Al Hassan Ghazi Ibrahim Shaker -Equity Report -21-05-2012

growth story continues

With a size of about SAR4.4bn, the Saudi air-conditioning market is one of the biggest in the MENA region. We expect this market to continue to grow at a healthy pace, largely backed by ever-increasing population, high GDP per capita, the current boom in the construction market and above all these, the hot climate of the Kingdom. Despite being one of the early movers, Shaker faces intense competition in the Saudi air-conditioning market. Nevertheless, given its competitive dynamics, we strongly believe the company is equipped quite well to position itself firmly ahead of its peers. Backed by a ramp-up in production capacity and improving demand, Shaker is poised to chart out the growth path over the next few years. We initiate our coverage on Al Hasan Shaker Company with an Overweight rating with a target price of SAR83.5, which implies an upside potential of 23.7%.

Shaker still offers value: Using long-run discounted economic profit valuation, we estimate the fair value per share for Shaker at SAR83.5. Our target price for Shaker is driven by the long-run DEP method only. Our target price implies an upside of 23.7% from the current levels. By our estimates, Shaker will distribute a healthy DPS of SAR4.0 for 2012, implying an attractive dividend yield of 5.9%.