Al Hammadi's Q1 profit beat estimates on lower expenses: Al Rajhi Cap

The net income of Al Hammadi Company for Development and Investment (Al Hammadi) in Q1 beat the projections of Al Rajhi Capital and average estimates issued by research firms in Saudi Arabia, Al Rajhi Capital said in a research note.

The Saudi-listed healthcare provider posted a net profit of SAR 30.8 million in the first quarter supported by lower expenses and provisions.

Al Rajhi Capital had estimated that Al Hammadi would achieve net earnings of SAR 24 million in Q1, while consensus estimates stood at SAR 27.90 million.

"The beat in the bottom-line is due to lower-than-expected general and administrative expenses and provisions," Al Rajhi Capital said.

Al Hammadi's revenue rose 11 percent to SAR 201 million (YoY), slightly below Al Rajhi's estimate of SAR 206 million.

The top-line growth was driven by the launch of commercial operations at Nuzha hospital in mid February, and higher operating rates for all hospitals, the report said.

The company's operating profit jumped 15 percent to SAR 40 million.

Al Rajhi Capital expected the company to increase its payouts for 2018 to 85 percent of net income (SAR 0.9 per share), due to a lower capital expenditure for the year.

In 2017, it distributed SAR 0.75 per share.

Al Rajhi Capital expects Al Hammadi's net profit for the entire 2018 to increase by 21 percent to SAR 130 million. The research firm maintained a 'Neutral' rating on the stock and a target price of SAR 40 per share. 

The report anticipated better times ahead for Al Hammadi given the government’s plan to resolve late dues to private sector, anticipated growth from Nuzha hospital and the non-recurrence of one-time expenses related to the opening of Nuzha hospital.