HSBC maintains Savola purchase share at SR44

Savola’s retail operations, through its subsidiary Panda, are growing not only in terms of sales per square meter but due to increasing margins within the retail segment, a global research report recently issued by HSBC said.

Sales per store are increasing at a much faster pace at Savola’s subsidiary Panda compared to other rivals in the market which indicate a change in consumer tastes and habits towards higher end stores and improving brand recognition due to the growing number of stores. Panda currently has over 131 stores in the Kingdom with plans to open 19 more in 2012 providing more than 800 jobs for Saudi nationals.

In addition to that, Panda has gained sufficient scale and absorbed all its acquisitions successfully with net income margins, improving from 1.2 percent in 2009 to 1.6 percent in 2010 and to 2.2 percent in 2012. HSBC rated the company with an overweight rating and determined the target price at SR44 compared to SR35 which was the existing share price when the report was issued.

The Savola Group operates in three core sectors: the Food Sector which includes edible oils, sugar, and pasta, the Retail Sector through Al Aziziya Panda supermarkets and hypermarkets and the Plastics Sector, which manufactures both rigid & flexible plastic products.

The Savola Group has also diversified portfolio of strategic investments in other companies such as Al-Marai fresh diary company where it owns 29.99 percent, 49 percent of Herfy foods & restaurant chain, 30 percent of Kinan International real estate, and one of the founders of King Abdullah Economic City and Knowledge Economic City in Al-Madina Al-Munawarah. The Group had previously declared a record net profit from operations for the year 2011 amounted to more than one billion riyals, an increase of 35 percent as well as announcing its forecast of net Income of SR1.2 billion (before capital gains) for the year ending 2012.