Al Othaim’s Q1 misses estimates on lower revenue: Aljazira Cap

Abdullah Al Othaim Markets Co.’s net profit of SAR 67.2 million for the first quarter of 2018 missed Aljazira Capital’s estimate of SAR 80.6 million as well as the consensus expectation, the brokerage firm said in a report.

“The deviation from estimates is mainly due to lower than expected top-line and higher than estimated selling, general and administrative expenses, partially due to expansions during the quarter,” the report said.

Revenue stood at SAR 1.8 million in Q1 versus SAR 1.7 million a year earlier on the back of the retailer’s accelerated expansion efforts in 2017-2018.

Al Othaim started the year with 187 stores in the Kingdom, adding 14 stores year-to-date, while stores in Egypt have reached 40 stores as of May-2018.

Like for like (LFL) sales appear to have been flat due to the implementation of the value-added tax (VAT), and will likely continue to see flat growth going forward.

Meanwhile, revenue trajectory is likely to continue the positive trend, supported by ongoing expansion plans. Revenues are estimated at SAR 8.7 billion, an 8.2 percent year-on-year (YoY) increase.

Egypt operations are seen to report slightly higher contributions.

Gross profit in Q1 came at SAR 341.5 million compared to SAR 319.7 million in Q1 last year.

Gross margins reached 18.99 percent versus 18.84 percent a year earlier.

Aljazira Capital maintained a “Neutral” rating on the stock with a target price of SAR 4.41 per share for fiscal year 2018.

“In response to the relative tighter regulatory environment on retailers, the sector is expected to exhibit higher concentration levels among competitors, in favor of the organized players in the market,” the research firm said.