Justice minister, DGA chief discuss partnership to boost digital judicial services    Netanyahu does not rule out further strikes on Hamas leaders    US farmers are being squeezed – and it's testing their deep loyalty to Trump    Romania condemns 'irresponsible' Moscow after Russian drone breaches its airspace    Kirk's assassination is forcing US politicians to make difficult choices about their safety    India players refused handshakes, says Pakistan coach    Final stage of Spanish Vuelta cycling race abandoned after disruption by pro-Palestine protesters    Mané fires Al Nassr past Al Kholood to keep perfect start as Ronaldo honored    Lacazette brace earns NEOM SC first Saudi Pro League win    Adolescence star Owen Cooper makes Emmys history at 15    Saudi liquidity grows 8.4%, reaching SR3.1 trillion in July 2025    Over 434,000 people acquire first aid skills during nationwide health campaign    Saudi Arabia's legislative advancement highlighted at International Conference on Judicial Training    Sudden swerving among 3 major causes of accidents in Riyadh in 2024    Princess Haifa emphasizes pivotal Saudi role in shaping future of tourism    Sahm Capital names Saudi Olympian Fayik Abdi as brand ambassador    SR9000 fine for copyright infringement using AI    King Charles and Prince Harry finally reunite after 19 months apart    Anastacia: Arnold Schwarzenegger made me sing Whatta Man 12 times    Thousands pay their last respects to Giorgio Armani, private funeral on Monday    The key to happiness    Sholay: Bollywood epic roars back to big screen after 50 years with new ending    Ministry launches online booking for slaughterhouses on eve of Eid Al-Adha    Shah Rukh Khan makes Met Gala debut in Sabyasachi    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Kingdom's retail sector to keep strong earnings over expansion
Published in The Saudi Gazette on 13 - 03 - 2013

JEDDAH – The Saudi retail sector expects sustained strong earnings growth due to expansion through opening stores, margin support from economies of scale and consolidation of fragmented markets, all of which are key drivers of profit growth, NCB Capital, the GCC's leading wealth manager and the Kingdom's largest asset manager, said Tuesday.
However, wage inflation due to Saudization, execution risk from store expansion and price-led competition are key concerns.
“We remain Overweight on Extra with a PT of SR132 and Al Hokair with a PT of SR129, while remaining Neutral on both Jarir with a PT of SR164 and Al Othaim with a PT of SR92,” said Farouk Miah, Head of Equity Research at NCB Capital.
“Extra and Al Hokair should continue to benefit from store expansion growth, as well as the possibility of higher margins. We believe Jarir is a high quality company although many positives are currently priced in. Al Othaim has a strong long-term outlook, although the coming 12 months will be difficult due to low organic sales growth, as well as pressure from Saudization,” he added.
NCB Capital considers that consolidation of fragmented sectors which are dominated by independent stores is a key theme for the Saudi retail market.
“Extra, Jarir and Al Othaim are well positioned to benefit from this structural trend in their respective sectors, leading to 30-50 percent expansion in their store count over the coming five years. Al Hokair has already consolidated the Saudi mid-market fashion segment, with potential growth coming from expansion in the value-segment and opening stores abroad,” Miah said.
Stating that Saudization is a longer term pressure on margins, the report noted that since the middle of 4Q12 Saudi firms have incurred a SR2,400 charge per year on each foreign employee in excess of local staff. NCB Capital considers that this expense will lead to an average of 3-5 percent EBIT pressure for the retail market. From the stocks under coverage the EBIT impact ranges from 0.2 percent for Jarir to more than 5 percent for Al Othaim.
“Given the growth outlook, the Saudi retail sector trades at an attractive 2013E P/E of 13.6x. The variance in multiples between the stocks under coverage is due to their differing risk-reward scenarios. Al Othaim trades at a discount due to low organic growth and Al Hokair due to expansion risks. Extra trades at a premium due to its high growth outlook and Jarir due to its high dividend yield and returns,” Miah added.


Clic here to read the story from its source.