Leejam Sports Q3 2020 profit tops estimates, TP set at SAR 77/share: Al Rajhi Cap

Leejam Sports Co.'s Q3 2020 net profit of SAR 27 million and revenue of SAR 210 million beat average estimates of SAR 15 million and SAR 165 million, Al Rajhi Capital said in a recent report.

Leejam was negatively impacted by the drop in the number of subscribers due to the precautionary measures taken to fight COVID-19 pandemic, particularly during the initial weeks of re-opening the company's gyms, according to Al Rajhi Capital.

The brokerage firm added that the number of male subscribers fell by 12% to 191,180 in Q3 2020, while the number of female subscribers was down 32% to 51,820.

"Leejam recently announced opening of a new express format gym with smaller area and lower subscription fees. This will help the company to penetrate further in Tier 2 cities and increase their market share," it said.

"We remain optimistic on Leejam’s recovery as Pfizer confirms successful trial of COVID-19 vaccine, which will drive people back to health clubs. We also expect consolidation to help market leaders like Leejam substantially," the firm added.

Leejam is projected to report SAR 19 million loss in fiscal year 2020, and turn profit of SAR 213 million in FY2021.

Al Rajhi Capital maintained its “Overweight” recommendation on the stock, and raised its target price (TP) to SAR 77 per share, from SAR 74/share.

The recommendation implies a 10% upside potential to the stock's current market price and also expects the stock to reach its TP in 12 months.