Itqan Capital initiates Arabian Centres coverage with 'Overweight' rating, TP at SAR 24.80

Itqan Capital initiated its coverage for Arabian Centres Co. with an “Overweight” recommendation, and a target price (TP) of SAR 24.80 per share.

The brokerage firm said in a research note that the company has ambitious expansion plans over the coming three years, which are expected to drive earnings growth.

The company also stands to benefit from supportive socio-economic reforms and long-term potential of the Saudi retail market, Itqan Capital said, adding that the market’s concerns regarding malls sustainability post-COVID are overstated given their position as leisure destinations.

The rental discounts offered due to COVID-19 will likely continue to impact the company's revenue over the coming period, the report said. Earnings from new malls are expected to compensate for such shortfall.

Meanwhile, key downside risks are represented in lower rental rates and rise in the debt levels, according to the brokerage.

Itqan Capital also said that the company's current focus on continuing its expansion strategy is expected to ease the impact of the downturn in growth of its portfolio.

The brokerage expects Arabian Centres to post SAR 446 million in net profit for the fiscal year ending March 2021, and SAR 557 million in the year ending March 2022.