Aljazira Capital has set a target price of SAR97.6 per share for Saudi Airlines Catering Company (Saudi Catering) along with an ‘overweight’ recommendation and stable outlook.
The brokerage firm said in a research note that Saudi Catering’s revenue growth is expected to be driven by tourism enhancement, partnerships with carriers providing business lounge benefits, and increase in consumption in the retail sector.
“With a projected increase in the inbound and outbound tourism, the aviation industry is expected to witness a gradual spike in volumes. We expect Saudi Catering to be the key beneficiary in volume growth,” the brokerage firm said.
Moreover, in its attempt to diversify from in-flight catering segment the company has entered into various contracts that might have positive impact on the company’s cash flows and revenues starting from Q4 2019.
However, owing to a rise in administration and personnel costs, the margins are expected to be subdued.
The company has maintained its high dividend yield as its annualized dividend yield stood at 6.3% for FY2019.
“We expect Saudi Catering to report EPS of SAR 5.41 in FY2019, representing a fall of 3.4%,” Aljazira Capital added.
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