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Savola Group
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Well placed for strong finish to ‘09
Savola reported a strong set of 3Q09 numbers with both the top and bottom line up sharply. We have updated our numbers for these results as well as the announced capacity expansions in the oil and sugar businesses and the acquisition of Geant. This leads to our PT increasing by 7% to SR30.3. With an upside of 4%, we maintain our Neutral rating
• Strong sales benefitting from Ramadan and Iranian Oil: Savola registered a 30% YoY rise in revenue to SR5.1bn in 3Q09, 4% above our estimate. We believe sales at Panda (3Q09 up 32% YoY) benefitted from the full inclusion of the weeks preceding Ramadan in 3Q09 vs. 3Q08, as well as synergy gains from the Giant Stores acquisition. The increase in its stake in the Iranian oil business from 49 to 80% also aided sales.
• Gross and net margins benefit from lower costs: Gross margins increased by 470bps and net margins by 160bps, largely due to lower raw material costs as global food prices have fallen. This improvement led to 3Q09 adjusted net income rising 36.6% YoY to SR276mn, 10% ahead of Savola’s guidance of SR250mn and 1.5% ahead of our SR272mn estimate.
• Geant acquisition to aid retail growth: At the results press conference, Savola highlighted its ambitious aims for its Retail business. It is targeting 180 stores in Saudi Arabia by 2013 with revenues of SR15bn. This includes the 11 stores and SR1.17bn in revenue it will receive via the acquisition of Geant, for which it received regulatory approval on 7 October.
• Increase in 2009 net income guidance by 6%: Savola has increased its 2009 net income guidance by 6% to SR846mn from SR800mn. We forecast SR861mn in net income for 2009e. Savola has also guided to SR190mn net income for 4Q09. We currently estimate SR202mn for 4Q09e.
• PT up by 7%-maintian Neutral rating: The higher than expected margins, increased stakes in its core businesses and higher capacity in oil and sugar leads to our PT increasing by 7% to SR30.3, indicating an upside of 4%.
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All data at market close |
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