Earnings Report /
Saudi Arabia

Saudi Tadawul Group: Lower income on volume normalization

  • Revenues decreased by 4.9% yoy (+1.4% qoq) to SAR298mn, in-line with our estimates

  • The Capital market revenue decreased by 14.2% yoy due to a decline of 23.6% yoy in trading services revenue

  • EBITDA stood at SAR155mn, down 18.8 yoy (-6.7% qoq), driven by a decline in revenue and higher opex

Iyad Khalid Ghulam
Iyad Khalid Ghulam

Head of Equity Research

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SNB Capital
16 August 2022
Published bySNB Capital

Saudi Tadawul Group reported an in-line set of Q2 22 results. The net income declined by 23.9% yoy (-2.1% qoq) to SAR138mn, but was in-line with our estimates. The yoy decline is attributed to the normalization of trading values (-21.6% yoy) and higher salaries and benefits. The Capital Market Segment revenue declined by 14.2% yoy due to lower trading values (-21.6% yoy) which was partially offset by higher listing fees. Data & Technology Segment was down by 6.1% yoy on lower Market Information services sales while Post-trade Segment grew by 3.4% yoy driven by the new fees structure.

  • Revenues decreased by 4.9% yoy (+1.4% qoq) to SAR298mn, in-line with our estimates. The yoy decrease in revenues is mainly due to a decrease in trading services driven by normalization of trading volumes which contracted by 21.6% yoy.  Trading revenues decreased by 14.8% yoy (flat qoq) to SAR198mn while non-trading revenues increased 23.3% yoy (+4.3% qoq) to SAR100mn. In Q2 22, ADTV stood at SAR8.4bn (-21.9% yoy), while the total market cap reached SAR11.5bn (+17.9% yoy).

  • The Capital market revenue decreased by 14.2% yoy due to a decline of 23.6% yoy in trading services revenue which was partially mitigated by a 46.2% yoy increase in listing fees. Post trade revenues increased by 3.4% yoy to reach SAR160mn driven by the new fees structure. The Data & Technology services revenues declined 6.1% yoy on lower revenue from Market Information services.

  • Gross profit stood SAR197mn, down 14.8% (-4.6% qoq), in-line with our estimates and compared to gross profits of SAR231mn in Q2 21. This reflects a gross margin of 66.0%, lower than the 73.7% in Q2 21 and our estimates of 68.1%.

  • Operating profit stood at SAR138mn, down 21.7% (-10.5% qoq) and is lower than our estimate of a profit of SAR145mn. Opex came-in at SAR59mn higher than SAR55mn and SAR52mn in Q2 21 and Q1 22 respectively and our estimates of SAR54mn. We believe the increase in opex is due to an increase in salaries and related benefits.

  • EBITDA stood at SAR155mn, down 18.8 yoy (-6.7% qoq), driven by a decline in revenue and higher opex. EBITDA margin came in at 52.1% in Q2 22 vs 61.0% in Q2 21 and 56.6% in Q1 22.

Outlook

Based on our latest update published in April 22, we are Neutral on STG with a PT of SAR184.9. STG is an integral pillar and a key enabler of Vision 2030, which we believe is a key value proposition. We believe the new fee structure and the ongoing launch of new products/ services will support earnings going forward. The stock trades at 2022f P/E of 43.1x, vs the peers average of 23x.