Aljazira Capital says Alhokair’s Q3 2019 losses exceeded expectations

Aljazira Capital said Fawaz Abdulaziz Alhokair Co.’s (Alhokair) third quarter net loss of SAR 27.2 million came higher than its estimated losses of SAR 3.1 million.

The brokerage firm said in a research note that due to higher than estimated depreciation and amortization (D&A) expense and finance costs, the company reported a higher net loss.

“We lower our EPS estimate for FY-19 to SAR 0.49 from SAR 0.90. We believe Alhokair stands to benefit from increased retail demand, which would largely drive the company’s growth in the long term,” the brokerage firm said.

The research firm said it has modeled an increase in store count to 1,879 at the end of FY23 from 1,694 in FY19, coupled with a slight single-digit increase in average revenue per store.

Alhokair is close to completing its target of shutting down non-profitable stores.

“We expect the company to focus on expansion,” it noted.

The brokerage firm maintained its “Overweight” recommendation on Alhokair from a long-term perspective with a target price of SAR 24.30 per share.