Equity Analysis /
Saudi Arabia

Seera Group: Q3 22 – Well positioned for growth

  • Saudi tourism ecosystem, to drive revenue CAGR of 34.4%

  • PIF investment in Almosafer- a game changer

  • Lumi IPO- a short-term catalyst

SNB Capital
24 October 2022
Published bySNB Capital

We remain Neutral on Seera with a PT of SAR21.8. The tourism industry is witnessing a major recovery with a positive long-term outlook, supported by Saudi tourism strategies. In addition, the potential investment by PIF in Almosafer, Lumi IPO and the World Cup are the main catalysts for Seera in the coming period. We expect revenues to bounce back in 2022f and to record a CAGR of 34.4% between 2021-24f, leading to profits of SAR272mn in 2024f. The stock trades at 2023f EV/EBITDA of 9.9x lower than its peer group average of 12.0x.

Saudi tourism ecosystem, to drive revenue CAGR of 34.4%

Developing the tourism sector is one of the targets of Vision 2030 with several initiatives introduced. Accordingly, the total number of tourists are expected to grow from 62.0mn in 2022f to 100mn in 2030f (CAGR of 6.2%), with international tourists increasing from 29.5mn in 2022f to 55.0mn in 2030f (CAGR of 8.1%). The sector contribution to GDP is expected to increase from 5.3% in 2022f to +10% in 2030f. We believe Seera is well positioned to capitalize on these goals and we expect the company’s revenue to increase from SAR1.3bn in 2021 to SAR3.3bn in 2024f. GBV is expected to improve to SAR8.6bn for 2022f, and to reach to SAR11.4bn by 2024f. We expect Seera to return to profitability in 2023f and to reach net income of SAR272mn in 2024f with a net margin of 8.4%.

PIF investment in Almosafer- a game changer

We believe PIF’s potential investment in Almosafer for a stake of 30% with a total of SAR1.55bn (including SAR386mn of earn-out amount) is a key driver for the company, complementing PIF’s tourism mega projects such as Red Sea and Qiddiyah. Pre-money valuation stands at SAR3.75bn (SAR13.0/share of Seera), while we estimate post-money valuation of Almosafer to be cSAR5.2bn (SAR18/share) translating into a 2023f P/S of 1.9x (pre money valuation). Under the agreement, Seera’s destination management company (Discover Saudi) and its Hajj & Umrah B2B operator (Mawasim), will come under Almosafer. The capital increase will be used to scale inbound, outbound, religious, and domestic tourism operations.

Lumi IPO- a short-term catalyst

We believe the potential listing of Lumi is another catalyst for Seera in the coming period. In terms of car rental from short- and long-term, its fleet of 19k cars is split equally which implies a good mix of high margin and sustainable business. Sales in 2022f are expected to reach SAR734mn (33.8% yoy) while EBT is estimated at SAR120mn (47.4% yoy). We estimate Lumi’s valuation at SAR3.2bn-SAR3.7bn, translating into EV/Car of SAR167k in-line with peer group average of SAR168k (Budget and Theeb). The proceeds from the IPO, if 30% is floated, may reach SAR1.0bn-SAR1.1bn which might be used to reduce debt and/or pay dividends. 

Remain Neutral on Seera with a PT of SAR21.8

We remain Neutral on Seera with a PT of SAR21.8. We believe Seera’s key drivers are 1) the recovery in the number of tourists resulting in higher GBVs backed by Saudi’s plans to develop the tourism sector and 2) Lumi and Almosafer opportunity to generate/unlock value for the business. The stock trades at 2023f EV/EBITDA of 9.9x lower than its peer group average of 12.0x.