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company’s activi-

ties are divided

across two major

divisions, the air-

line division and

the non-airline

division. The non-airline division

primarily provides catering and

other related services to non-air-

line customers, including universi-

ties, large corporates and remote

oil fields and, during the Hajj and

Umra season, to pilgrims.

“Catering operates in five dif-

ferent segments which include Sky

Sales, airport lounge operations

and non-airline catering. Sky Sales

are expected to grow at a CAGR of

5.9% between 2016-2020 supported

by the expansion of retail shops in

airports. Non-airline catering sales

will be driven mainly by religious

tourism and demand from sites in

remote areas. The company is also

planning to expand operations to

railway catering services, security

and restaurants. We believe this

will help in reducing the depen-

dency on Saudia which represent-

ed 66.9% of total revenues in 2016”

“We initiate coverage on Saudi

Airlines Catering with an Over-

weight rating and a PT of SR103.4

(17.9% upside),” wrote Iyad Gh-

ulam. “Saudi Airlines Catering is

trading at 11.7x P/E 2017E, lower

than the peer group average of

20.5x. The expansion of Saudia’s

fleet, a diversified product mix,

high market share of c.90% and

an attractive 7.7% 2017E dividend

yield are the stock key strengths.

However, the expiry of Saudia con-

tract in 2019E is a key risk. We ex-

pect Saudi Airlines Catering to re-

port a net income of SR617 million

in 2017E, growing 13.9% YoY, with

a CAGR growth of 1.5% between

2016 and 2020.”

n

Saudi Ground

Services Company

SGS is a leading ground ser-

vices

operator

in Saudi Arabia,

providing its ser-

vices to both lo-

cal and foreign

airlines across all

27 airports in Saudi Arabia. The

company provides a range of han-

dling services including passenger,

fleet, ramp and transportation ser-

vices. SGS is a subsidiary of Saudia.

“Saudia, the parent company of

SGS is expected to increase its fleet

from 126 aircraft in 2016 to 200 air-

craft by 2020. This, in addition to

the focus on Haj and Umrah, is ex-

pected to increase the top-line of

SGS by 6.1% in 2017E, with a CAGR

of 4.7% during 2016-2020E. The

recent announcement of Flynas to

increase its fleet by 80 planes will

also be a key catalyst going for-

ward. Additionally, Nesma Airlines

and Saudi Gulf Airlines started op-

erations in November 2016 with 10

planes in total”.

“We initiate on SGS with an

Overweight rating and a PT of

SR60.8, reflecting an upside of

22.8%. The stock is trading at a P/E

2017E of 12.2x, lower than the peer

group average of 14.3x. A DPS of

SR2.75 in 2017E, which is distrib-

uted quarterly, with an attractive

2017E dividend yield of 5.6% is an

additional key advantage. We be-

lieve the dividends are sustainable,

supported by a FCF yield of 9.1%,

and a debt free balance sheet.”

n

Al Tayyar

“Al Tayyar is a leading provider

of travel services in Saudi Arabia,”

Iyad Ghulam said. “The company’s

services include airline ticketing,

hotel reservations, tourism, trans-

portation and cargo services. It

also owns and operates 6 hotels, a

commercial center and a business

center in Holy Makkah and Jeddah.

Al Tayyar is increasingly focusing

on e-business through four plat-

forms: Almosafer, Careem, Tajawl

ECONOMY

TUESDAY 25 APRIL 2017,

SAUDI GAZETTE

12

EMAIL

pr@saudigazette.com.sa sgadvertising@saudigazette.com.sa business@saudigazette.com.sa

Joyalukkas’ showroom

in Al Ahsa to unravel

world of jewelry choice

AL-AHSA —

The globally re-

nowned jewelry retail chain will

expand its presence in the King-

dom of Saudi Arabia by opening its

new showroom tomorrow (April

26) at LuLu Hypermarket, Al Ahsa,

KSA. Many local dignitaries and

VIPs are expected to attend the

grand opening ceremony planned

by Joyalukkas.

The Joyalukkas Al Ahsa, KSA

showroom will showcase the ex-

clusive brands of Joyalukkas such

RIYADH —

The Saudi religious

tourism sector will be a major

beneficiary of economic growth

and development in the Kingdom

under Vision 2030 and the Nation-

al Transformation Program 2020

initiatives of the government,

NCB Capital, the Kingdom’s larg-

est asset manager, said in it update

report on the sector.

“Religious tourism has been

a key area of focus and will con-

tinue to be so going forward, capi-

talizing on the large infrastructure

investments over the last decade

in Holy Makkah, Al Madinah

and Jeddah,” Iyad Ghulam, NCB

Capital equity research analyst

said. “Saudi Arabia is planning to

increase the number of Hajj and

Umra pilgrims by 39% and 150%,

respectively by 2020. This initia-

tive will be a key growth driver for

companies operating in this sector

such as Saudi Airlines Catering,

SGS and Al Tayyar. We expect the

net income of these companies to

grow between 4.3-17% in 2017E,

driven by the expansion of local

airline fleets, new airlines and

new hotels commencing opera-

tions.”

Consequently, NCB Capital

has initiated coverage of Saudi

Ground Services Company (SGS)

with an Overweight rating and a

PT of SR103.4 while designating

Overweight ratings to SGS and

Al Tayyar and PTs of SR60.8 and

SR40, respectively.

Moreover, NCB Capital gave

also its ratings update on selected

Saudi companies, to wit:

n

Saudi Airlines Catering

One of the first Saudi Airlines

divisions to privatize as part of

the airline’s overall privatization

plan, Saudi Airlines Catering pro-

vides catering and related services

to Saudi and other airlines flying

into and out of the Kingdom. The

Saudi religious tourism

sector growth to benefit

travel services business

Saudi Food, Hotel &

Hospitality Exhibition

opens with high hopes

By Saleh Fareed

Saudi Gazette

JEDDAH —

The 22nd edition

of Saudi Food, Hotel & Hospi-

tality Exhibition, claimed to be

the Saudi Arabia’s largest an-

nual food and hospitality trade

show, was inaugurated Sunday

by Mohammad bin Abdullah Al-

Omari, Director General of the

Saudi Commission for Tourism

and National Heritage - Makkah

Region, in the presence of Za-

hoor Siddique, Vice President

of Al Harithy Company for Ex-

hibitions (ACE), top executives

of participating companies and

dignitaries.

Taking place till April 26 at

Jeddah Center for Forums and

Events, Saudi Arabia›s 22nd

International Event for Food,

Beverages and Catering, Hotel

Equipment, Supplies and Ser-

vices is witnessing this year the

participation of more than 300

companies from 14 countries.

The Director General of the

Saudi Commission for Tourism

and National Heritage - Makkah

Region said “we are delighted to

inaugurate this exhibition, which

is witnessing a good presence

in terms of food, hospitality and

health products.”

He added “tourism will be an

important component in boost-

ing non-oil revenue, the tourism

and hospitality sector is set to

play a big part in the Kingdom’s

2030 Vision.”

This year’s exhibitors coming

from different segments of the

food and hospitality industry like

F&B, interiors, kitchen equip-

ment, housekeeping, bakery and

others, and will aim at providing

solutions to various industry-re-

lated problems.

Zahoor Siddique, Vice Presi-

dent of Al Harithy Company for

Exhibitions (ACE), said “our

strategy to offer the sector and

its audience and market more

opportunities, whether business,

investment or learning, we be-

lieve, is contributing much to the

sector’s advancement. By incit-

ing awareness of current issues

and challenges in Saudi Arabia,

such as food safety, organic food

which are also a global issues,

and bringing local international

specialists, we are able to cre-

ate a wider audience and market

base.”

He added that the exhibi-

tion aims to provide a strategic

platform to promote food and

hospitality products, services

and new technology and bring

together industry experts and

professionals, potential business-

to-business deals and networking

opportunities await our partici-

pating exhibitors.

The Jeddah Open Cooking

Championship & Art de Table

competition is showcasing the

culinary skills of more than 30

professional and amateur chefs

from local hotels. This year’s sa-

lon will be evaluated by a panel

of 25 renowned experts, mandat-

ed by the World Association of

Chefs Societies (WACS).

According to the latest stud-

ies, food consumption in Saudi

Arabia is projected at 31.1 million

mt in 2019, showing an annual av-

erage growth of 3.0% since 2014.

The hotel industry in Saudi Ara-

bia is growing, mainly due to the

Kingdom’s economic stability.

Additionally, the occupancy rates

reach around 100% during spe-

cific periods of the year, and an

average of up to 75% throughout

the year. — SG

Mohammad bin Abdullah Al-Omari (middle), Director General of the

Saudi Commission for Tourism and National Heritage - Makkah Region,

tours the expo after the inauguration ceremony

as Veda Temple Jewelry, Pride Dia-

monds, Eleganza Polki Diamonds,

Masaaki Pearls, Zenina Turkish

Jewelry, Li’l Joy Kids Jewelry, the

Apurva Antique collection Ratna

precious stone jewelry along with

ethnic, special occasion and con-

temporary jewelry. Along with the

grand opening, Joyalukkas tailored

its inaugural offers like free 2 gram

gold coins on purchase of diamond,

Polki and pearl jewelry worth

SR5,000, free 1 gram gold coin on

purchase of Diamond, Polki and

pearl jewelry worth SR3,000 and

free quarter gram gold coin on pur-

chase of gold & precious Jewelry

worth SR3,000. Making the open-

ing even more special will be the

0% deduction on gold exchange.

“We are delighted to open our

doors once again in KSA,” said Joy

Alukkas, Chairman and Managing

Director of Joyalukkas Group. “The

loyalty and support that the people

here have shown us through the

years inspired us to open one more

showroom in KSA with the en-

hanced jewelry shopping experi-

ence that we are known for.

I am very excited to showcase

a wider selection of world-class

jewelry, more amazing offers and

the award-winning customer ser-

vice that people have come to ex-

pect from Joyalukkas.” The inaugu-

ral offer will be valid from April 26

till May 4. The opening of Al Ahsa

showroom will open up a world of

choice to the patrons. The latest

designs, the best collection and the

best prices will be the highlight of

the showroom.

—SG

Saudia app

available on

App Store,

Google Play

The Saudi Arabian Airlines

launches on Monday its

own application on both

the App Store and Google

Play. The application has a

modern design that invites

the user to complete his

booking procedure in a

fast and efficient way. The

application is a part of the

airline’s plan toward a more

digitalized service.

and Wadi. Thakher is another key

investment with an ownership of

30%.

“Al Tayyar has 6 hotels in

Makkah and Jeddah, with a total

of 2,080 rooms, ranging from 5

stars to affordable accommoda-

tion. Three hotels are operational;

Mövenpick in Jeddah (228 rooms),

Masafi (192 rooms) and Beer Bale-

la (547 rooms) in Makkah. Three

additional hotels are expected to

commence operations in 2017E.

The Sheraton, in Makkah, is ex-

pected to operate in 1Q17, The

Prince Majed Hotel in Jeddah will

start operations in 4Q17, while

Sheab Quresh in Makkah will

commence operations in 1Q17. In

2017, hotels revenue is expected

to reach SR115mn and to grow by

76% in 2020E.

“We initiate coverage on Al

Tayyar with an Overweight rat-

ing and a PT of SR40.0. In 2017, we

expect a net income of SR862mn,

increasing 4.3% YoY. This reflects

a P/E ratio of 7.3x, vs. the peer av-

erage of 14.4x. We believe the cur-

rent valuation fully discounts the

Ministry of Education contract,

and the discount is not justified

due to 1) Al Tayyar competitive

advantage through its global reach

and expertise and 2) the strong

growth in hospitability and e-

business segments.” — SG