Almarai Company (Almarai) - MEC
Transcript of Almarai Company (Almarai) - MEC
Almarai 1
Global Research - Saudi Arabia
Almarai Company (Almarai)
Investment Update
• Concentric diversification leading to expansion oftargetmarket&productlines.
• Strategicalliancestoexpandgeographicalnetwork.• Operationalsynergiestoimprovemargins.
Syed Taimure Akhtar Senior Financial Analyst [email protected] No:(966) 1-2199966 Ext.: 950
HoldTarget Price
SR 185.9
Market DataBloomberg Code: ALMARAI ABReuters Code: 2280.SECMP (20th Mar 2010): SR181.7O/S (mn): 115Market Cap (SRmn): 20,901.2Market Cap (US$mn): 5.573.7P/E 2010e (x): 14.2P/Bv 2010e (x): 3.4
Price Performance 1-YrHigh / Low (SR): 182.0 / 141.5Average Volume: 141,761
Market Data 1m 3m 12mAbsolute 5.0% 12.5% 22.0%Relative -0.8% 3.2% -32.2%
Price Index Performance
Source: Tadawul & Zawya
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Almarai (SR) - RHSTASI - LHS
March 2010
Acquisition & infant food segment - Expanding production line & target marketAlmarai Company (Almarai) recentlycompletedHailAgricultureDevelopmentCompany(HADCO) takeover,whichwill diversify its current production line from dairy to poultryproductsandenableittoservetheexitingtargetmarketwithpoultryproducts.Basedonthegiveninformation,thecompanyisexpectedtomakeaninvestmentofSR2.0bninHADCOduring 2011-12 to increase its chicken handling and processing capacity and improve itsexisting distribution network. In addition, the expected completion of infant food segmentduring1H2011willnotonlyexpandthetargetmarketbutalsohelpthecompanytoplaceitselfinabetterwaytocapturethebenefitsofarisingregionalpopulation.
Marketing strategy - Improving operational synergies ThecompanyhasacompetitiveedgeovertheotherplayersinthelocalmarketwiththeabilitytoplaceitsproductsinaneffectivemannerthroughtheretailoutletsofSavolai.e.‘HyperPanda’.TheacquisitionofHADCOwillstrengthenthedistributionnetworkandallowthecompanytoderivevalueoutofthesupplychainbyusingtheproductionofgrainsandanimalfeedforin-houseproductionofmilk.ThecompanyisalsolikelytoadoptproductbundlingstrategywithintheGCCregion.JVwithPepsiCo.inEgyptwillhelpthecompanytoexpandgeographicallyi.e.MiddleEast(excludingGCC),SoutheastAsiaandAfrica.Inaddition,wecannotruleoutthepossibilityofproductbundlingwithPepsiCo.fortheagreedregions.
Improving profitability - Increase in product prices and population to drive growthWeexpectthecompany’sgrossandnetprofitmarginstoshowimprovementduring2010-13to41.8%and22.1% respectively in2013 as compared to40.3%and18.7% respectivelyrecordedin2009.Theexpectedimprovementinthecompany’sprofitabilitymarginismainlyonthebackof(i)expectedincreaseinaveragepriceofdairyproductsata2009-13CAGRof6.9%,(ii)expectedincreaseinregionalpopulationata2009-13CAGRof2.3%and(iii)benefitsarisingoutofproductandgeographicaldiversification.
ValuationWehaveupdatedourDCFbasevaluation toSR185.9,whichoffers apotentialupsideof2.3%fromthecurrentmarketpriceofSR181.7(ason20thMarch2010).Moreover,thestockistradingattheprospective2010Eand2011Eprice-earningsmultipleof14.2xand12.7x,respectively.We,therefore,recommendHOLDforthestock.
Table 01: Investment IndicatorsNetProfit(SRmn)
EPS(SR)
BVPS(SR)
ROA(%)
P/E(x)
P/BV(x)
2013(E) 1,863.5 16.2 76.9 15.3 11.22 2.362012(E) 1,766.7 15.4 68.8 14.7 11.83 2.642011(E) 1,642.2 14.3 61.0 14.0 12.73 2.982010(E) 1,468.9 12.8 53.7 13.0 14.23 3.382009(A) 1,096.7 9.5 46.8 11.4 17.30 3.53Source: Company Annual Reports & Global Research*Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on closing prices on the Tadawul as of 20th March 2010.
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March 2010Almarai2
Valuation&Recommendation
DCF MethodWehaveuseddiscountedcashflow(DCF)methodologytovalueAlmaraistockandusedCapitalAssetPricingModel(CAPM)tocalculatethecostoftheequity,whichisbasedonthefollowingassumptions:
• Risk-freerateof5.6%• Marketriskpremiumof6.0%• Betaof1.0• Costofequityof11.6%• Costofdebtof7.0%
TheWeightedAverageCostofCapital(WACC)basedontheaboveassumptionsis10.4%.Wehaveassumedaterminalgrowthrateof3.5%.WehavearrivedattheDCFbasevalueofSR185.9forAlmaraibasedonearningsprojectionstill2013.
Table 02: DCF Base Valuation (SR Mn) 2010 (E) 2011 (E) 2012 (E) 2013 (E)FCF 1,298.7 1,470.4 1,691.7 1,760.2DiscountedCashFlow 1,206.1 1,237.3 1,289.8 1,215.9TerminalValue 26,532.9PrimaryValue 4,949.2TerminalValue(discounted) 18,329.4Company’s Net Present Value 23,278.6Long-TermDebt (3,503.4)Add:Investments&CashEquivalents 1,606.3Net Worth 21,381.5SharesOutstanding('000) 115,000Fair Value Per Share 185.9Source: Global Research
Sensitivity AnalysisAsensitivityanalysisfordifferentestimatedlong-runfuturegrowthratesandweightedcostofcapitalisshownintablebelow.ThetableprovidesestimatedDCFbasedfairvaluesforAlmaraisharebasedonarangeofvaryinginputs.Theshadedareaatthecentershowsthemostprobablerangeofalternatives.
Table 03: DCF Base Valuation Terminal Growth Rates
1.50% 2.50% 3.50% 4.50% 5.50%8.37% 195.8 226.2 269.2 334.4 445.29.37% 168.6 190.8 220.5 262.4 326.0
10.37% 147.6 164.3 185.9 214.9 255.811.37% 130.8 143.8 160.2 181.2 209.512.37% 117.2 127.5 140.2 156.2 176.7
Source: Global Research
ValuationBasedonourvaluations,atpresent,thestockistradingataprospective2010and2011P/Eof14.2xand12.7x,andofferingthepotentialupsideof2.3%fromthecurrentmarketpriceofSR181.75ason20thMarch2010.We,therefore,recommendHOLDforthestock.
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3March 2010 Almarai
AlmaraiCompany-FinancialUpdate
HADCO & Egyptian JV - Expanding product line & geographical network WeexpecttheacquisitionofHADCOandJVwithPepsiCo.,underthenameofInternationalDiary& JuiceCompany (IDJ), are expected to play a vital role in the company’s futuregrowth.TheacquisitionandJValsooffersampleroomforthecompanytocomeupwiththeeffectivemarketingstrategiesi.e.productbundling,effectivedistributionandpromotionalactivities.ThecompanyisexpectedtomakeaninvestmentofSR2.0bn,during2011-12,inHADCOwiththeaimto(i)doubletheproduction&handlingcapacityofchickenand(ii)makefurtherimprovementinthedistributionnetworkofthecompany.Ontheotherhand,thecompanyistargetingtoexpanditsgeographicalnetworkthroughtheJVwithPepsiCo.,whichwillcoverAfrican,SoutheastAsianandMiddleEast(excludingGCC)markets.
Chart 01: Almarai Sales Revenue
Source: Company Reports & Global Research
We expect the company to record sales revenue of SR7.3bn in 2010 as compared toSR5.9bnrecordedin2009.Thegrowthinthecompany’ssalesrevenueismainlybasedonthe expected increase in production by 7.7% during 2010 on account of additional salesrevenuefromHADCOacquisitionandtheweightedaverageimpactof16.0%basedontheexpectedaverageimprovementintheproductpricesby19.6%during2010.Goingforward,thecompany’s sales revenue isexpected to increaseat aCAGRof9.5%during2009-13toSR8.4bnin2013,whichismainlybasedon(i)theexpectedincreaseinproductionataCAGRof3.1%during2009-13onthebackofeffectiveimplementationofthecompany’smarketingandexpansionstrategies, (ii)weightedaverage impactof6.0%on thebackoftheexpectedincreaseinproductpricesataCAGRof6.9%during2009-13and(iii)local®ionalpopulationgrowthataCAGRof2.0%and2.3%during2009-13,respectively.
Chart 02: Sales Revenue Composition 2009 Chart 03: Sales Revenue Composition 2013
Source: Company Reports & Global Research Source: Company Reports & Global Research
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25.1%6.3% 3.9% 4.3%
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Sales Revenue (SR mn) - LHS Growth - RHS
0.6% 1.2%
48.0%
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19.5%
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Fresh Dairy
HADCOOthersBakery Products
Chesse & Butter
Fruit Juice
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0.5% 4.5%
43.6%
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HADCOOthersBakery Products
Chesse & Butter
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Long Life Dairy
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March 2010Almarai4
The company’s sales revenue during 2009 remained highly concentrated on fresh dairyproducts,contributing48.0%ofthecompany’stotalsalesrevenue.Weexpectthefreshdairyproductstoremainthemajorcomponentoftherevenuepie.However,theadditionofpoultryproductsinthecompany’sexistingproductionlineisexpectedtodilutecontributionfromfreshdairyproductto43.6%in2013.
Infant food segment- Expanding target marketTheincorporationofAlmaraiBabyFoodCompanyinJuly2009isamongoneofthemajormilestones that the company has achieved during 2009. The expected commencementof commercial production fromAlmaraiBaby FoodCompany in 1H2011willmake theadditionofinfantproductsinthecompany’sexistingproductprofile.Hence,thiswillleadthecompanytoexpanditstargetmarketfromdairy,poultry,bakeryandotherproductstoinfantmarket.Furthermore,wecannotruleoutthepossibilitytoadoptproductbundlingstrategyi.e.promotionofbabyfoodalongwithdairyproductsorviceversa.
Cattle stock - In house milk production The company has ended the year 2009 with the capacity to handle around 52,000milkproducingcattlestockwiththepercattleproductioncapacityof13.0tonsofmilkperyear(365days).Accordingly,thecompany’stotalrawmilkproductionis676,000tons.Besides52,000milkproducingcattle,thecompanyalsohasthecapacitytohandlearound55,000ofyoungcattlestocks,whichindicates100.0%cattlestockreplacementratio.
Improving gross margins - Higher economies of scaleThecompanyhaspostedgrossprofitofSR2.4bn,during2009,ascomparedtoSR1.9bnin2008.Thegrossmarginwasrecordedat40.3%ascomparedtopreviousyear’sgrossmarginof39.7%.Thisindicatesthecompany,during2009,hassuccessfullyutilizedthebenefitof(i)wellintegratedproductionstructurei.e.inhousemilkproductionand(ii)strongbrandimagetoincreasethesalesrevenue.Webelievethesefactorshaveallowedthecompanytorestricttheincreaseincostofsalesto15.6%in2009overcostofsalesofSR3.0bnrecordedin2008.Furthermore,thecompanyhaspostedEBITmarginof21.8%during2009ascomparedto21.1%in2008.
Chart 04: Almarai - Gross Margins Chart 05: Almarai - EBIT Margin Growth
Source: Company Reports & Global Research Source: Company Reports & Global Research
Based on the recent acquisition, product expansion and JV, we believe the company’sdiversificationstrategyismainlybasedontheexpansionintherelatedmarket,whichwilllead the company’s ability to run its operation with well-integrated production process.Consequently, the company’s grossmargins is expected to remain on higher level at theaverageof41.5%during2010-13,whichwillhelp thecompany tomanage itsmarketing
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Gross Profit (SR mn) - LHS Gross Profit Margin - RHS
20.7%
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EBIT (SR mn) - LHS EBIT Margins - RHS
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5March 2010 Almarai
andadministrativecoststokeepitsEBITmarginattheaverageof22.8%during2010-13ascomparedtothe4-yearshistoricalaverageof20.7%during2006-09.
Profitability Growth-Relatively immune to economic downturnDespite facing lotofchallengesduring2009, including theworldeconomic recessionandswineflu, thecompanymanagedtopostafter taxprofitofSR1.1bn,anincreaseof20.5%YoY.Thenetprofitmarginalsoimprovedto18.7%ascomparedto18.1%recordedin2008.
Chart 06: Profitability & ROAA Chart 07: Profitability & ROAE
Source: Company Reports & Global Research Source: Company Reports & Global Research
Goingforward,thecompany’sprofitabilityisexpectedtoshowagrowthof33.9%during2010,whileintermsofCAGRthebottomlineisexpectedtoincreaseataCAGRof14.2%during2009-13.Ontheotherhand,thecompany’sROAAandROAEareexpectedtoremainattheaverageof14.3%and24.1%during2010-2013,respectively.
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Profit after tax (SR mn) - LHS ROAA - RHS
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Profit after tax (SR mn) - LHS ROAE - RHS
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March 2010Almarai6
Food&AgricultureSectorWorld Milk & Dairy SectorBasedontheFood&AgriculturePolicyResearch2009(FAPRI),theoverallproductionofmilk&dairyproducts(includingbutter,cheese,wholemilkpowder&skimmilk)aroundtheglobebytheendof2009wasrecordedat742.3mntons,whichisexpectedtoincreaseby1.9%in2010.Goingforward,theworldproductionisexpectedtoincreaseata2009-13CAGRof1.7%to794.3mntons.Webelievethegrowthinthemilkanddairyproductsismainlyassociatedwiththeforecastedincreaseintheworld’spopulationataCAGRof1.8%during2009-13.
Chart 08: World Milk & Dairy Production
Source: FAO & Global Research
BasedonFAPRI2009,majorityofthemilkanddairyproductionisdirectedfromEuropeanUnion(EU)andIndia,wheretheproductionhasrecordedat147.0mntonsand111.6mntons,respectively,during2009.Furthermore, theproduction fromEUand India isexpected toreach149.3mntonsand115.2mntonsduring2010,respectively,followedbyUSwheretheproductionisforecastedtoreach91.8mntons.
Table 04: Country-Wise Contribution to World Milk & Dairy Production2007 2008 2009 2010E 2011E 2012E 2013E
Argentine 1.4% 1.5% 1.6% 1.6% 1.6% 1.6% 1.7%Australia 1.5% 1.4% 1.4% 1.4% 1.4% 1.4% 1.5%Brazil 3.9% 4.2% 4.3% 4.4% 4.5% 4.7% 4.8%Canada 1.2% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1%China 5.7% 5.4% 5.8% 6.0% 6.3% 6.4% 6.6%Colombia 1.0% 1.0% 1.0% 1.0% 1.0% 1.0% 1.0%Egypt 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%EuropeanUnion 20.0% 19.9% 19.8% 19.7% 19.4% 19.1% 18.7%India 14.2% 14.9% 15.0% 15.2% 15.3% 15.4% 15.5%Japan 1.2% 1.1% 1.1% 1.1% 1.1% 1.1% 1.0%Mexico 1.5% 1.5% 1.5% 1.6% 1.6% 1.6% 1.6%NewZealand 2.4% 2.4% 2.4% 2.4% 2.4% 2.5% 2.5%Peru 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3%Romania 0.7% 0.6% 0.6% 0.5% 0.5% 0.4% 0.4%Russia 4.6% 4.6% 4.6% 4.5% 4.5% 4.5% 4.5%SouthKorean 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%Switzerland 0.6% 0.6% 0.6% 0.5% 0.5% 0.5% 0.5%Ukraine 1.9% 1.6% 1.4% 1.3% 1.3% 1.2% 1.2%Uruguay 0.3% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%United States 12.5% 12.7% 12.4% 12.1% 12.0% 12.0% 11.9%ProductionFromOtherCountries 24.8% 24.3% 24.3% 24.3% 24.3% 24.3% 24.4%
Source: FAPRI & Global Research
2.3%
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Milk & Dairy Products ('000' tons) - LHS Growth - RHS
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7March 2010 Almarai
Furthermore,theweightedaveragepercapitaconsumptionoftheworld’sdairyproducts,asperFAPRI2009,hasshownimprovementduring2009andrecordedat58.8Kgascomparedto57.6Kgin2008.Goingforward,theweightedaveragepercapitaconsumptionofdairyproductsisexpectedtocontinueitsupwardtrendandreachat60.0Kgbytheendof2013.Webelievetheincreaseinpercapitaismainlybasedontheexpectedmassivemarketingallianceandpromotioncampaignscoupledwiththeexpansionsofretailoutletsinmajorconsumingareasoftheworld,whichwillleadtotheeasyavailabilityoftheseproductsinthemarket.
Milk & Dairy Product PricesThemainfeedstockpriceindairyfoodindustryisthepriceofcornsandgrains,whichareusedtofeedthecow.Moreover,pricesoftheseproductshaveamajorimpactonthecostofproducingrawmilk,whichconsequentlyhaveanimpactofthepricesofendofproducts.Inaddition,thepriceofcornsiscorrelatedwiththepriceofcrudeoil,sincecornisalsousetomakeethanolfuel(alternativefuel).Hence,higherthepriceofcrudeoil thehigherthedemandforethanol,whichrequirescornasafeedstock.Consequently,thiscreatesshortageofcornsforcowfeedingthusleadingtoanincreaseinprices.WeexpecttheaveragepriceofcorntoremainintherangeofUS$100.0toUS$105.0pertonduring2010,whilewehaveupdatedtheaveragelong-termpricesofcorntoremaininrangeofUS$100.0-US$120.0pertonduring2010-13.
Chart 09: Feedstock & Crude Oil Prices Chart 10: Raw Milk Price (US$ per ton)
Source: USDA & Global Research Source: Agriculture & Applied Economics & Global research
AccordingtoCaliforniaDepartmentofFood&Agriculture(CFDA)pricingmechanismthepriceofrawmilkisdifferentiatedonthebasisofenduse,whichprovidesthebasistoclassifyrawmilkintodifferentclasses.Moreover,thepricesofeachclassofmilkaredifferentandagainbasedontheenduseofthatparticularmilkclassandhencerepresentasthefeedstockfordairyproducts.
Chart 11: Dairy Product Prices
Source: Bloomberg, Agriculture & Applied Economics & Global research
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Butter (US$ per ton) - LHS Cheese (US$ per ton) - RHS
Skim Milk (US$ per ton) - RHS Dry Whey (US$ per ton) - RHS
Dry Milk Powder (US$ per ton) - RHS
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March 2010Almarai8
Middle East Milk & Dairy Sector - High PotentialWeexpecttheregionalmilkanddairymarkettoincreaseata2009-13CAGRof2.6%to7.7mntons,whichismainlybasedonthe(i)expectedincreaseintheMiddleEastpopulationataCAGRof2.6%during2009-13to115.5mnand(ii)strongspendingpowerintheregionalcountries,particularlyinGCCmembercountries.
Table 05: Regional Milk & Dairy Consumption‘000’ tons 2007 2008 2009* 2010E 2011E 2012E 2013ESaudi Arabia 3,950 4,029 4,110 4,193 4,277 4,363 4,451Kuwait 434 450 462 473 485 497 510Bahrain 154 156 160 164 168 173 177Qatar 164 166 171 176 181 187 192UAE 711 739 765 792 819 848 878Oman 474 489 501 514 527 540 554Iraq 284 290 305 321 337 355 373Yemen 103 106 113 121 129 139 148Jordan 239 244 256 268 280 294 307Lebanon 127 129 131 135 138 141 144Total 6,641 6,798 6,974 7,156 7,343 7,536 7,734
Source: Almarai Prospectus & Global Research*Based on our calculations
It isworthmentioning that SaudiArabia is expected to remain the leading consumer ofthemilk and dairy products in the region followedbyUAE,which ismainly due to thepopulation size in these two countries.However, the lower spending power in the otherregionalcountrieslikeYemenandIraqisthemajorfactoroflowconsumptionthoughthepopulationishighintheseareas.
Chart 12: Regional Product Wise Consumption Composition
Source: Company Reports & Global Research
Basedonourcalculations,bytheendof2009,theregionalmilk&dairyproductconsumptionismainlybasedonthelong-lifeproductsi.e.cheese,milk-longandbutter.Sincethetastepreference&demographic factorsare rigid tochange,weareexpectingconstantproductwisecompositionduring2009-13.
Milk-Short,5.7%
Milk-Long,19.7%
Laban,8.9%
Yoghurt,3.8%
Labneh,0.5%
Cream,5.3%
Dairy Desert,0.3%
Natural Cheese,25.0%
Evaporated Mike,7.0%
Condensed,0.3%
Butter Ghee,12.9%
Other Cheese,10.8%
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9March 2010 Almarai
Saudi Arabia Milk & Dairy Sector - Leading Regional MarketAmongtheregionalcountriesSaudiArabiahasthelargestin-housemilkproductionfacility.Basedonourcalculations,SaudiArabiahasacapacitytohandlecattlestockofmorethan138,000bytheendof2009withtheannualcapacitytoproduce7.8tonsofperhead.Goingforward, theKingdom’s cattle stock is expected to increase at a CAGR of 3.1% during2009-13,whiletheperheadannualproductionisexpectedtoremainconstantat7.8tonsperheadduring2010-13.
Table 06: Regional Milk & Dairy Consumption2007 2008 2009* 2010E 2011E 2012E 2013E
Milk-Short 171 175 178 182 185 189 193Milk-Long 803 819 835 852 869 887 904Laban 439 448 456 466 475 484 494Yoghurt 127 129 132 135 137 140 143Labneh 19 20 20 20 21 21 22Cream 226 231 235 240 245 250 255DairyDesert 11 11 11 12 12 12 12NaturalCheese 1,038 1,058 1,079 1,101 1,123 1,146 1,168EvaporatedMilk 218 222 227 231 236 241 246CondensateMilk 11 11 11 12 12 12 12ButterGhee 411 419 428 436 445 454 463OtherCheese 411 419 428 436 445 454 463IceCream 64 66 68 70 71 73 76Total 3,950 4,029 4,110 4,193 4,277 4,363 4,451
Source: Almarai Prospectus & Global Research*Based on our calculations
Webelieve theconsumption inSaudidairymarket isexpected to increaseataCAGRof2.0%during2009-13,whichisproportionatelylinkedwithexpectedgrowthinthedomesticpopulation.ItisworthmentioningthatmajorityoftheconsumptioninsidetheKingdomisassociatedwithfatrichandlonglifedairyproductsi.e.butterandcheese.
Global Research - Saudi Arabia Global Investment House
March 2010Almarai10
Bal
ance
She
etAlmaraiCom
pany-Almarai
(SR
‘000
’)20
0720
0820
0920
10E
2011
E20
12E
2013
EC
urre
nt A
sset
s
Cash&BankBalances
137,975
246,585
507,666
623,939
653,886
679,185
764,841
DerivatesFinancialInstruments
938
6,648
-
-
-
-
-
Receivable&Prepaym
ents
367,810
409,777
455,492
577,531
611,647
593,522
598,021
Inventories
733,573
1,096,723
1,218,575
1,230,761
1,243,068
1,255,499
1,268,054
Tot
al C
urre
nt A
sset
s
1,2
40,2
96
1,75
9,73
3
2
,181
,733
2,
432,
231
2,5
08,6
01
2,52
8,20
6
2,6
30,9
16
Non
-Cur
rent
Ass
ets
Investment&
FinancialAssets
471,074
489,337
963,131
982,394
992,218
1,002,140
1,012,161
Property,Plant&Equipment
4,041,132
5,343,308
6,282,208
6,502,404
6,696,206
6,752,740
6,785,795
IntangibleAssets-Goodw
ill548,636
548,636
1,528,157
1,604,565
1,684,793
1,769,033
1,857,484
DeferredCharges
34,692
40,270
31,766
33,354
35,022
36,77338,612
Tot
al N
on-C
urre
nt A
sset
s
5,0
95,5
34
6,42
1,55
1
8
,805
,262
9,
122,
716
9,4
08,2
39
9,56
0,68
6
9,6
94,0
52
Tot
al A
sset
s
6,3
35,8
30
8,18
1,28
4
10,
986,
995
1
1,55
4,94
8
11,
916,
840
1
2,08
8,89
1 1
2,32
4,96
8
C
urre
nt L
iabi
litie
s
Short-T
ermLoans
182,348
511,165
395,534
355,981
338,182
405,818
385,527
Payables&Accruals
575,337
669,558
962,585
1,218,392
1,385,799
1,493,481
1,600,875
DerivativeFinancialinstruments
10,033
108,072
82,153
90,368
99,405
109,346
120,280
Tot
al C
urre
nt L
iabi
litie
s
7
67,7
18
1,28
8,79
5
1
,440
,272
1,
664,
741
1,8
23,3
86
2,00
8,64
4
2,1
06,6
83
Non
-Cur
rent
Lia
bilit
ies
Long-TermLoans
2,409,428
3,132,956
3,981,193
3,503,450
2,837,794
1,901,322
1,064,740
EmployeesT
erminationBenefits
104,903
128,041
165,814
190,686
219,289
252,182
290,010
Tot
al N
on-C
urre
nt L
iabi
litie
s
2,5
14,3
31
3,26
0,99
7
4
,147
,007
3,
694,
136
3,0
57,0
83
2,15
3,50
5
1,3
54,7
50
Tot
al L
iabi
litie
s
3,2
82,0
49
4,54
9,79
2
5
,587
,279
5,
358,
877
4,8
80,4
69
4,16
2,14
9
3,4
61,4
33
ShareCapital
1,090,000
1,090,000
1,150,000
1,150,000
1,150,000
1,150,000
1,150,000
Shar
e Pr
emiu
m612,000
612,000
1,600,500
1,600,500
1,600,500
1,600,500
1,600,500
StatutoryReserves
325,663
416,689
526,361
673,253
673,253
673,253
673,253
OtherReserves
(9,095)
(83,161)
(81,390)
(20,348)
(2,035)
4,070
8,139
RetainedEarnings
1,034,878
1,581,614
2,187,164
2,774,730
3,595,821
4,479,147
5,410,881
Tot
al S
hare
hold
ers'
Equ
ity
3,0
53,4
46
3,61
7,14
2
5
,382
,635
6,
178,
136
7,0
17,5
39
7,90
6,96
9
8,8
42,7
73
MinorityInterest
335
14,350
17,081
17,935
18,832
19,77320,762
Tot
al L
iabi
litie
s & S
hare
hold
ers'
Equ
ity
6,3
35,8
30
8,18
1,28
4
10,
986,
995
1
1,55
4,94
8
11,
916,
840
1
2,08
8,89
1 1
2,32
4,96
8 So
urce
: Com
pany
Rep
orts
, Glo
bal R
esea
rch
Global Research - Saudi Arabia Global Investment House
11March 2010 Almarai
Inco
me
Stat
emen
tAlmaraiCom
pany-Almarai
(SR
‘000
’)20
0720
0820
0920
10E
2011
E20
12E
2013
ESa
les
3,769,833
5,029,904
5,868,805
7,339,465
7,800,499
8,102,618
8,448,466
CostofS
ales
(2,276,495)
(3,030,947)
(3,503,013)
(4,346,506)
(4,565,478)
(4,709,780)
(4,917,964)
15.6%
Gro
ss P
rofit
1,49
3,33
8 1,
998,
957
2,36
5,79
2 2,
992,
959
3,23
5,02
1 3,
392,
838
3,5
30,5
02
Selling&DistributionExpenses
(570,149)
(750,878)
(887,147)
(1,100,920)
(1,170,075)
(1,215,393)
(1,267,270)
General&Adm
inistrativeExpenses
(142,451)
(187,108)
(199,735)
(268,167)
(283,693)
(294,467)
(306,560)
Inco
me
Bef
ore
Ban
k C
harg
es, Z
akat
& M
inor
ity In
tere
st78
0,73
8 1,
060,
971
1,27
8,91
0 1,
623,
872
1,78
1,25
3 1,
882,
979
1,9
56,6
72
BankCharges
(94,860)
(125,489)
(147,518)
(115,783)
(95,279)
(69,214)
(43,508)
Lossfrom
Associate
(2,003)
Inco
me
Bef
ore
Ban
k Z
akat
& M
inor
ity In
tere
st68
5,87
8 93
5,48
2 1,
129,
389
1,50
8,08
9 1,
685,
974
1,81
3,76
4 1
,913
,164
Zakat
(18,079)
(24,662)
(29,229)
(37,702)
(42,149)
(45,344)
(47,829)
Inco
me
Bef
ore
Min
ority
Inte
rest
667,
799
910,
820
1,10
0,16
0 1,
470,
387
1,64
3,82
4 1,
768,
420
1,8
65,3
35
MinorityInterests
(530)
(558)
(3,438)
(1,470)
(1,644)
(1,768)
(1,865)
Net
Inco
me
667,
269
910,
262
1,09
6,72
2 1,
468,
917
1,64
2,18
0 1,
766,
652
1,8
63,4
70
App
ropr
iatio
n A
ccou
nt
Ope
ning
Bal
ance
63
4,33
6 1,
034,
878
1,58
1,61
4 2,
187,
164
2,77
4,73
0 3,
595,
821
4,4
79,1
47
TransfertoShareCapital
-
-
-
-
-
-
-
TransfertoStatutoryReserves
(66,727)
(91,026)
(109,672)
(146,892)
-
-
-
DividendPaid
(200,000)
(272,500)
(381,500)
(734,458)
(821,090)
(883,326)
(931,735)
Ret
aine
d E
arni
ngs
1,03
4,87
8 1,
581,
614
2,18
7,16
4 2,
774,
730
3,59
5,82
1 4,
479,
147
5,4
10,8
81
Sour
ce: C
ompa
ny R
epor
ts, G
loba
l Res
earc
h
Global Research - Saudi Arabia Global Investment House
March 2010Almarai12
Cas
h Fl
ow S
tate
men
tAlmaraiCom
pany-Almarai
(SR
‘000
’)20
0720
0820
0920
10E
2011
E20
12E
2013
EProfitfortheyear
667,269910,2621,096,7221,468,9171,642,1801,766,6521,863,470
Depreciation
227,684378,968505,201657,814717,018770,794826,677
OtherOperatingActivities
114,899
40,129
37,169(71,637)
(98,914)
(131,830)(160,541)
ChangeinW
orkingCapital
(284,653)
(313,223)
163,064121,582120,984113,37590,341
Net
Cas
h fr
om o
pera
ting
activ
ities
72
5,19
9
1,01
6,13
6
1,80
2,15
6
2,17
6,67
6
2,38
1,26
9
2,51
8,99
1
2,6
19,9
46
Inve
stin
g A
ctiv
ities
Plant&
Property
(1,099,196)(1,655,619)(1,334,987)
(878,010)
(910,820)
(827,328)(859,732)
DerivatesFinancialInstruments
-
(5,710)
6,648
-
-
-
-
Investment&
FinancialAssets
-
(18,263)
(473,794)
(19,263)
(9,824)
(9,922)(10,021)
IntangibleAssets-Goodw
ill
-
-
(979,521)
(76,408)
(80,228)
(84,240)(88,452)
DerivativeFinancialinstruments
-
98,039(25,919)
8,215
9,037
9,94110,935
OtherInvestmentA
ctivities
(389,007)
83,531(376,015)
164,418184,156194,983196,580
Cas
h Fl
ows f
rom
Inve
stin
g A
ctiv
ities
(1
,488
,203
) (1
,572
,088
) (1
,711
,002
)
(713
,592
)
(726
,664
)
(632
,345
)
(66
3,15
1) Fi
nanc
ing
Act
iviti
es
IncreaseinLoan
1,127,5961,052,345689,625(517,297)
(683,454)
(868,836)(856,873)
BankCharges
(94,860)
(125,489)
(147,518)
(115,783)
(95,279)
(69,214)(43,508)
DividendPaid
(199,396)
(270,173)
(379,977)
(734,458)
(821,090)
(883,326)(931,735)
OtherFinancingActivities
(387)
7,879
7,797
20,727(24,834)
(39,971)(39,023)
Cas
h Fl
ows f
rom
Fin
anci
ng A
ctiv
ities
83
2,95
3
66
4,56
2
16
9,92
7 (1
,346
,811
) (1
,624
,657
) (1
,861
,347
) (
1,87
1,13
8)
In
crea
se/D
ecre
ase
in C
ash
69,
949
108,
610
261,
081
116,
273
29,
947
25,
298
85
,656
CashBeginningBalance
68,026
137,975246,585507,666623,939653,886679,185
Cas
h E
ndin
g B
alan
ce
137,
975
246,
585
507,
666
623,
939
653,
886
679,
185
764
,841
So
urce
: Com
pany
Rep
orts
, Glo
bal R
esea
rch
Global Research - Saudi Arabia Global Investment House
13March 2010 Almarai
Fact
She
etAlmaraiCom
pany-Almarai
20
0720
0820
0920
10E
2011
E20
12E
2013
EL
iqui
dity
Rat
ios
CurrentRatio
1.62
1.37
1.51
1.46
1.38
1.26
1.25
CashRatio
0.18
0.19
0.35
0.37
0.36
0.34
0.36
Profi
tabi
lity
Rat
ios
GrossM
argin
39.6%
39.7%
40.3%
40.8%
41.5%
41.9%
41.8%
EBITDAM
argin
30.4%
30.7%
30.4%
31.1%
32.0%
32.8%
32.9%
EBITM
argin
20.7%
21.1%
21.8%
22.1%
22.8%
23.2%
23.2%
NetProfitM
argin
17.7%
18.1%
18.7%
20.0%
21.1%
21.8%
22.1%
ROAE
27.0%
27.3%
24.4%
25.4%
24.9%
23.7%
22.3%
ROAA
13.2%
12.5%
11.4%
13.0%
14.0%
14.7%
15.3%
Lev
erag
e R
atio
s
DebttoEquity
0.44
0.46
0.43
0.36
0.29
0.19
0.11
DebttoAsset
40.9%
44.5%
39.8%
33.4%
26.7%
19.1%
11.8%
Liabilities/TotalA
ssets(x)
0.52
0.56
0.51
0.46
0.41
0.34
0.28
Gro
wth
Rat
es
RevenueGrowthRate
36.7%
33.4%
16.7%
25.1%
6.3%
3.9%
4.3%
NetIncomeGrowthRate
43.6%
36.4%
20.5%
33.9%
11.8%
7.6%
5.5%
EquityGrowthRate
60.9%
18.5%
48.8%
14.8%
13.6%
12.7%
11.8%
TotalA
ssetGrowthRate
68.0%
29.1%
34.3%
5.2%
3.1%
1.4%
2.0%
RatiosU
seforV
aluation
Num
berofS
hares(mn)
109
109
115
115
115
115
115
Parvaluepersh
are(SR)
1010
1010
1010
10BVpersh
are(SR)
28.0
33.2
46.8
53.7
61.0
68.8
76.9
EPS(SR)
6.1
8.4
9.5
12.8
14.3
15.4
16.2
MarketPrice(SR)
118
135
165
181.75
181.75
181.75
181.75
MarketC
apin(S
Rmn)
12,862
14,715
18,975
20,901
20,901
20,901
20,901
EV(S
Rmn)
15,841
18,411
22,449
23,781
23,085
22,123
21,201
EV/EBITDA
13.81
11.91
12.58
10.42
9.24
8.34
7.62
P/ERatio(x)
19.28
16.17
17.30
14.23
12.73
11.83
11.22
P/BVRatio(x)
4.21
4.07
3.53
3.38
2.98
2.64
2.36
Sour
ce: C
ompa
ny R
epor
ts, G
loba
l Res
earc
h*H
isto
rica
l P/E
& P
/BV
mul
tiple
s per
tain
to re
spec
tive
year
end
pri
ces,
whi
le th
ose
for f
utur
e ye
ars a
re b
ased
on
clos
ing
pric
es o
n th
e Ta
daw
ul a
s of 2
0th
Mar
ch 2
010.
Global Research - Saudi Arabia Global Investment House
March 2010Almarai14
ThisPageisIntentionallyLeftBlank(ForPrintingPurposeOnly)
Global Research - Saudi Arabia Global Investment House
15March 2010 Almarai
ThisPageisIntentionallyLeftBlank(ForPrintingPurposeOnly)
Global Research - Saudi Arabia Global Investment House
March 2010Almarai16
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DisclosureChecklist
AlmaraiCompany(Almarai)
Company Recommendation
Hold
Ticker
ALMARAIAB2280.SE
Price Disclosure
1,10SR181.75
GlobalResearch:EquityRatingsDefinitions
BuyHoldReduceSell
GlobalRating Definition
Fairvalueofthestockis>10%fromthecurrentmarketpriceFairvalueofthestockisbetween+10%and-10%fromthecurrentmarketpriceFairvalueofthestockisbetween-10%and-20%fromthecurrentmarketpriceFairvalueofthestockis<-20%fromthecurrentmarketprice
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