Taiba Holding misses Q1 forecast on investment losses, says NCBC

Taiba Holding Co.’s Q1 2018 net profit (SAR 27.2 million) missed NCB Capital’s estimate of SAR 44.2 million by 38.4 percent.

“We believe the overall economic slowdown and spending rationalization impacted the company’s hotels negatively… Moreover, we believe the variance from our estimates came mainly from recognizing losses on investments,” NCB Capital said in an earnings note.

Sales declined 3.7 percent year-on-year (YoY) to SAR 102 million, matching the brokerage firm’s forecasts. The

Investment loss and other income stood at SAR 13.4 million in the first quarter, compared to NCB Capital’s estimates of SAR 7.1 million gain and SAR 11.4 million gain in Q1 2017.

Taiba invested SAR 445.8 million in SABIC and Makkah Construction, and raised its investment in SAFCO by SAR 269 million to SAR 895 million, bringing up total investments to SAR 1.08 billion.

“We believe investing CPO compensations in equities exposes Taiba to a significant risk, which may impact its ability to build new hotels,” the brokerage firm added.

NCB Capital recommended “neutral” rating on the stock with a target price at SAR 33.70.