Falcom remains ‘neutral’ on Saudi Catering; raises TP to SAR 91

Falcom Financial Services has revised slightly upwards (1.1%) its target price for Saudi Airlines Catering Co. to SAR 91 per share. The current stock price is SAR 90, as of August 15, 2018.

The firm has maintained a “neutral” rating on the stock.

“The stock has run-up 4% since our previous earnings report, however we see limited upside potential from current levels,” Falcom noted in its research report released on August 16, 2018, following the stock’s Q2 2018 results.

The report added that the company’s weak retail sales weigh on bottom line.

“Debt free operations and healthy operating cash flows continue to support stock’s attractiveness to investors, the emergence of low cost carriers, poses an inherent risk to Catering’s business model. Given the countervailing factors, we retain our ‘neutral’ rating on the stock,” Falcom said.

Saudi Airlines Catering Co.’s net profit for Q2 2018 fell slightly short of consensus estimates, and dropped 8.2 percent YoY to SAR 120 million, primarily due to a plunge in retail sales revenue (-43 percent YoY), along with a rise in general and administrative expenses and one-time impact of reversal of trade receivables as a result of the implementation of IFRS 9, Falcom noted.