SACC Stronger growth expected
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- Muriel Washington
- 6 years ago
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1 9-Jul 9-Aug 9-Sep 9-Oct 9-Nov 9-Dec 9-Jan 9-Feb 9-Mar ` Saudi Airlines Catering Company SACC Stronger growth expected We re-iterate our BUY rating and raise our target price to SAR per share on Saudi Airlines Catering Company (SACC, 6004, CATERING AB), implying an upside potential of 11%. We revised our growth forecasts mainly on further fleet expansion by Saudi Airlines, the impact of which was partially off-set by our reduced margin expectations. SACC reached the target price assigned in our initiation coverage last year (previous recommendation: BUY, TP: SAR 84.8, SFC report July 2012). The stock generated total returns of 35% since our initiation in July BUY with TP of SAR per share: Our TP implies a P/E 13 of 14.9x a discount of 22% to global peers but broadly at par to the local peers (based on exchange categorization). EV/EBITDA 13 implies a multiple of 12.7x for SACC a premium of 28% to global comparatives and 13% to the local ones. Tax adjusting the global EV/EBITDA multiple (25-35% tax rate vs 8% for SACC), the like-for-like premium would be much lower. With a superior expected ROE of 46% and dividend yield of 5.5% this year, totally unleveraged balance sheet, current net cash per share of SAR12.5 and an average free cash flow yield of 9% - we continue to view SACC as a solid investment. Saudi Airlines fleet expansion increased by 71 planes: We see higher growth outlook on the back of the growing Saudi Airlines order book of planes, now implying a fleet size of 199 by 2017 compared to 128 in our old forecasts (2016). Saudi fleet forecast is now 55% higher in year five which inevitably is a strong positive for SACC, the exclusive supplier of Saudi Airlines. Apple to apple, 2016 fleet size is now 37% higher, up to 175 planes from 128. The largest fleet additions are due in Fleet expansion impact on forecasts partially off-set by margin cut: Compared to our old forecasts we raise revenue CAGR to 13.5% (Old: 8.1%), EBITDA to 13.2% (Old: 10.7%), EPS to 14.1% (Old: 11.1%). Based on 2012 results, where EBITDA margins were higher YoY but nevertheless 105bps lower than we anticipated, we cut our EBITDA margin expectations going forward thus partially off-setting the fleet expansion impact. While SACC is keen to stress their cost plus pricing agreements, the growing proportion of revenues from the lower margin (~7%) airline equipment business is a key factor behind the overall retreat. We note that this business is focused on Saudia and comes as a relationship based add-on rather than a strategic focus by SACC, consequently it is viewed in absolute terms and as an EPS bonus. The relationship is the strategy here, not the airline equipment business. EPS (as reported) seen at SAR 6.82/share in 2013, 15% YoY growth: We expect SACC to achieve an EPS (as reported) of SAR 6.82/share this year, slightly lower than we had anticipated in our old forecasts. However, with the bulk of new fleet expansion due in , our long-term EPS expectations are higher. Expecting dividend yield of 5.5%: SACC s 2012 dividend yield was 4.8%. Which compares favorably on the Tadawul (Average 3.5%) and to the few close listed peers available globally (Average 3%). Recommendation BUY Ticker Tadawul 6004 Closing price (20 March 13) SAR 91.3 Average volumes (6 months) Market capitalization SAR mn 7,483 High SAR 93.5 Low SAR 59.3 Price chg. (3 months) % 14.8 EPS (as reported) (2012) SAR 5.9 Beta NA Shareholding (%) Saudia 35.7 SCCL 34.3 Public 30.0 Key Ratios (2013E) P/E 14.5 EV/EBITDA 11.3 RoE 46.0 Source: Company, analysis Stock price movement vs. TASI TASI SACC SAR mn E 2014E 2015E 2016E 2017E Revenues 1,465 1,687 1,884 2,125 2,433 2,861 3,180 EBITDA Margin (%) Net income (as reported) Margin (%) Net income (after tax) Margin (%) FCF yield Assets 1,424 1,557 1,708 1,879 2,080 2,327 2,558 Equity 981 1,062 1,164 1,279 1,411 1,566 1,737 RoE (%)* RoA (%)* EPS (as reported) (SAR) EPS (after tax) (SAR) BVPS (SAR) Source: Company, analysis; *Returns are calculated on net income after Zakat. Source: Tadawul Equity Coverage Roy Cherry rcherry@fransicapital.com.sa Refer to important terms of use, disclaimers and disclosures on back page
2 E 2014E 2015E 2016E 2017E E 2014E 2015E 2016E 2017E E 2014E 2015E 2016E 2017E SAR bn Growth (%) Passengers (mn) Growth (%) SAR Payout(%) E 2014E 2015E 2016E 2017E E 2014E 2015E 2016E 2017E E 2014E 2015E 2016E 2017E SAR bn EBITDA Margin (%) SAR Net Margin (%) SAR ` Saudi Airlines Catering Company SACC - Key Forecast Revenue and EBITDA margin ( E) EPS* vs. Net Income Margin ( E) Price per meal ( E) % 14 29% % 31.0% 30.5% 30.0% 29.5% % 27% 26% % 0 25% 30 Revenues EBITDA Margin EPS Net income margin % Saudia Others Total Sources: Company reports, analysis Note: EPS as reported (before Zakat) SACC - Key Forecast Total Assets and YoY Growth ( E) Passenger Traffic and Growth ( E) DPS and Payout ratio* ( E) % 12% 10% 8% 6% 4% 2% 0% % 10% 8% 6% 4% 2% 0% % 74% 73% 72% Total assets Growth % Passenger traffic Growth YoY DPS Payout ratio Sources: Company reports, analysis Note: Payout ratio on as reported EPS (before Zakat) Page 2
3 ` Saudi Airlines Catering Company Financial Statements Income Statement Details (SAR mn) E 2014E 2015E 2016E 2017E Revenues 1,465 1,687 1,884 2,125 2,433 2,861 3,180 Cost of sales (907) (1,059) (1,190) (1,342) (1,543) (1,816) (2,032) Gross profit ,045 1,147 Gross margin (%) General and administrative (140) (121) (137) (153) (171) (196) (207) EBITDA EBITDA margin (%) Operating profit Operating margin (%) Net income (as reported) Net margin (%) EPS (as reported) Net income (after tax) Net margin (%) EPS (after tax) Sources: Company reports, analysis Balance Sheet Details (SAR mn) E 2014E 2015E 2016E 2017E ASSETS Cash & equivalents 655 1,022 1,101 1,237 1,389 1,551 1,725 Trade receivables Due from related parties Inventories Total current assets 1,315 1,467 1,559 1,719 1,908 2,140 2,364 PPE Total assets 1,424 1,557 1,708 1,879 2,080 2,327 2,568 LIABILITIES AND SHAREHOLDERS EQUITY Accounts payable - trade Accrued expenses and other liabilities Total current liabilities Total liabilities Total shareholders equity 981 1,062 1,164 1,279 1,411 1,566 1,737 Total liabilities and shareholders equity 1,424 1,557 1,708 1,879 2,080 2,327 2,568 Sources: Company reports, analysis Cash flow Statement Details (SAR mn) E 2014E 2015E 2016E 2017E Cash flows from operating activities Cash flows used in investing activities (59) (20) (75) (32) (36) (43) (48) Cash flows from financing activities (261) (399) (457) (517) (590) (696) (771) Net change in cash (106) Cash at year end 655 1,022 1,101 1,237 1,389 1,551 1,725 Sources: Company reports, analysis Page 3
4 Valuation boosted by more Saudia expansion We see higher growth outlook on the back of the growing Saudi Airlines order book of planes, which is now 55% higher in year five compared to our old forecasts a strong positive for SACC, the exclusive supplier of Saudi Airlines. Although our revised forecasts are now higher, they have been significantly moderated by a cut in margin expectations on the back of 2012 s 105bps lower than expected EBITDA margin. Consequently, we see CAGRs during next five years for EBITDA at 13.2% (old: 10.7%) and EPS (as reported) at 14.1% (old: 11.1%). We do not expect a major spike in capex/sales, especially keeping in mind the existing spare capacity at SACC s existing facilities. As a result, we see the free cash flow yield averaging 9% over the next five years a very high yield by any standards. ROE is also expected to stay above the 45%-level, one of the highest rates on Tadawul and 2.2x peer market cap weighted average (2.8x based on median, see tables under P/E valuation). As a result, we reiterate our BUY recommendation on SACC with a higher TP of SAR 101.4, implying an upside to the last close of 11.1%. The stock is currently trading at a P/E 13 of 14.5x and EV/EBITDA 13 of 11.3x broadly in line with local peers. Valuation - Scenario Analysis Fair Value estimate for different scenarios Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 SAR SAR SAR 82.5 Fair Value Bull Case Base Case Bear Case We assume additional increase of: 1) 10% in Saudia meals; 2) SAR 1 price per meal; 3) 5% in non-airline revenues; and 4) GPM to expand by 2 percentage points. We assume: 1) 11.7% CAGR in total Saudia meals; 2) an average price per meal of SAR 39; 3) 20.4% CAGR in revenues from the non-airlines division; and 4) an average GPM of 36.6%. We assume decrease of: 1) 10% in Saudia meals; 2) SAR 1 in price per meal; 3) 20% in non-airline revenue; and 4) GPM to contract by 3 percentage points. Bull Case Base Case Bear Case Maintain BUY rating Overall, we find SACC shares attractive at current levels; upside potential of 11.1% Sources: Bloomberg; analysis We derived our target price by using the weighted Average approach and three valuation methods including; 1) Discounted Cash Flow (DCF); 2) P/E 13 based peer valuation; and 3) EV/EBITDA 13 based valuation. We assigned higher weight to the DCF approach, as we believe it is the method that best accounts for the primary leg of expansion ( ). Valuation summary of SACC Fair Value Weights DCF Valuation SAR % EV/EBITDA SAR % P/E Multiple SAR % Weighted Average Fair Value SAR Upside/(Downside) from current market price % 11.1% Sources: analysis Page 4
5 Discounted Cash Flow (DCF) Our DCF model is based on a five-year explicit forecast period until 2017E. We arrived at a WACC of 11.8% for SACC. In terms of terminal growth, we applied a 2.0% rate to estimate the terminal value. Our terminal growth rate assumption is on the conservative side, especially given Saudia s massive capacity expansion plans which extend into 2020 (230 planes vs 199 in 2017). Our DCF approach yields a fair value of SAR 104.3/share. SACC: Discounted cash flow valuation summary (SAR 000s) Details 2013E 2014E 2015E 2016E 2017E NOPAT 512, , , , ,552 Depreciation & Amortization Exp. 16,256 21,066 24,142 27,716 31,794 Changes in Working Capital 20,180 12,803 11,708 (3,962) (1,686) Capex (75,000) (31,875) (36,495) (42,919) (47,698) Free Cash flow to Equity 474, , , , ,962 Discount Factor PV of Free Cash Flow 434, , , , ,395 Total PV of FCF 2,391,162 Continuing value (CV) 8,785,920 PV of CV 5,143,254 Enterprise Value 7,534,416 Add: Cash 1,022,122 Less :- Debt 0 Equity Value 8,556,539 No. of shares 82,000 Fair value per share SAR Upside/(Downside) % 14.4% Sources: analysis Price-Earnings (P/E) multiple approach We arrive at a P/E multiple of 18x for SACC. We used the market cap weighted P/E for Saudi Arabia and global peer universe. Our fair value estimate using P/E approach is SAR per share, derived using 2013E post tax earnings forecast of SAR 515mn. Company MCap (USD mn) Price/Earnings (x) RoE (%) E 2014E E 2014E Herfy Food Services x 16.7x 14.7x 37.7% 36.5% 35.2% Savola 5, x 12.8x 10.8x 16.9% 17.3% 18.1% Halwani Bros Co x 15.5x 13.0x 15.8% 16.0% 17.9% National Agricultural Development Company x 13.9x 11.8x 8.9% 9.7% 11.0% Almarai Co Ltd 6, x 16.1x 13.4x 20.2% 19.9% 21.1% Al Jouf x 9.8x 9.5x 16.3% 15.8% 14.9% Gate Group x 10.4x 8.0x 12.2% 10.2% 14.6% SATS 2, x 17.4x 16.0x 11.9% 13.1% 14.4% Auto Grill 3, x 20.5x 17.1x 13.5% 13.3% 14.1% DO & CO AG x 15.3x 14.6x 14.1% 13.8% 13.4% Compass group 23, x 18.0x 16.3x 24.8% 25.5% 25.6% SODEXO 14, x 21.1x 18.4x 18.8% 16.3% 17.3% Catering International x 17.7x 15.3x 19.4% 21.3% 21.0% Median Multiple for KSA (Ex- SACC) 15.8x 14.7x 12.4x 16.6% 16.7% 18.0% Median Multiple for all peers (Ex- SACC) 18.8x 16.1x 14.6x 16.3% 16.0% 17.3% Mcap weighted average Multiple for KSA (Ex - SACC) 16.5x 14.7x 12.4x 19.6% 19.5% 20.4% Mcap weighted average Multiple for all peers (Ex - SACC) 19.6x 18.0x 15.8x 20.7% 20.3% 20.9% Sources: Bloomberg, analysis, as on 19 March 2013 Page 5
6 EV-to-EBITDA (EV/EBITDA) multiple approach We used EV/EBITDA multiples for SACC s market approach-based relative valuation. We selected a peer group of global companies in addition to the Saudi sector peers. Our comparative valuation is summarized in the following table. This valuation was based on market cap adjusted EV/EBITDA valuation. Company MCap (USD mn) EV/ EBITDA (x) RoE (%) E 2014E E 2014E Herfy Food Services x 13.1x 11.6x 37.7% 36.5% 35.2% Savola 5, x 10.4x 9.3x 16.9% 17.3% 18.1% Halwani Bros Co x 8.2x 7.0x 15.8% 16.0% 17.9% National Agricultural Development Company x 7.4x 6.7x 8.9% 9.7% 11.0% Almarai Co Ltd 6, x 12.3x 10.6x 20.2% 19.9% 21.1% Al Jouf x 6.0x 6.0x 16.3% 15.8% 14.9% Gate Group x 4.4x 3.9x 12.2% 10.2% 14.6% SATS 2, x 11.5x 10.8x 11.9% 13.1% 14.4% Auto Grill 3, x 6.5x 6.3x 13.5% 13.3% 14.1% DO & CO AG x 5.4x 4.9x 14.1% 13.8% 13.4% Compass group 23, x 10.6x 9.9x 24.8% 25.5% 25.6% SODEXO 14, x 9.7x 8.8x 18.8% 16.3% 17.3% Catering International x 6.2x 5.5x 19.4% 21.3% 21.0% Median Multiple for KSA (Ex- SACC) 10.3x 9.3x 8.1x 16.6% 16.7% 18.0% Median Multiple for all peers (Ex- SACC) 9.3x 8.2x 7.0x 16.3% 16.0% 17.3% Mcap weighted average Multiple for KSA (Ex - SACC) 12.7x 11.3x 9.9x 19.6% 19.5% 20.4% Mcap weighted average Multiple for all peers (Ex - SACC) 11.0x 10.2x 9.4x 20.7% 20.3% 20.9% Sources: Bloomberg, analysis, as on 19 March 2013 Key risks Upside Margin expansion: We have lowered our EBITDA going forward on account of lower than expected performance in 2012 and ongoing concerns over rising cost. However, if SACC manages to contain cost in coming years through improved operational efficiency, margins are set to expand. This could positively affect SACC s earnings estimates and therefore our valuation. Totally unleveraged: SACC is debt free. This provides significant potential for RoE expansion in the coming years. Moreover, unleveraged balance sheet and comfortable cash position also leave sufficient room for undertaking inorganic expansion. Both cases provide additional room for shareholders value creation. Downside Adverse changes in SACC s agreements with Saudia might hurt earnings: SACC generates majority of its revenues from Saudia under airline catering services and sky sales services agreements which are due for renewal on 29 January Any unfavorable changes in the terms and conditions (such as additional discounts to Saudia) would result in weaker than expected margins for SACC. However, we do not forsee any major changes in the forseeable future Weaker-than-expected growth in passengers: Any geopolitical event and weaker-than-expected growth in the global economy could have an adverse impact on the airlines industry, thus denting SACC s revenues and margins. Page 6
7 Revision in forecasts The rise in the number of religious visitors to Umrah and Hajj is being boosted by the government s continuous investment in visitor capacity at the religious sites and remains a key driver for air passenger growth in the Kingdom. Note that Saudi Arabia maintains annual visitor/visa number caps for each country, due to the overwhelming demand and comparatively limited capacity. The rapidly expanding economy, increasing domestic spending and rising per capita income are also important factors behind the positive outlook for passenger growth. As per IATA s recently published data, air traffic in Saudi Arabia is expected to increase at a CAGR of 7% until 2016E. Saudia estimates the total number of air passengers to double by the end of To meet this demand Saudia is planning to increase its fleet size from 103 in 2012 to 199 in 2017, and 230 in Apple to apple, 2016 (year five in old forecasts) fleet size is now 37% higher, up to 175 planes from 128. The largest fleet additions are due in , where the new Saudia planning suggests an average of 42% increase annually compared to figures provided in July Comparison of Saudia s fleet expansion plan (old versus new) E 2014 E 2015 E 2016 E 2017 E Fleet expansion (new) Fleet expansion (old) Source: Company, analysis Supported by Saudia s fleet expansion, our new expectations are significantly higher than our old forecasts. We raised our CAGRs on: revenues to 13.5% (old: 8.1%), EBITDA to 13.2% (old: 10.7%) and EPS (as reported) to 14.1% (old: 11.1%). Page 7
8 SAR mn % Saudi Airlines Catering Company Old Vs New forecasts SAR mn, unless specified 2013E 2014E 2015E Details Old Forecast New Forecast Old Forecast New Forecast Old Forecast New Forecast Revenues 1,873 1,884 2,037 2,125 2,174 2,433 EBITDA EBITDA margin (%) Net income (as reported) Net margin (%) EPS (as reported) (SAR) Net income (after tax) Net margin (%) EPS (after tax) (SAR) RoE (%)* RoA (%)* BVPS (SAR) Sources: Company reports, analysis, * Returns are calculated on net income after Zakat. Top-line take off on growing fleet size With the top-line meeting our expectations last year coupled with the planned expansion at the Saudi flag carrier, we have made a significant upward revision to our expectations. Comparison of old versus new estimates for SACC s revenues and gross margins 5, % 39.8% 39.9% 40.0% 40% 4, % 36.9% 36.6% 36.5% 35% 3,000 2,000 1,884 1,873 2,125 2,037 2,433 2,174 2,861 2,307 30% 1,000 25% E 2014 E 2015 E 2016 E 20% New Revenue Old Revenue New GPM Old GPM Source: Company, analysis EBITDA CAGR raised; margins cut While cost of material increased from 39.5% in 2011 to 40.8% in 2012, G&A expenses to sales fell from 9.5% to 7.2%. All in all EBITDA margins increased by some 130bps YoY but were 105bps lower than we had anticipated. Consequently, we have moderated our margin expectations going forward especially amidst growing impact of the low margin airline equipment business (GPM of ~7%). Page 8
9 SAR mn % SAR mn % Saudi Airlines Catering Company Comparison of old versus new estimates for SACC s EBITDA & EBITDA margin 2,000 1,800 1,600 1,400 1, % 33.6% 33.9% 34.0% 30.4% 30.7% 30.5% 30.6% 40% 35% 30% 25% 1, % 15% 10% 5% E 2014 E 2015 E 2016 E New EBITDA Old EBITDA New Margin Old Margin 0% Source: Company, analysis Net income CAGR of 14% Reported net income increased 15.8% YoY to SAR 487mn (EPS: SAR 5.94) (SACC s reported net income is before Zakat), but missed our estimate by 4.3%. However, if we adjust for one-time expenses, SACC s profits grew 21.2% YoY and were therefore in line with our estimate of SAR 510mn for Reported net profit was knocked down by a SAR 22.8mn write-off in 4Q 2012 on a building, the ownership of which was transferred to the General Authority of Civil Aviation. GACA recently changed the terms for SACC on its leased land plot, which was on a 20 year contract that expired in late The new contract includes a clause giving GACA the right to terminate the lease contract at any point in time without compensation 1. As a result, management believes that as the future benefit is doubtful, it has decided to write-off the carrying value of SAR 22.8mn. Our raised top-line and EBITDA expectation produce an EPS CAGR of 14.1% compared to our old forecasts. The major EPS impact is towards the end of the projection period, when most of the plane additions are expected to materialize. Comparison of old versus new estimates for SACC s net profit and net margin 2,000 1,800 1,600 1,400 1, % 31.4% 31.8% 32.1% 32.2% 29.8% 29.7% 29.7% 40% 35% 30% 25% 1, % 15% 10% 5% E 2014 E 2015 E 2016 E New Net Income Old Net Income New NPM Old NPM 0% Source: Company, analysis; Net income as reported (before Zakat) 1 From 2012 financials Page 9
10 Capex no spike in sight There are no major new capex plans ahead and, according to the management, most of the growth can be met with minimal tweaks and additions to existing capacity. This is more or less confirmed by our high-level analysis, system spare capacity is around 42%, meaning it can absorb up to 73% growth from current levels. In comparison, our total meal growth projection is 69% in 2017 compared to estimated 2012 meals. Note that SACC has also developed a freeze & store capacity, which means it can pre-cook and store meals during off-peak season. Capacity details of SACC s catering units at key airports Details Jeddah Riyadh Dammam Madinah Cairo Total Design capacity (meal per day) 45,000 40,000 18,000 12,000 9, ,000 Average flights handled per day Average number of daily flight meals produced* 32,538 26,398 6,609 3,443 2,552 71,540 Spare capacity (%) Implied capacity for growth (capacity/used) (%) 73.3 Projected growth in meals (2017/12) (%) 69.0 Source: Company prospectus; * The total no. of daily flight meals produced exceeds 70,000 meals; As on 31 December 2011 Attractive dividends ahead Implied yield of 5.5% in 2013 The management aims to maintain a payout ratio of 60-80%, implying potential payout of SAR per share during based on our EPS expectations which converts into a yield range of 5.5%-9.3%. We expect them to pay around 74%, in line with Page 10
11 Financial Statements Income Statement Details (SAR 000s) E 2014E 2015E 2016E 2017E Total revenue 1,465,271 1,687,393 1,883,660 2,124,977 2,432,968 2,861,291 3,179,847 Growth (%) 22.8% 15.2% 11.6% 12.8% 14.5% 17.6% 11.1% Cost of revenue (906,809) (1,059,393) (1,189,804) (1,341,645) (1,542,889) (1,816,254) (2,032,409) Gross profit 558, , , , ,079 1,045,037 1,147,438 GPM (%) 38.1% 37.2% 36.8% 36.9% 36.6% 36.5% 36.1% S,G&A (139,824) (121,217) (136,968) (152,875) (171,148) (196,331) (207,372) As a % of revenues 9.5% 7.2% 7.3% 7.2% 7.0% 6.9% 6.5% Operating profit 418, , , , , , ,066 OPM (%) 28.6% 30.0% 29.6% 29.7% 29.5% 29.7% 29.6% EBITDA 434, , , , , , ,859 EBITDA margin (%) 29.7% 31.0% 30.4% 30.7% 30.5% 30.6% 30.6% Other (expenses)/income 1,924 (19,731) 2,000 2,000 2,500 2,500 2,500 Net Income (as reported) 420, , , , , , ,566 Source: Company reports, analysis Page 11
12 Balance Sheet Details (SAR 000s) E 2014E 2015E 2016E 2017E ASSETS Cash & equivalents 655,053 1,022,122 1,101,011 1,237,017 1,389,060 1,550,648 1,724,711 Trade receivables 52,119 53,792 61,268 68,550 77,704 90,307 98,990 Due from related parties 511, , , , , , ,419 Inventories 65,540 73,280 79,041 87,290 98, , ,881 Total current assets 1,314,693 1,466,726 1,559,306 1,719,011 1,908,283 2,139,687 2,364,499 PPE 109,770 90, , , , , ,058 Total assets 1,424,463 1,556,772 1,708,096 1,878,610 2,080,234 2,326,841 2,567,557 LIABILITIES AND SHAREHOLDERS EQUITY Accounts payable - trade 115, , , , , , ,058 Accrued expenses and other liabilities 233, , , , , , ,608 Total current liabilities 348, , , , , , ,666 Total liabilities 443, , , , , , ,305 Total shareholders equity 981,002 1,062,388 1,164,146 1,279,300 1,410,653 1,565,636 1,737,252 Total liabilities and shareholders equity 1,424,463 1,556,772 1,708,096 1,878,610 2,080,234 2,326,841 2,567,557 Source: Company reports, analysis Cash Flow Statement Details (SAR 000s) E 2014E 2015E 2016E 2017E Cash flows from operating activities 214, , , , , , ,710 Cash flows used in investing activities (58,728) (20,197) (75,000) (31,875) (36,495) (42,919) (47,698) Cash flows from financing activities (261,298) (398,917) (457,129) (517,303) (590,078) (696,224) (770,949) Net change in cash (105,771) 367,070 78, , , , ,063 Cash at year end 655,053 1,022,123 1,101,011 1,237,017 1,389,060 1,550,648 1,724,711 Source: Company reports, analysis Page 12
13 Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price. Page 13
14 Contacts RESEARCH & ADVISORY DEPARTMENT Roy Cherry Head of Research & Advisory SAUDI FRANSI CAPITAL Call centre Website SAUDI FRANSI CAPITAL LLC C.R , P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh Authorized and regulated by the Capital Market Authority (CMA) License No. ( ) Page 14
15 Disclaimer This report is prepared by ( SFC ), a fully fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC s judgment as of the date of production of this report, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than what he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this report may be reproduced without the written permission of SFC. Neither this report nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations. LLC; C.R , P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. ( ) Page 15
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