Al Othaim posts in-line Q3 on store expansions: NCBC

Abdullah Al Othaim Markets Co.’s Q3 2018 net profit of SAR 54.3 million matched NCB Capital (NCBC) and analysts’ forecasts of SAR 54.3 million and SAR 55.6 million, respectively.

However, adjusting for a one-off income of SAR 100.1 million recorded in Q3 2017 from the sale of Al Othaim’s mall in Hail City, net income increased 7.5 percent YoY.

“We believe the year-on-year (YoY) growth is mainly due to strong revenue growth on new store expansion which offset the impact of negative LFL,” NCBC said in an earnings note.

Q3 sales stood at SAR 1.75 billion, broadly in line with NCBC’s forecast of SAR 1.71 billion.

Gross profit margins dropped 9 basis points to 19.5 percent in the third quarter, also in line with the brokerage firm’s estimate of 19.8 percent.

“We believe aggressive store expansions will be a key growth catalyst going forward.

However, negative LFL remains the key concern for all consumer names. Al Othaim currently trades at a 2019f PE of 15.2x vs. sector at 22.9x,” NCBC said.

The brokerage firm added that it recommended “neutral” on the stock with a price target of SAR 79.3.