Saudi Airlines Catering Company Agriculture & Food Industries

Refer to important terms or use, disclaimers and disclosures on back page. Saudi Fransi Capital
Saudi Airlines Catering Company Agriculture & Food Industries | Equity Research | July 2012
Source: Company, Saudi Fransi Capital analysis; * Returns are calculated on net income after Zakat.
Tanked up and ready for takeoff
Saudi Airlines Catering Company (SACC) is the largest in-flight catering service provider
in Saudi Arabia. Backed by its market leading production capacity and strategic
relationship with Saudi Arabian Airlines (Saudia), the Kingdom’s largest carrier, SACC
commands a 95% market share in the high-margin in-flight catering business. The
company is also expanding its non-airline business to increase diversification. This
recently listed company offers higher growth, margins and dividend yield than most of its
peers and is currently trading at attractive levels. SACC is trading at a LTM P/E of 14.2x
(compared to the peer group average of 15.6x) and LTM EV/EBITDA of 10.5x (peer
average 11.3x). We initiate coverage on SACC with a BUY recommendation and a target
price of SAR84.8 per share, a 19.4% upside from the closing share price on 30/7/2012.
Largest player in the growing Saudi market. The International Air Transport
Association (IATA) projects the number of air passengers in KSA to increase at
7.5% CAGR over 2011–15 versus the global average of 5.8%. We expect SACC’s
relationship with Saudia coupled with the rapid expansion into new higher growth
business segments to deliver a revenue CAGR of 9.5% to SAR2.3bn with net
income growing at a CAGR of 12.0% to SAR742.7mn during 2011–2016E.
Exploring new avenues to increase diversification. SACC is exploring non-
airline markets to reduce its dependency on the volatile aviation industry. The
company is expanding its catering business to schools, hospitals and large
corporations. In addition, SACC is expanding into the industrial laundry business to
leverage on existing client relations and demand. While the non-airline business is
expected to realize lower margins, this is offset by the diversification and
significantly higher growth it brings to SACC. We expect revenues from this
segment to increase at a CAGR of 30.0% to SAR166.5mn by 2016E and its
proportion in total revenues to rise to 7.2% from 3.1%.
Better profitability vis-à-vis peers. SACC’s average operating margins (31.6%)
for the last three years were significantly higher than its peers: with local peers’
margins at 20% and global peers’ margins ranging from 5 to 20%. SACC benefited
from the larger contribution of high-margin in-flight catering business (about 71% to
revenues in 2011). The company’s superior profitability and efficient asset utilization
resulted in a RoaE of 42.4% in 2011, well above the average of 17.8% reported by
its peers. We expect the company’s RoaE to hover in the 47-56% range over our
forecast period. SACC’s balance sheet is also expected to remain debt free over
our forecast horizon, as internal accruals continue to fund expansions.
SAR mn 2010 2011 2012E 2013E 2014E 2015E 2016E
Revenues 1,193 1,465 1,676 1,873 2,037 2,174 2,307
Net income 417 421 518 588 648 698 743
Assets 1,208 1,424 1,476 1,631 1,788 1,946 2,111
Equity 824 981 965 1,072 1,189 1,315 1,450
Net margin (%) 35.0 28.7 30.9 31.4 31.8 32.1 32.2
ROaE (%)* 60.5 42.4 47.4 49.9 51.7 49.9 56.0
ROaA (%)* 37.8 29.0 31.8 33.7 35.0 34.3 37.7
EPS (SAR) 5.09 5.13 6.31 7.17 7.90 8.52 9.06
BVPS (SAR) 10.04 11.96 11.77 13.07 14.50 16.04 17.68
Recommendation BUY
Market capitalization SAR mn 5,822
High SAR 73.0
Low SAR 59.3
EPS (2012E) SAR 6.3
Stock price movement vs TASI
Source: Tadawul
TABLE OF CONTENTS
Investment summary
Largest in-flight caterer in the Kingdom and growing attractively
SACC, the largest in-flight catering company in Saudi Arabia, accounts for 95% of the market. The
company, which was part of Saudia Airlines until 2008, was separated under a privatization plan. However,
Saudia still holds the largest stake of 35.7% in the company. SACC continues to benefit from growth in the
Kingdom’s passenger market due to its close association with Saudia. The latter commands 94% share in
the domestic air passenger market and 33% of the international air passenger market in the Kingdom.
SACC generates about 83% of revenues from Saudia and its affiliates through in-flight catering services
(58% in 2011), sale of airline equipment (9%), onboard sales (10%), the management of Al Fursan lounges
(3%) and other activities (3%).
Saudia witnessed a CAGR of 8.4% in domestic and international passengers during 2009–2011. This could
be ascribed to an expansion in the Saudi economy, inelastic demand from religious visitors, a large
population base and high proportion of expats in the Kingdom. IATA estimates the uptrend to continue and
air passengers to increase at a CAGR of 7.5% over 2011–2015 vis-à-vis the global average of 5.8%.
Considering its strong foothold in the market, Saudia as well as SACC would be the primary beneficiaries of
this growth. The former plans to expand its fleet of owned aircraft to 128 by 2016 from 97 in 2011. In our
opinion, SACC’s total meal servings would expand at a CAGR of 7.6% to 37.6mn in 2016E from 26.1mn in
2011. Moreover, we expect some improvement in price per meal and project it to reach SAR41.3 by 2016E
from SAR39.6 in 2011. However, our price per meal assumption is very conservative, indicating there is
significant room for an upside. Consequently, in-flight catering revenues (excluding airline equipment sales)
are expected to total SAR1,553.1mn by 2016E compared to SAR1,034.1mn in 2011.
Growth in meals served and in-flight catering revenues, 2009-2016E
Source: Company, Saudi Fransi Capital analysis
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Accounts for 95% of the Kingdom’s in-flight catering industry
Revenues from in-flight catering to increase at a CAGR of 8% on strong outlook for passenger growth during 2011–2016E
Page 4 Saudi Fransi Capital
Increase in business activities. An expansion in the Saudi economy would continue to bolster
demand for business travel. The International Monetary Fund (IMF) projects the Kingdom’s real GDP
to grow 6% in 2012 and 4.1% in 2013 (6.8% in 2011).
Religious tourism. A rise in the number of religious tourists for Umrah and Hajj remains the key driver
for air passenger growth in the Kingdom. Nearly 3mn pilgrims visited Mecca and Medina during the
Hajj season in 2011, while close to 5mn religious tourists visited for Umrah. The Tourism Information
and Research Centre estimates foreign and domestic tourists to grow 5.3% YoY to 20.4mn and 6%
YoY to 25.4mn, respectively, in 2012.
Geographic and demographic profile. Travelers prefer air travel over road transport due to large
distances between main cities and a difficult terrain in the Kingdom. Moreover, a large population base
of 27.6mn (in 2010) fuels air passenger growth. This, coupled with Saudia’s near monopoly in the
domestic air travel segment, provides SACC with scale and certainty.
Large number of non-Saudis. Expats working in Saudi Arabia account for a major portion of the
inbound and outbound airline passengers in the Kingdom. According to the Saudi Arabian Monetary
Agency (SAMA), non-Saudis comprised about 31% of the total population in 2010. Though this
proportion has increased historically (28% in 2005), enhanced focus on Saudization might limit growth
in the coming years. Nevertheless, we believe the existing expat population would continue to support
an increase in air passengers in the near term.
Entry of new airline companies. The General Authority of Civil Aviation (GACA) is likely to issue new
licenses to foreign players keen on operating in the domestic market from April 2013. About 14 foreign
airlines have applied for the domestic license and GACA is expected to commence the approval
process in September 2012. New entrants in the market would offer additional growth opportunities for
SACC considering its well established presence in the in-flight catering business. While forecasting the
company’s future cash flows, we have not considered potential growth from the entry of new carriers in
the Kingdom due to lack of clarity. Nonetheless, we believe SACC is well placed to capitalize on such
growth opportunities in its core business. Any positive news flow on this front would be a key catalyst
for the stock price.
High-margin catering business offers a competitive edge to SACC
SACC’s operating margins stood at 28–35% during 2009–2011, higher than its global peers (such as SATS
Ltd and Autogrill SPA), which reported operating margins of close to 10%. The company’s operating margins
are also higher than its peers in the KSA Agriculture & Food Industries sector which generated an average
operating margin of about 20%. This could be ascribed to a greater proportion of the high-margin in-flight
catering services in the revenue mix. In-flight catering services (excluding sales of airline equipment)
contributed 71% to SACC’s revenues in 2011 as against 30–45% for peers. Operating margins are expected
to improve to 32.2% by 2016E from 28.6% in 2011 benefiting from higher operational efficiency and large
economies of scale. This would sustain SACC’s RoaE in the range of 47-56% during the same period. In
2011, SACC generated an RoaE of 42.4%, which is much higher than the industry average of 17.8%. An
efficient asset utilization and superior earnings enable the company to generate superior returns.
Higher contribution from in-flight
catering business leads to
generation of better margins
Inelastic demand from religious
tourists support air passenger
growth in the Kingdom
SACC’s operating margins during 2009-2016E
On the domestic front, SACC is well ahead of its peers engaged only in in-flight catering as they are smaller
in size. Adel Abuljadayel Flight Catering Company (AAFC), the company’s closest domestic peer in the in-
flight catering segment, can supply just 8,000 meals per day from its two catering facilities at Jeddah and
Riyadh. The company generated SAR41.3mn in revenues in 2010. SACC’s revenues totaled SAR1,193.2mn
during the same period. The company has a capacity to supply 124,000 meals per day.
Pricing remains weak, premium foods might offer some respite
SACC reported a modest CAGR of 3.9% in price per meal during 2009–2011, mainly driven by improved
realization on Saudia flights (CAGR of 4%) as prices increased at a CAGR of just 2% on other airlines.
Inflationary pressures and a discount of SAR69mn offered to Saudia in 2011 burdened its cost structure.
SACC agreed to reduce cost of food supplied to Saudia by 10% for a five-year period starting from January
2011. Higher orders for premium food offerings provided some respite to SACC and the net effect of the
discount was reduced to SAR38mn. In our opinion, the company would continue to focus on increasing sales
of premium food products in the coming years and pass on the inflationary pressures to customers. We
consequently expect SACC’s average price per meal to increase at a modest CAGR of 0.8% during 2011–
2016E.
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Saudia - price per meal Other airlines - price per meal Price per meal - airline
Local peers not comparable due to
small size of operations
pass on inflation pressure to
customer
Scale of operation restricts any immediate threat of competition
SACC’s strategic relationship with Saudia, large production base, advanced production processes and deep
knowledge of the Saudi market are significant entry barriers for new players in the Kingdom. Therefore, we
believe the company does not face any immediate threat of competition in its core business. Moreover,
SACC’s sustained focus on process improvement and cost containment enabled it to maintain gross and
operating margins despite a fluctuation in prices and cost scenario.
Large economies of scale. SACC has achieved economies of scale across the supply chain. While
the company obtains a significant proportion of raw materials at favorable prices, its large-scale
production facilities (ovens and cooking facilities) enhance operating efficiency. Also, SACC has
widespread cold storage and distribution facilities. Recently, the company acquired or committed to
purchase nearly 20 new high loaders to supply food to airplanes. SACC currently has 98 high loaders
and plans to invest about SAR5.5mn in 2012 (SAR13.5mn in 2011) to buy new vehicles and high
loaders and thereby expand its distribution network.
Technological advancements. SACC has improved its institutional expertise over decades that, in
turn, have enabled it to develop catering processes, which are difficult to replicate and provide
operational flexibility. The company adopted advanced technologies to offer high-quality services to
customers as well as contain costs. On 18 July 2011, SACC’s first central production unit (CPU)
commenced operations at the Riyadh catering unit. This unit produces frozen meals for the economy
class, thereby reducing the company’s dependence on imports. CPU is an integrated facility, which
produces a variety of standard dishes and stores them in deep freeze for a maximum period of 18
months. As required, the frozen dishes are supplied to SACC’s different catering units. Apart from
offering on-time and reliable supplies, the storage facility also enables SACC to make bulk purchases
of raw materials at a low-cost during off-season, thereby improving the margins of its catering business.
Currently, the unit has a production capacity of 27,000 meals per day, representing 22% of SACC’s
total designed capacity of 124,000 meals per day. The company’s focus on automation may lead to a
reduction in purchase, overhead and personnel costs.
Strategic location. SACC’s catering units are strategically located at major airports in Saudi Arabia
and in Cairo, the largest airport in Egypt. In addition, it has access to prime and exclusive facilities at
airports due to which it can completely avoid the increasing security control processes.
Association with Newrest. SACC’s partnership with France-based Newrest Group Holding S.L. (a
leading firm in the global airline catering industry) enables it to identify future trends in the catering
industry and developments in food production technologies. The company also benefits from Newrest’s
expertise in managing lounges and buy-on-board services along with its global presence. Newrest
helps SACC in recruiting senior employees and developing quality control practices. The partnership
aims to reduce the dependence on Saudia to less than 60% by 2017. Newrest holds about 14.4% stake
in SACC, through Strategic Catering Company LLC (SCCL) which is a special purpose vehicle
established by Al Fozan Holding Co, Abdulmohsen Al Hokair Group for Tourism and Development (Al
Hokair Group) and Newrest during privatization.
Sustained focus on technological advancements. Considering the nature of the business, delivering
high-quality food at the right temperature is of utmost importance. Capitalizing on its cash rich and
unleveraged balance sheet, SACC is able to invest in developing market leading technologies. SACC
set up a system to observe on-line temperature at over 20 points at its catering facilities. This helps the
company to rectify any issues in a timely manner.
Higher economies of scale considered a key competitive edge
SACC invests in market-leading technologies to improve processes and contain costs
Revenues from sky sales to grow in tandem with passenger growth
SACC manages and operates the on-board shopping business on Saudia and National Air Services (NAS)
flights. The company expects revenues from the Sky Sales segment to increase at a CAGR of 7–9% during
2012–2016E. This could be ascribed to the anticipated 7.5% rise in air travelers and increasing popularity of
in-flight shopping, mainly among young passengers. About 37% of the total Saudi population was in the age
group of 20–40 years in 2010. In addition, an improvement in spending capacity and expansion in product
offerings support growth in revenues from this business. In our opinion, segmental revenues would expand
at a CAGR of 7.8% over 2011–2016E, in line with the company’s guidance of 7–9%.
In terms of profitability, Sky Sales appears attractive with net margins of 20–30% in the last two years. The
segment’s margins have been very volatile—net margins improved to 32.9% in 1H12, up 669 basis points
YoY. This could be due to higher sales of premium products during the same period. Going forward, we
expect the segment to generate similar net margins.
Diversification efforts to offer additional revenue streams
By leveraging its expertise in catering services, SACC is exploring non-airline markets to reduce
dependency on Saudia as well as its revenue contribution to less than 60% by 2017. These include schools,
universities, banks, hospitals and corporations. Though this business is low margin in nature, there is
significant untapped demand. The company is also providing ancillary services to Saudia and has entered
diversified businesses, such as laundry and staff camp, which are also low margin in nature. In our opinion,
expansion in non-airline businesses would enable SACC to leverage its existing production facilities and
cost-effective catering solutions.
Non-airlines market. The non-airline catering industry in the Kingdom is currently fragmented and
therefore, SACC’s expertise in airline catering services enables it to offer attractive solutions. The
company is currently offering catering services to Saudi British Bank, Saudi Telecom Company,
National Commercial Bank, Saudi Arabia Mining Company, three international schools, British
Continental School’s cafeteria (Jeddah), Princess Noura University (Riyadh) and the Islamic
Development Bank. Besides exploring non-airline catering markets, the company is developing a
housing project at Jeddah and two laundry facilities each at Jeddah and Riyadh. Benefiting from these
initiatives, the Non-airlines segment is projected to contribute 7.2% to total revenues by 2016E from
3.1% in 2011. The segment’s revenues are expected to increase at a CAGR of 30.0%, faster than the
7.9% growth in the Airline segment’s revenues. Margins of non-airline businesses are lower than that of
airline catering services. This could be ascribed to intense competition. However, this market offers
stable growth prospects. We estimate SACC’s overall gross margins to improve to 40.0% by 2016E
from 38.1% in 2011 as the company would be able to limit margin contraction through volume growth.
o Staff camp project. SACC has initiated a housing project, wherein it would build 4,000 units in
Jeddah. About 900 housing units would be occupied by the company’s employees, while the
remaining would be leased to third parties. Construction commenced in May 2011 and is
scheduled for completion by the end of 2013. The total investment of SAR143.7mn is spread over
2011–2013. Apart from the addition of a new revenue stream for SACC, this project would also
reduce costs as employees are currently staying at the premises leased through Saudia. This
project is expected to generate additional revenues of SAR20.1mn in 2013 reaching SAR22.1mn
by 2016E.
o Construction of laundry facilities. SACC plans to construct two laundry facilities, one in the
King Abdullah Economic City (KAEC) and another at a hospital in Riyadh. The project’s total
investment is estimated at SAR33.7mn. Both facilities would have a capacity of 40 tons per day.
Target customers are expected to be Saudia, industrial facilities, hotels and hospitals.
Expanding passenger base, propensity to spend and widening product portfolio considered key drivers
Sky Sales generated net margins of 32.9% in 1H12
Stable and fragmented non- airlines catering market offers growth opportunities
Construction is expected to start in July 2012 and scheduled for completion by the end of the
year. This project is expected to generate additional revenue of SAR10.1mn in 2013E, further
increasing to SAR20.0mn by 2016E.
Sale of airline equipment. Initially, SACC commenced the sale of food-related equipment, such as
cutlery and chinaware, to airline companies. The company generated SAR138.4mn through the sale of
airline equipment in 2011 which accounted for 9.4% of total revenues. Though Saudia is the single
customer, we expect SACC’s customer base to expand, going forward. Revenues from this segment
are projected to increase at a CAGR of 4.4% to SAR171.7mn over 2011–2016E.
Best dividend play in the sector
SACC’s dividend payouts stood at 65.0% in 2009 and 80.8% in 2011 due to its ability to generate high free
cash flows. The company did not pay any dividends in 2010. We expect the company to maintain a dividend
payout ratio of ~73% throughout our forecast horizon. In 2011, SACC distributed dividends of SAR340mn,
implying a dividend yield of 5.8%. This seems to be attractive when compared to the average dividend yield
of 3.5% in the KSA Agriculture & Food Industries sector during the same period.
Dividend per share and dividend payout, 2011-2016E
Key Investment Risks
Unfavorable changes in SACC’s agreements with Saudia. SACC generates 77% of its revenues
from Saudia under airline catering services and sky sales services agreements. These agreements are
due for renewal on 29 January 2015. Though there is a strong likelihood of renewal as SACC is a
critical part of Saudia’s value chain, unfavorable changes in the terms and conditions (such as
additional discounts to Saudia) would dent SACC’s margins.
Back catering remains a potential threat. Foreign carriers accounted for 61% of the Kingdom’s
international passengers in 2011. Most airlines carry food from their base airport, thereby reducing
their dependency on SACC’s catering services. Growth in the number of such operators remains a
cause for concern.
Weaker-than-expected growth in passengers. Slowdown in passenger growth due to any
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Dividend per share (DPS) Payout ratio
SACC’s dividend yield stood at 5.8% in 2011, higher than the average of 3.5% in KSA’s food and agricultural sector
Additional discounts to Saudia would negatively impact SACC’s earnings
geopolitical event and weaker-than-expected growth in the global economy could have an adverse
impact on the airlines industry, thus denting SACC’s revenues and margins. However, inelastic
demand from religious visitors could offer some support to the airline and in-flight catering industries in
Saudi Arabia.
Delayed payments from Saudia could reduce operating cash flows. Saudia and its subsidiaries,
Saudi Ground Services Company and Saudi Airlines Cargo Company, jointly accounted for 83.0% and
81.5% of SACC’s total revenues in 2011 and 2010, respectively. Of this, outstanding receivables
totaled SAR511mn and SAR253mn at the end of 2011 and 2010, respectively, indicating 152 and 93
days of sales outstanding. Considering the dependence on receivables from Saudia, we have
analyzed the sensitivity of SACC’s valuation to changes in receivables days. As indicated in the chart
below, if Saudia and its affiliates make early payments, SACC’s operating cash flow will improve
thereby positively impacting its valuation. Currently, we have assumed gradual reduction in receivables
days over our forecast horizon. We estimate receivables days to improve to 130 days by 2016E from
152 days in 2011 and 2012E. Any delay in payments from Saudia would dent SACC’s valuation.
SACC’s target price declines with increase in receivable days
Source: Saudi Fransi Capital analysis
Low-cost carriers could impact in-flight catering. Rising number of budget carriers in the Middle
East pose a challenge to SACC in the long run. Air Arabia was the first budget carrier to commence
operations in 2003. Thereafter, Jazeera Airways, NAS Air, Sama (which subsequently seized
operations), Bahrain Air and Flydubai entered the market. Low-cost carriers have increased their
market penetration to 7% in just eight years. This is a cause for concern compared to the market
penetration of budget airlines in developed countries - Europe (35%) and the US (20%).
SAR 86.22
SAR 85.27
SAR 84.33
SAR 83.40
SAR 82.45
75 days 100 days 125 days 150 days 175 days
Company description
Company history
Established in 1981, SACC primarily offers in-flight catering services to Saudia and other airlines in the
Kingdom. The company was part of Saudia until January 2008, when the latter’s catering and sky sales
business units were separated and converted into a limited liability company. This move was in line with the
Saudi government’s privatization plan. In January 2011, SACC was transformed into a joint stock company
with a share capital of SAR100.8mn. Later, the company increased its share capital to SAR820.0mn in March
2011 by capitalizing SAR719.2mn from its retained earnings, general reserve and statutory reserve.
Important milestone in SACC’s history
Source: Company
Since inception, Saudia remains the single largest customer of SACC. As the former commands 94% share in
the domestic air passenger market and 33% of the international air passenger market in the Kingdom, this
strategic partnership provides SACC with the scale and certainty to expand. In 2011, Saudia and its
subsidiaries (Saudi Ground Services Company and Saudi Airlines Cargo Company) accounted for 83% of the
company’s total reveneus, mainly through in-flight catering, on-board sales, lounge management and sales of
airline equipment.
On 29 January 2008, Saudia and SACC signed two contracts – Saudia Catering Agreement and Sky Sales
Agreement – that are effective until 29 January 2015. Under the former, SACC offered catering and ancillary
services to Saudia. Since then, the terms and conditions of this agreement have been amended thrice. In
June 2008, Saudia agreed to provide a fixed monthly payment of SAR50mn for SACC’s services. The amount
was increased to SAR60mn per month in January 2012. SACC offered a 10% discount on food supplied to
Saudia for a period of five years starting January 2011.
Under the Sky Sales Agreement, SACC is authorized to sell certain products on domestic and international
flights operated by Saudia. The pricing of such products is solely decided by the former. Saudia receives 10%
of the revenues generated through in-flight sales.
About 31.9% of SACC’s employees were Saudi nationals as of December 2011, as the company lays
emphasis on Saudization. SACC falls under the Premium Category of the Nitakat program, thereby availing
various benefits and sanctions from the government. This is commendable when compared with its peers in
the Food and Agricultural sector which majorly employ non-Saudi nationals.
1981 1983 1984 1985 1999 2001 2006 2008 2009 2011 2012
First catering
Jeddah
limited liability
stake to public through IPO
SACC employs high proportion of Saudi nationals when compared with its peers
SACC generated 83% of total revenues in 2011 from Saudia and its affiliates
SACC has catering units across key airports in the Kingdom and Egypt. The chart below mentions the
company’s production capacity.
SACC’s asset base is strategically located at key airports
Source: Company; *details are as on 31 December 2011
Airline segment alone accounted for 92.8% of SACC’s total revenues in 2011
SACC reports revenues under two broad segments: Airlines and Non-airlines.
Airlines segment includes revenues generated through in-flight catering services to Saudia and other
airlines, Sky Sales and Al Fursan lounges. In 2011, the company generated about 67.1% of revenues through
in-flight catering services and airline equipment sales to Saudia. In-flight catering services to other airlines
contributed 12.9% to total revenues in 2011. SACC also provides in-flight shopping services (Sky Sales) on
Saudia flights and operates Al Fursan lounges (on behalf of Saudia) at the international airports in Jeddah,
Dammam, Riyadh and Madina. Revenues from Sky Sales and Al Fursan lounges accounted for 10.0% and
2.7% of SACC’s revenues, respectively, in 2011.
Non-airlines segment includes revenues generated through catering services provided to corporations,
educational institutes, religious sites and firms operating in remote locations of the Kingdom. These activities
accounted for 3.1% of the company’s revenues in 2011.
Under other revenues, about 4.2% of the total revenues in 2011 were generated through other activities such
as offering meals to the staff of Saudi Ground Company Ltd, consultancy fees from suppliers, and
miscellaneous sales and exclusivity fees.
• Established in 1999, this unit is 3rd
largest in terms of capacity • Design capacity = 18,000 meals
daily
• Avg. f lights handled daily = 54 • Avg. no. of daily f light meals = 6,609
• Total meals served in 2011 = 2.4mn
• Established in 1983, this unit is 2nd
largest in terms of capacity
• Design capacity = 40,000 meals daily
• Avg. f lights handled daily = 153
• Avg. no. of daily f light meals = 26,398
• Established in 2001, this unit is 4th
largest in terms of capacity
• Design capacity = 12,000 meals daily • Avg. f lights handled daily = 35
• Established in 1981, this unit is largest in terms of capacity
• Established in 1984, this unit is smallest in terms of capacity
Riyadh Dammam
Segment-wise breakdown of SACC’s total revenues in 2011
Source: Company
Major shareholders
Saudia is the single largest shareholder in SACC with 35.7%, followed by Strategic Catering Company LLC
(SCCL – 34.3%), which is a special purpose vehicle. SCCL was set up for investing in SACC during
privatization. Al Fozan Holding Co, Abdulmohsen Al Hokair Group for Tourism and Development (Al Hokair
Group) and Newrest were involved in establishing SCCL. Al Fozan Holding Co and Al Hokair Group
transferred their stake in SCCL to their affiliates, Injaz Projects Ltd Co and Al Hokair, respectively. The
remaining 30% stake in SACC was offered to the public through an IPO in June 2012.
Prior to the IPO, Saudia Aviation Company Ltd (SACL), Saudia Private Aviation Company Ltd (SPACL) and
Saudia Real Estate & Development Company Ltd (SRECL) held a 1% stake each in SACC. These companies
are wholly owned by Saudia.
SACC’s shareholding pattern
Qualified and experienced management team
SACC has a highly knowledgeable team with extensive experience in in-flight catering. Majority of the senior
management personnel have more than 20 years experience in the industry along with in-depth
57.7%
12.9%
10.0%
9.4%
3.1%
2.7%
4.2%
Sky sales - Saudia
understanding of the Saudi Arabian market.
SACC functions under the guidance of Mr. Christophe Parent, CEO, who has 23 years of experience in
catering and life support services; he worked with Sodexho Group, one of the leading catering companies
worldwide, for 20 years.
Mr. Wajdy Mohammed Al-Ghabban, serving SACC for the past 24 years, was appointed Chief Operating
Officer (COO) and Deputy CEO in 2010 and 2011, respectively. He held key positions at the Cairo and
Riyadh catering units during these years.
Mr. Mohamed Nabi, General Manager of the Shared Services Department, and Mr. Gilles Corroy, General
Manager of the Business Development Non-Airline Department, have extensive international and local
experience of over 20 years in catering and support services. They have also served in internationally
renowned companies such as Sodexo Group.
Mr. Abdulwahab A. Saati, General Manager of the Airline Marketing and Sales Department, and Dr. Fahad
Khayat, General Manager of the lnternal Control & Performance Improvement Department, have been
associated with the catering industry for 20+ years.
Industry overview
Global airlines catering industry generates about USD14bn in annual turnover. Airline catering
has emerged as a key aspect of the airline industry as companies compete in terms of the food served
on flights. The in-flight catering market worldwide is estimated to generate an annual turnover of over
USD14bn. The global industry is dominated by two players: LSG Sky Chefs and Gate Gourmet GmbH.
The former commands the largest share of 26%, capitalizing on its 70+ years of experience. LSG Sky
Chefs served 492mn meals to more than 300 airlines and generated EUR2.3bn (approximately
USD3.2bn) in revenues in 2011. According to estimates, the company caters to about 35–40% of the in-
flight demand in the US and Europe. However, domestic players continue to dominate in emerging
economies such as Asia, the Middle East and Africa.
Growth in emerging markets. As the airline catering industry is in a declining stage in North America,
in-flight catering offers very low margins with intense competition. The industry has reached a mature
stage in majority of Europe, Latin America and the Mediterranean region. Low growth in business is
exerting pressure on the industry’s margins in these regions. On the contrary, Asia, the Middle East and
Eastern Europe offer huge growth potential and the in-flight catering industry is characterized by high
margins. As the industry in these regions is in the initial stages of development, the focus is on all
routes – short range, mid range and long range – in a move to enhance market coverage.
SACC enjoys lion’s share in airline catering indsutry in the KSA. Considering wide population base
and inelastic demand from religious visitors, Saudi Arabia is a key market in the Middle East. As per
GACA, Saudi Arabia accounted for 29% of total passenger traffic in ME (including Egypt) in 2009.
Moreover, SACC dominates the in-flight catering market in the KSA given its association with Saudia.
Growth drivers
LSG Sky Chefs and Gate Gourmet dominate the global market
Attractive growth in the in-flight
catering industry in the Middle
East
share of 95%
Positive demand fundamentals offer sustainability and resilience. Given the nature of the
business, in-flight catering’s performance is directly linked to the health of airline companies. The Saudi
airline industry is benefiting from an expansion in the population base, government investment in air
travel infrastructure, growing number of pilgrims and the government’s focus on increasing investment
opportunities in the Kingdom. IMF forecasts Saudi Arabia’s real GDP growth at 6% in 2012 and 4.1% in
2013. Improving economic conditions, coupled with a favorable demographic profile and inelastic
demand from Muslim pilgrims, continue to support inbound and outbound air travel in the Kingdom.
Passenger growth in KSA would outpace global growth. IATA expects passenger traffic in Saudi
Arabia to increase at a CAGR of 7.5% during 2010–2015 compared to the global average of 5.8%.
Saudia is set to capitalize on these growth opportunities as it is the largest carrier in Saudi Arabia.
According to GACA, 94% of the domestic passengers opted for Saudia in 2011. The other 6% is
controlled by NAS Air, a low-cost carrier. In August 2010, Sama Airline Company Ltd, the third operator
in the Kingdom, suspended operations due to rising debt and operating losses. In terms of international
passengers, foreign carriers accounted for a majority (61% in 2011), followed by Saudia (33%) and
NAS Air (6%).
Passenger growth at KSA airports, 2009-2016E
Source: GACA, Saudi Fransi Capital analysis
Government’s initiatives to improve infrastructure. GACA aims to invest SAR37.5–56.25bn to
expand and upgrade the existing international and regional airports as well as to set up new airports in
the Kingdom by 2020. Capacity of the Riyadh airport is expected to increase from the current 9mn
passengers to 25mn by 2016. Moreover, a new terminal is expected to be set up at Jeddah’s existing
airport at a total investment of SAR27bn to increase the total capacity to 30mn passengers annually by
2015 from the current 17mn. About SAR3.75–5.6bn would be invested for capacity expansion (to 8mn
vis-à-vis 4mn currently) at the international airport in Medina by 2015. In line with the long-term
expansion plans, the government has earmarked a capital expenditure of SAR35.2bn (up 40% YoY) for
the transportation and telecommunication sectors. Some funds would be directed toward the expansion
of existing airports and construction of new ones.
Competitive landscape
G ro
w th
g e rs
Strong foothold in the KSA market
to enable Saudia to benefit from
an expanding air passenger base
in coming years
Quality remains a key distinguishing factor. As hygiene and safety are of utmost importance, firms
operating in this industry have to adhere to strict norms while delivering high-quality food to customers.
SACC received various awards, certifications and accreditations due to its high quality standards and
best practices. For instance, the company received the IATA Regional Golden Awards in 2009 and
2010, and IATA Global Platinum Award in 2011.
Market leader with little threat from local players. Apart from SACC, other domestic players are
much smaller in size and majorly cater to the needs of private jets and few international flights. Adel
Abuljadayel Flight Catering Company (AAFC) is the closest and direct competitor to SACC. However, it
is smaller in size as it has a production capacity of just 8,000 meals per day. However, back catering
offers a potential threat to SACC on international routes.
Stratigic relationship and huge capital requirement limits new entrants. The relationship with
Saudia and high capex requirements, render this an industry with significant entry barriers in Saudi
Arabia; it is difficult for a new player to achieve the scale and deliver quality while managing costs.
Emerging trends
Expanding offerings to airlines and customers to assure contract extensions. With a reduction in
the catering budgets of airlines and rising competition, in-flight caterers are offering ancillary services
(such as airline equipment sales and management of lounges). Moreover, firms seek to lower operating
costs by offering a diversified range of products to passengers. These include process improvement in
kitchens along with continuous innovation of new delicacies.
JVs with global players help domestic firms to acquire global traits. Singapore-based SATS
acquired a 40% stake in AAFC for SAR69.4mn. Along with offering services to few international airlines
(such as Cathay Pacific Airways and Malaysia Airlines), AAFC is primarily engaged in the provision of
in-flight catering services to private jets and Hajj charters since 1982. Therefore, SATS’ tie up with
AAFC would offer it access to the Kingdom’s two largest airports, Jeddah and Riyadh, along with
private jets and Hajj charters. Jeddah and Riyadh jointly handled close to 38mn passengers in 2011,
representing 69% of the total air passenger traffic in the Kingdom.
Tapping the potential of the non-airline markets to generate additional revenues. Airline catering
firms are now diversifying their revenue streams to de-risk business models and explore non-airline
markets that offer stable and growing revenue streams. Non-airline markets enable in-flight caterers to
leverage their expertise in niche and fragmented markets(catering to hospitals, schools and larger
corporations). As this business is less profitable, firms focus on enhancing market penetration that, in
turn, leads to higher volumes.
Concerns
Stagnation in passenger volumes. Factors such as a reduction in air travel due to geopolitical
instabilities and financial weakness of airline companies is a cause for concern. Though growth in
international passengers is exposed to these macro factors, the Kingdom’s in-flight catering industry
benefits from strong domestic demand and resilient religiuos tourism.
Rising inflation remains a concern. Prices of raw materials (mainly food, meat and dairy products)
have been on an uptrend in recent years. According to the Food and Agriculture Organization (FAO),
the food price index reached 238 in February 2011 surpassing its previous high of 224 in May 2008.
The sharp increase in global food prices could be ascribed to increasing demand, lower crop yield and
growing popularity of crops for biofuels. Nevertheless, prevailing economic conditions are exerting
downward pressure on food prices in 2012. The food price index declined to 201 in June 2012. Food
prices track the global movement due to the Kingdom’s dependency on imports. Apart from inflation,
pandemic diseases such as avian influenza and mad cow disease exert additional pressure on the
SATS purchased 40% stake in AAFC for SAR69.4mn
Increased raw material costs exert pressure on airline catering service providers
SACC won renowned global awards due to its high quality standards and best practices
supply chain management of airline catering companies.
Food inflation in Saudi Arabia
Source: SAMA; considering 1999 as the base year for KSA food inflation index
Back catering remains a cause for concern. SACC faces significant competition from regional
airlines, which prefer back catering from their base airports. For example, Emirates Flight Catering Co
(EKFC), with a capacity of more than 175,000 meals per day, provides in-flight catering services to
Emirates Airlines. Etihad Airways, Qatar Airways, Gulf Air, Iran Airlines, Kuwait Airways, Mahan
Airways and Syrian Air also prefer back catering.
Little scope for in-flight catering in a low-cost carrier. Airline catering does not fit into the business
model of low-cost carriers (LCC). Though LCCs cater to a very small proportion of the market, they are
growing at a faster pace and could become a potential threat for the industry.
Outlook
Growth prospects intact due to strong fundamentals. Despite the weak global economy in recent
years and the seemingly bleak outlook in the near to medium term, the Saudi economy continues to
deliver growth. The growing spending plans by the Saudi government on infrastructure lend further
support to the positive outlook for economic growth. This coupled with growing population and
workforce, inelastic demand from religious visitors and sustained growth in domestic air travel bode well
for the Kingdom’s airline catering industry in the near to medium term.
Non-airline catering industry
Unlike airline catering, this industry is fragmented with various players ranging from local restaurants to
well-established firms such as Saudi Catering and Contracting Company, Gulf Catering Co, National
Company for Management and Services, Arabian Food Supplies Company and Al Tamimi Global
Company Ltd. The industry’s clientele comprises oil and gas, petrochemical, construction and mining
industries; government agencies; educational institutes; and hospitals and military.
Based on a study conducted by Digma Management Consulting AG (Digma) in 2008, the total market
size of this industry is about SAR17.4bn. Demand is driven fundamentally by an expansion in the
economy, growing population and workforce, and sustained growth in religious tourists in the Kingdom.
Planned and upcoming economic cities, growing number of educational institutes as well as industrial
100
110
120
130
140
150
160
KSA Food Inflation Index
Non-airline catering industry is fragmented in KSA
Digma projects non-airline industry market size to be SAR17.4bn in Saudi Arabia
growth are further demand drivers. The end markets can be categorized as follows.
Religious: With a market size of SAR6.9bn (according to Digma’s study undertaken in 2008), this
segment includes catering services to pilgrims visiting Hajj and Umrah through retail outlets or
Tawafa establishments.
Remote sites: Under this segment, catering firms offer services to companies located in remote
areas of the Kingdom. Digma estimated the total market size to be SAR3.9bn in 2008. Well-
established firms such as National Company for Management and Services (managed by Sodexo
Group), Arabian Food Supplies Company and Al Tamimi Global Company Ltd are currently
catering to this segment.
Party services: This segment has the potential to generate a turnover of SAR2.9bn by offering
services to wedding and large parties.
Hospitals and medical centers: In 2008, the total market size was estimated at SAR1.5bn. With
the government’s sustained focus on improving health facilities, there is significant growth potential
in this segment. The government allocated SAR86.5bn for health and social initiatives in the 2012
budget, up 26% YoY.
Businesses and industries: This segment, with a market size of SAR1.3bn in 2008, includes
companies operating in various industries.
Educational institutions: Digma estimated the market size, including schools and universities, to
be SAR860mn in 2008. The government’s plans to establish new universities and about 742
schools in the Kingdom could offer additional growth opportunities. In the 2012 budget, the
government earmarked SAR168.6bn for this sector, an increase of 13% from 2011.
Cost drivers are broadly the same as that of airline catering, except that non-airline catering firms
engage in extensive promotional and marketing activities due to the fragmented nature of the industry in
Saudi Arabia. With insignificant differentiating factors, firms compete in terms of pricing that renders the
business less profitable vis-à-vis the airline catering industry.
Significant upside potential and cyclical resilience. In our opinion, the non-airline catering industry
offers huge growth potential considering the ongoing or planned expansion initiatives across different
sectors in the Kingdom. Though the industry is characterized by lower profit margins relative to the
airline catering industry, volume growth is attractive as demand is less cyclical.
KSA’s non-airline catering industry
being fragmented in nature, firms
focus more on marketing and
promotional activities
Valuation
Discounted Cash Flow (DCF) method
We have used the DCF methodology to value SACC, as it captures the inherent growth prospects of the
company. Also, we forecasted the company’s revenues and cost components in detail. Thereafter, we
calculated the free cash flows for five years (2012E–2016E). Cash flows beyond 2016E have been estimated
through the continuing value principle using a sustainable growth rate of 2%. Cash flows were then
discounted using the weighted average cost of capital (WACC), which offers SACC’s enterprise value. This
was then adjusted for debt, and cash and cash equivalents to derive the equity value.
We have considered the SIBOR yield of 1.1% as the risk-free rate for SACC. We have assumed a Beta of
1.02. We have considered an emerging market equity risk premium of 10.5% for Saudi Arabia. Thereafter, we
derived cost of equity as 11.9%. As SACC is debt-free, there is no cost of debt. This results in a WACC of
11.9%.
DCF valuation details
Year ended Dec (SAR mn) FY12F FY13F FY14F FY15F FY16F Cont. value
NOPLAT 460 535 589 635 676
D&A 21 31 36 39 42
Changes in working capital (43) (8) (11) (7) (11)
Capex (146) (75) (31) (33) (35)
Free cash flow to firm (FCFF) 292 483 584 634 672 6,957
Discount period 0.42 1.42 2.42 3.42 4.42 4.42
Discount factor @ cost of equity 0.95 0.85 0.76 0.68 0.61 0.61
Present value of FCFF 278 412 445 432 409 4,238
Sum of present value of FCFE 1,977
Present value of terminal value 4,238
Enterprise value 6,214
Add: Cash 666
Less: Debt 0
Equity value 6,880
Sensitivity
The exhibit below indicates changes in the DCF target price with changes in cost of equity and terminal
growth rate.
Sensitivity analysis
Comparative valuation method
For comparative valuation, we have considered SACC’s peers in the KSA Agriculture & Food Industries
sector that are listed on Tadawul.
2013E P/E and EV/EBITDA multiples comparison for SACC and its peers
Source: Bloomberg, Saudi Fransi Capital analysis
We used the price-to-earnings (P/E) and enterprise value-to-EBITDA (EV/EBITDA) methodologies to derive
the target price based on comparative valuation. SACC reported that net income does not include Zakat and
tax-related expenses. However, we deducted these expenses from the company’s net income to derive its
P/E multiple and make it comparable with peers. On a conservative note, we assumed that SACC would be
at par with its domestic peers despite its above-average profitability and strong association with Saudia. We
have assigned 2013E P/E multiple of 13.0x and 2013E EV/EBITDA multiple of 10.3x.
Comparative valuation
0x
2x
4x
6x
8x
10x
12x
14x
16x
Herfy Food Services Savola Halwani Bros Co Almarai Co Ltd
2 0 1 3 E
m u lt ip
Blended valuation
We have assigned 50% weighting to DCF as this methodology aptly captures the free cash generating
capacity of the businesses based upon their evolving business model, growth prospects and profitability. The
remaining 50% is distributed equally amongst the market multiples methodologies — P/E and EV/EBITDA.
Consequently, we initiate on SACC with a buy recommendation and a target price of SAR84.8 per share,
indicating an upside of 19.4% from from the last close of SAR71.0.
Methodology Weight assigned Target price Weighted average
target price
EV/ EBITDA ratio 25% 86.24 21.56
Weighted average target price (SAR)
84.76
71.00
Upside
19.4%
Scenario analysis
Valuation most sensitive to growth in meals and changes in COGS
SACC’s operating cash flows are highly dependent on passenger growth and movement in price per meal
served on Saudia flights. An increase of 1% in the price per meal would raise the company’s target price by
SAR1.37 per share. Similarly, a 1% increase in the number of meals served on Saudia flights would boost our
target price by SAR1.25 per share. We have also analyzed impact of changes in COGS and contribution from
the non-airline segment on the company’s valuation.
Target price in bull, bear and base case
Bull case: Assuming SACC’s volumes are 10% higher than in the base case, the target price
increases to SAR 107.5 per share. Moreover, higher proportion of premium food offerings is expected
to raise price realizations from meals served on Saudia flights. In addition, COGS is expected to
decrease 2% due to SACC’s sustained focus on process improvements and technological
advancements. Consequently, the net income is estimated to total SAR960.2mn in 2016E, implying a
CAGR of 18.0% during 2011–2016E.
Bear case: Under this scenario, the target price is estimated to be SAR59.4 per share, assuming
SACC faces challenges in terms of expanding volume and pricing pressure exists along with poor
performance in the non-airline segment. The net income is expected to increase at a CAGR of 3.4%
during 2011–2016E and reach SAR496.5mn.
Base case: DCF and peer multiple based blended valuation, we arrived at a target price of SAR84.8
per share. Revenue is projected to grow 9.5% over, while net income is expected to increase at a
CAGR of 12.0% to SAR742.7mn during 2011–2016E.
59.4 59.4 61.9 68.9
30
50
70
90
110
130
u e
u e
A R
a s e
In c re
a s e
A R
u e
n o
u e
Financial outlook
Income statement
Revenue. We estimate SACC’s revenue to increase at a CAGR of 9.5% to SAR2.3bn in 2016E from
SAR1.5bn in 2011 due to strong growth across business segments: Airline, Non-airline and Other.
The Airline segment is expected to benefit from the 7.6% growth in total meals served on Saudia
(CAGR of 7.1%) and other airlines (CAGR of 10.3%). We have assumed an increase of 0.8% in the
average price per meal during 2011–2016E owing to increased sale of high value food items. During
the same period, revenues from in-flight catering services to Saudia are projected to expand at a
CAGR of 7.7%, while revenues from airline catering services on other airlines are estimated to
witness a CAGR of 11.7%. Moreover, an increase in the sale of airline equipment (CAGR of 4.4%) to
Saudia would support growth in the Airline segment’s revenues.
Non-airline segment’s revenues are projected to increase at a CAGR of 30.0%, benefiting from a rise
in contracts. This includes additional revenues from SACC’s laundry business and staff camp project.
In our opinion, total revenues from these projects would increase to SAR42.1mn by 2016E from
SAR30.1mn in 2013E. Consequently, the share of Non-airline segment in SACC’s total revenues is
expected to stand at 7.2% by 2016E vis-à-vis 3.1% in 2011. Furthermore, we expect other revenues
to grow at a CAGR of 20.0% to SAR151.7mn by 2016E (from SAR60.9mn in 2011), in line with the
company’s guidance of 20-22% CAGR growth.
Margins. Considering SACC’s enhanced focus on increasing sales of high-margin food items, we
expect gross margins to improve to 39.6% in 2012E from 38.1% in 2011. The uptrend is expected to
continue, led by sustained focus on higher sales of premium products and faster growth in passengers
due to the anticipated improvement in macroeconomic factors. Accordingly, we estimate SACC’s
gross margins to improve to 40.0% by 2016E. Moreover, we expect the company’s SG&A expenses
(as a proportion of revenues) to decline to 7.8% by 2016E from 9.5% in 2011 and 12.9% in 2009, led
by sustained focus on improving processes and economies of scale. SACC’s operating margins would
increase gradually to 32.2% by 2016E from 28.6% in 2011. In our opinion, the net income would
expand at a CAGR of 12.0% to SAR742.7mn by 2016E from SAR420.6mn in 2011 led by top-line and
margin expansion.
Balance sheet
Capex. We project SACC would incur a capex of SAR142mn in 2012E, in line with the company’s
guidance. This includes maintenance capex and growth capex related to SACC’s ongoing projects of
setting up two laundries in Jeddah and Riyadh, and constructing a staff camp in Jeddah. In 2013E,
the total capex is projected at SAR75mn, including mainteance capex and investments related to the
staff camp project. Thereafter, maintenance capex is assumed at 1.5% of total revenues throughout
our forecast period.
Debt. We expect SACC to remain debt free over our forecast horizon given its comfortable cash
position. Cash and cash equivalents are expected to account for 60.3% of SACC’s total assets by the
end of 2016E (60.9% in 2011).
SACC’s top line likely to benefit
from sustained growth in air
passengers in KSA
Higher orders for value-added
margins
Financial analysis
0%
5%
10%
15%
20%
25%
0
500
1,000
1,500
2,000
2,500
0%
10%
20%
30%
40%
50%
60%
0
500
1,000
1,500
2,000
2,500
Financial statement analysis
Income statement
Year to December (SAR mn) 2010 2011 2012E 2013E 2014E 2015E 2016E
Revenues 1,193 1,465 1,676 1,873 2,037 2,174 2,307
Cost of sales (648) (907) (1,013) (1,129) (1,226) (1,306) (1,385)
Gross profit 545 558 663 743 811 868 922
Gross margin (%) 45.7 38.1 39.6 39.7 39.8 39.9 40.0
General and administrative (131) (140) (147) (155) (163) (170) (179)
Operating profit 414 419 516 588 648 698 743
Operating margin (%) 34.7 28.6 30.8 31.4 31.8 32.1 32.2
Other (expenses)/income 3 2 2 0 0 0 0
Net income 417 421 518 588 648 698 743
Net margin (%) 35.0 28.7 30.9 31.4 31.8 32.1 32.2
EPS 5.09 5.13 6.31 7.17 7.90 8.52 9.06
Balance sheet
Assets
Cash and cash equivalents 761 655 485 556 684 823 968
Trade receivables 50 52 70 80 86 92 96
Due from related parties 253 512 571 593 612 625 641
Inventories 53 66 66 71 75 78 81
Other receivables 24 30 48 52 57 60 64
Total current assets 1,141 1,315 1,241 1,352 1,514 1,678 1,851
Property, plants and equipments 67 110 235 279 274 268 261
Total assets 1,208 1,424 1,476 1,631 1,788 1,946 2,111
Liabilities
Total current liabilities 300 349 404 441 469 489 507
End-of-service indemnities 85 95 107 118 130 142 154
Total liabilities 384 443 511 559 599 631 661
Shareholders’ equity
Equity share capital 101 820 820 820 820 820 820
Legal reserve 50 46 97 156 221 291 365
General reserve 14 0 0 0 0 0 0
Retained earnings 659 115 48 95 148 204 265
Total shareholders’ equity 824 981 965 1,072 1,189 1,315 1,450
Total liab. & shareholders’ equity 1,208 1,424 1,476 1,631 1,788 1,946 2,111
Cash flow
Cash flows from operating activities 682 214 516 628 689 744 788
Cash flows from investing activities (13) (59) (146) (75) (31) (33) (35)
Cash flows from financing activities (24) (261) (540) (482) (531) (572) (608)
Net change during the year 645 (106) (170) 71 127 139 145
Cash & cash equi. at year end 761 655 485 556 684 823 968
Disclaimer
This report is prepared by Saudi Fransi Capital (“SFC”). a fully fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security.
This report is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this report.
This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this report take into account both risk and expected return.
To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from
the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than what he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this report may be reproduced without the written permission of SFC. Neither this report nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.

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