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almarai company

evaluation

neutral

05 May 2010

A Play on MENAs growth Demand, Wait for the Right Entry Point
initiation of coverage
provender and crapulence ? saudi arabia
Wafaa Baddour, CFA +20 2 3332 1163 wbaddour@efg-hermes.com Nada Amin +20 2 3331 8985 namin@ efg-hermes.com STOCK DATA Price SAR198.8* SAR214.3
SAR4.0 / 12 Apr. 10 SAR22,856 / cxv SAR505 SAR201 / SAR144 ALMARAI:AB / 2280.SE 35.8%

Initiate Coverage of Almarai We initiate coverage on Almarai with a fair value (FV) of SAR214/sh atomic number 18. Almarai trades moderately above its peers, part due to its higher margins and expansion strategy. Our FV tornados upside potential of yet 8%, and we therefore assign a Neutral rating to the stock. However, we are positive on Almarai and believe a speak weakness in the Saudi market, or the stock price, would offer a good entry point for investors. Aiming to Become a Regional Food and Beverage Producer Almarai is evolving from a GCC dairy farm (30% market share) and juice producer (11%) into a regional food and beverage player. In the GCC, it plans to expand in cook goods, domestic fowl (Saudi Arabia) and baby food. It has also entered, through a 48%-owned JV with PepsiCo (IDJ), the Egyptian and Jordanian dairy and juice markets.



Room for potency Positive Surprises Positive surprises include: i) stronger growth in case food consumption, ii) higher market share in baked goods, poultry and long-life milk, iii) better performance at IDJ, and iv) IDJs further expansion into the Middle eastern hemisphere ex-GCC, Africa, and South East Asia. Expect Solid Growth in Net addition We forecast strong net profit growth of 19% in 2010, an average of 16% over 20112014 (peaking in 2013 at 21%), and 11% thereafter. We estimate non-dairy products contri onlyion to revenue impart increase to 40% by 2016, from its current 23%. We support the EBITDA margin to remain solid at 27.7% in 2010, but to then soften to 26.0% by 2016. Challenges We believe the main challenges to Almarai are: i) the...If you want to get a full essay, order it on our website: Orderessay



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