Saudi Ground Services Co.'s (SGS) Q3 2019 net profit exceeded Aljazira Capital’s estimates, the investment bank said in a recent earnings note.
The revenue growth is expected to be driven by a rise in the number of flights and terminals owing to measures undertaken by General Authority of Civil Aviation (GACA), the Saudi aviation market regulator, and growing tourism in the Kingdom.
The company’s full-year EPS is forecast to grow by 19.7% year-on-year to SAR 2.35 in fiscal year 2019.
The Saudi aviation sector has favorable growth prospects, driven by rising tourism and the Kingdom’s increased focus on refurbishment of the industry.
“SGS stands to benefit from the rise in the number of flights and the addition of new terminals”, Aljazira Capital noted.
In fiscal year 2019, Sky Prime and Jet Aviation were licensed by GACA, thus increasing the number of ground handling companies in the Kingdom to four. Accordingly, pricing pressure may continue to affect SGS’ margins.
Aljazira Capital recommended “overweight” on the stock, with a positive outlook from a long-term perspective and a price target of SAR 35.25.
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