Saudi Catering's Q3 2020 recovery below expectations: Itqan Capital

Saudi Airlines Catering Co. showed below-than-expected recovery in Q3 2020, despite 37% quarter-on-quarter (QoQ) increase in revenues, Itqan Capital said in a new report.

The company continued to post a net loss in Q3 2020 due to low demand from domestic travelers, as well as the continued ban on international travel and high fixed costs.

Going forward, the travel sector will continue to suffer due to the negative impact of COVID-19, while recovery is likely in the medium and long term supported by Vision 2030.

The brokerage added that Saudi Catering is expected to see some relief as it extended its partnership agreement with The Dakar Rally where the company will be providing high-quality services to the international sports events hosted by the Kingdom.

"We expect a bleak outlook for Catering in the near term, with estimated net losses in Q4 2020, as fixed costs remain while revenues are under pressure," the report said.

Itqan Capital upgraded its recommendation on the stock to “Neutral”, from “Underweight”, but maintained the target price at SAR73.7 per share.

The “Neutral” recommendation means that the stock will likely stay in the range of its value (up/down 10%) in a 52-week period, it noted.