GulfBase GCC Cap Indices
IndexLevelChg%
Large Cap4,019 -0.10
Med Cap3,848 -0.05
Small Cap4,895 -0.24
Micro Cap8,498 -0.25

Research Reports

Quick Links

Most Viewed News

Most Viewed Companies

Ticker Price Volume
GFH 0.5 1,361,733
BKSB 0.14 70,617
DANA 0.62 13,288,208
DAMAC 3.85 372,716
DSI 0.39 34,049,322
ALINMA 16.47 22,194,374
SABIC 98.09 2,208,800

Herfy Food Services Co.

Source: Al Rajhi Bank

Q1: solid results

Herfy released Q1 results with robust year-on-year sales growth of 17% and remarkable net profit growth of 16%. Sales in two divisions, restaurants and meats, showed very strong growth of 19% and 56% respectively; with around 6% same store sales growth in the core restaurants division. The bakery and rusk divisions showed modest growth of 4% and 1% after struggling in the last two quarters of 2010. The gross margin decreased in Q1 as a result of increasing foods commodities prices, but was offset by declining SG&A costs. Despite the declining gross margin, the overall results were solid and above our expectation. In our view, the acceleration in same store sales and the recovery in bakery segment are extremely positive news. Therefore, we upgrade our rating to Overweight and set a new target price of SAR91.7.

Valuation and conclusion: Herfy reported strong sales and profit growth for Q1 2011. Although we are concerned about declining gross margin, the overall results were solid and above our expectation. In our view, the acceleration in same store sales and the recovery in bakery segment are extremely positive news. We have made slight changes to our forecasts. Therefore, we have set a new target price of SAR91.7 (old target price was SAR89.4). This implies 16% upside as the share price has recently fallen and so we rate the stock Overweight. Herfy stock is currently trading on a 2011 PE of 15.3x and an EV/EBITDA ratio of 11.9x.

Click here to download the complete report
GulfBase GCC Index
Search By
  • Company Symbol
  • Company Name
  • Mutual Fund Name
  • News Content
Send this page to a friend

Poll

Looking ahead, what change you are more likely to make in investing in your domestic stock market?