Quarterly Update

• Kingdom Holding Company (KHC) reported total revenues of SAR 756 million for 1Q11, down 40.9% YoY.
• Net income increased 20.5% to SAR 91 million from SAR 75 in 1Q10.
• We are forecasting total revenues of SAR 4,254 million and net income estimate of SAR 637 million for 2011.
• We are maintaining our earlier OVERWEIGHT recommendation on KHC with a DCF target price of SAR 10.00, implying an upside of 17.6%.

Revenue
During 1Q11, total revenues plunged 40.9% to SAR 756 million from SAR 1,279 million. Hotels and other operating revenues dropped 45.0% to SAR 547 million from SAR 994 million in the same period last year. Loss from associates stood at SAR 80 million, as opposed to an income of SAR 251 million in 1Q10. On the other hand, dividend income improved 10.5% to SAR 17 million and other revenues increased 17.7% to SAR 20 million. Further, the company realised SAR 250 million from sale of real estate as compared to nil in 1Q10.

Profitability
Income from operations plunged 84.5% to SAR 10 million, attributable to lower operating revenues. However, KHC recorded SAR 59 million as gain on sale of investments as opposed to a loss of SAR 35 million from disposal of sale of investments. Further, net profit improved 20.5% to SAR 91 million as compared to SAR 75 million, due to SAR 94 million reversal of impairment loss. Consequently, adjusted annualised EPS stood at SAR 0.10, compared to SAR 0.08 in 1Q10.


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