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Savola Group -Equity Report -19-01-2012

Source: NBK Capital

12-Month Fair value: SAR 30
Recommendation: Accumulate - Risk level: 4
Last Close (17 January 2012): SAR 28.50

Savola reported revenue of SAR 6.6 billion in 4Q2011. This represents a 14% growth compared to 4Q2010 and 14% higher than our forecast of SAR 5.8 billion.

Savola’s recorded an impressive bottom line result of SAR 498.6 million in 4Q2011. This represents a significant jump compared to the SAR 2 million reported in 4Q2010 (which included write-downs). The bottom line result included gains from the sale of land assets at SAR 153 million. After the exclusion of capital gains and exceptional items, Savola reported a bott om line result of SAR 370 million, which came in 16% above our 4Q2011 forecast of SAR 319 million. This also was 12% higher than consensus estimates.

We will be updating on Savola soon, but we await the release of full financial results. The company issued new guidance for FY2012 net income of SAR 1.2 billion (before capital gains and exceptional items), which is 7% lower than our forecast of SAR 1.29 billion. However, given the strength of the 4Q2011 results and the recent asing in commodity prices we remain comfortable with our FY2012 forecasts. We maintain our fair value of SAR 30 for Savola’s share price. This represents a 5.3% upside compared to the latest close; hence, our “Accumulate” recommendation.

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