SGS Q4 2020 loss deeper than expected; rating ‘Neutral’, TP SAR 27.9: AlJazira Cap

Saudi Ground Services equipment

Saudi Ground Services Co.’s (SGS) net loss of SAR 118 million in Q4 2020 fell below AlJazira Capital and consensus estimates of SAR 23.9 million and SAR 19.5 million, respectively, the brokerage said in an earnings review. 

AlJazira Capital believes the COVID-19 related pressure will likely continue in the first half of 2021, given the slower pace of recovery. In the second half of the year, the situation is likely to improve in line with the government’s plans to roll out more vaccines.

With improved volume of operations, margins would also recover in H2 2021, it added.

“Over the long term, once pre-COVID-19 conditions are restored, we believe that prospects for aviation and related businesses in Saudi Arabia remain bright. The government’s focus on attracting tourists, increasing the number of flights and improving airport capacities would help in the growth of the whole sector,” the report said.

AlJazira Capital maintained its “Neutral” recommendation on the stock with a target price (TP) of SAR 27.9 per share.

A “Neutral” rating, according to AlJazira Capital, implies that the stock is trading in the range of its 12 months price target, and its price may remain within +/-10% range from the current price levels over next 12 months.