Falcom Financial starts Al Tayyar with ‘overweight' rating

Falcom Financial Services initiated coverage of Al Tayyar Travel Group Holding Co., recommending an “overweight’ rating on the stock, with a target price of SAR 34.40.

“Our long term investment case stems from Al Tayyar’s strategic diversification of revenue streams, booming online business, growth in religious tourism sector and a focus on efficient cost management remains intact,” the brokerage firm said in a recent report.

In addition, a new contract with the Saudi ministry of education supports Al Tayyar’s healthy balance sheet and positive net profit expected in the short-term.

The contract was won by the travel group from the Saudi ministry in partnership with Saudi Arabian Airlines (Saudia).

“We believe the new contract will reduce the working capital requirements through improved receivables; and be positive for its bottom line, by lowering finance costs. We also believe the recent recovery in accounts receivable (down 27% in Q4 2017) indicating accelerated progress in outstanding arrears pay-out from the Saudi government is encouraging,” the brokerage firm added.

The Kingdom’s plan to double the number of foreign Umrah performers to over 15 million in 2020 is a great opportunity for Al Tayyar.

Al Tayyar is aiming to achieve SAR 3.7 billion gross booking value by 2020 in line with its strategy to transform into an integrated e-travel agency. Al Tayyar’s profit margins are likely to be driven by focus on leisure tourism (target sales of SAR 2.7 billion by 2022).

Al Tayyar is also planning to develop 30 hotels with 6,000 rooms by 2022 with the Choise Hotels, Falcom added.