Riyadh-Mubasher: Abdullah Al Othaim Markets' Q4-15 figures were a positive surprise, led by strong revenue growth (up 18.7% year-on-year versus estimate of 11.5%), which points to better-than-estimated LFL growth, Al Rajhi Capital said in a report.
"Al Othaim remains the best retail stock to weather a period of slowing consumer spending, which primarily impacts retailers with high discretionary-product-mix," the research firm said.
It added that the strong revenue growth led to a better-than-estimated gross margin of 20% (up 120 bps y-o-y), suggesting healthy year-end supplier rebates and/or lower discounting.
However, the sharp jump in operating expenses resulted in flat operating margin y-o-y at 5.4%.
Along with higher revenues and gross margin, higher rental income and other income (mainly profit from investments) resulted in strong beat on net profit which came at SAR 89.2 million versus estimate of SAR 79.4 million.
The research firm said it continues to remain positive on the prospects for Al Othaim going forward.
The Tadawul-listed firm reported net earnings of SAR 89.23 million for Q4-15, a rise of 20% over SAR 74.23 million in the same period a year ago.
Al Rajhi Capital maintained its 'Overweight' rating for the stock, with a revised price target of SAR 103.2 and upside potential of 41.4%.
