Equity Analysis /
Saudi Arabia

Seera Group: Q2 19 – Weak earnings due to one-offs

    Iyad Khalid Ghulam
    Iyad Khalid Ghulam

    Vice President, Senior Equity Research Analyst

    SNB Capital
    5 August 2019
    Published by

    Seera (formerly Altayyar Travel Group) reported a lower-than-expected Q2 19 results with a net income of SAR65mn, down 39% yoy (+37% qoq). This is lower than NCBC estimates of SAR72mn. We believe earnings deviations is due to one-off charges of SAR11mn. Adjusting for the one-offs, net income stood at SAR76mn, slightly higher than our estimates.

    Revenues stood at SAR466mn, down 8.1% yoy mainly due to the end of the Ministry of Education contract in Q2 18. This is 5.1% lower than our estimates. We believe the variance from our estimates is due to lower-than-expected revenue from the ticketing and tourism segments. Based on our estimates, ticketing and tourism segments revenue came in at SAR375mn vs our estimate of SAR419mn. The transportation segment revenue was SAR60mn, up 91% yoy and (in-line with our estimates) while hospitality revenue was SAR46mn, up 11% yoy and (vs our estimates of SAR46mn).

    Gross Booking Value increased 5% yoy to SAR2.8bn in Q2 19, with consumer travel recording SAR1.1bn (online sales represented 70%). Seera believes that online sales will reach SAR3bn in 2019.

    For H1 19, Saudia passengers grew by 1% yoy to 17mn, with international passengers representing 51.2% of the total. The number of flights increased 1.6% yoy to 107,600. Moreover, Umrah visitors reached 2.6mn in Q2 19.

    Although gross profit was down 15.8% yoy (+4.6% qoq) to SAR341mn, it came in line with our estimates. Gross margins came in at 69.9% vs 76.3% in Q2 18 and our estimates of 65.5%. We believe lower-than-expected sales was offset by lower cost of sales due given higher contribution from transportation and hospitality.

    Operating income declined 60% yoy to SAR87mn. It was significantly lower than our estimates of SAR100.4mn. Opex stood at SAR254mn, higher than our expectations of SAR236mn. According to Seera, Opex/sales ratio was 52%, which is below the international peer average. 

    Seera reported one-offs in Q2 19 with a total of SAR11mn. It reported an impairment loss of SAR3mn and a Zakat provision of SAR8mn. Adjusting for one-offs, net income was SAR76mn vs our estimates of SAR72mn.

    We are Overweight on Seera with a PT of SAR24.1. We believe recording Careem gains in the coming quarters will be positive for the stock. It is trading at an adjusted 2019 PE (excluding Careem) of 12.8x, lower than the peers average of 14.6x.