revenues to reach
SAR4.3bn by the end of this
year
Alothaim is likely to report revenue of around SAR1.1bn for Q4 2012, indicating a 12.9% y-o-y
growth, driven by higher same-store-sales and lease income. As a result, the revenue for 2012
will stand at SAR4.3bn, reflecting an increase of 5.7% y-o-y. In Q4, we expect the company to
report a double-digit y-o-y growth (19.2%) in EBITDA to reach SAR68.7mn. For Q4 and fullyear,
the company’s EBITDA margin is estimated to be 6.3% and 5.4% respectively. We
expect the Q4 net profit to reach SAR41mn, indicating an increase of 12.4% y-o-y. For 2012,
Alothaim’s bottom-line is expected to grow by around 1.5% y-o-y, reaching SAR152.3mn. The
slow growth in the company’s net profit for 2012 is primarily due to the lack of new store
openings in 2012 and high labor costs.
Figure35 Alothaim : Q4 & FY2012 results estimates
(SAR) mn 2011Q4A 2012Q4E YOY % chg. FY2011A FY2012E YOY % chg.
Revenues 963 1,087.1 12.9% 4,090.9 4,325.9 5.7%
EBITDA 58 68.7 19.2% 232.9 233.6 0.3%
EBITDA margin (%) 6.0% 6.3% 5.7% 5.4%
Operating profit 38 43.5 14.0% 157.6 146.1 -7.3%
Operating profit margin (%) 4.0% 4.0% 3.9% 3.4%
Net Income 36 41 12.4% 150.1 152.3 1.5%
Source: Company data, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report. 28