United International Transportation Co. -Equity Report -02-07-2012

Budget Saudi continues to be at the forefront of the steadily growing car rental industry in Saudi Arabia, with improving demand and fleet expansion driving earnings growth.

United International Transportation Company Ltd. (Budget Saudi) is Saudi Arabia’s largest car rental company which owns the franchise for international brand ‘Budget’ in the Kingdom. The company’s services include short and long-term car rentals, pre-owned car sales, hajj and umrah services, premier limousine services, lodge and drive, cross border and corporate leading services. The company offers operating leases for commercial, passenger, SUV, MUV, and luxury vehicles.

The stock currently trades at 9.5x its FY 2012 (E) EPS of SAR 4.38. We estimate a fair value for the stock to be at SAR 56, based on a Discounted Cash Flow valuation as shown below.. This offers a 35% upside from current levels. Downside risks include a sharp slowdown in domestic economic activity impacting the flow of business visitors or unexpected global health risks that may slow the religious tourism in the kingdom.