Fawaz Abdulaziz Alhokair Company’s net profit of SAR 225 million for the quarter ending June 30, 2019, missed Al Rajhi Capital’s estimates of SAR 263 million, due to higher interest cost resulting as a result of IFRS16 implementation.
According to Al Rajhi Capital, the brokerage firm expected the company revenue to remain low on the short term.
“Revenue declined 6 percent year-on-year (y-o-y) to SAR 1.7 billion, impacted by store closures as a part of company’s cost optimization strategy,” it noted.
“The company continues to follow its cost optimization strategy in a challenging economic environment which has improved its operating margins by reducing the SG&A,” the note added.
Accordingly, Al Rajhi Capital revised its forward looking estimates and upgraded the stock to “Neutral”, and changed target price to SAR 22 per share.
“Our long term view on the growth remains optimistic boosted by pick-up in consumer sentiments following an overall economic recovery and increase in disposable income,” it noted.
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