Seera reported a weaker than expected Q4 19 results with a net income of SAR9mn, down -47.1% yoy and -85.7% qoq. This compares to NCBC and consensus estimates of SAR65mn and SAR66mn, respectively. The main reasons behind the variance are lower margins and one-offs. Seera reported one-offs in Q4 19 with a total of SAR69mn related to receivables, losses on investments and FX losses. Adjusting for that, net income was SAR78mn.
Revenues stood at SAR594mn, +5.1% yoy and -7.5% qoq. This is higher than our estimates of SAR506mn which we believe is due to strong growth in gross bookings. Gross booking reached SAR2.4bn in Q4 19 (flat yoy) despite the end of the Ministry of Education contract in 2018. We believe the strong growth in Retail segment (+78% yoy), driven by online bookings, offset the decline in corporate and government segment (-18% yoy). Moreover, transportation segment revenues reached SAR87mn in Q4 19 to record a full-year top-line of SAR343mn (+60% yoy).
Gross margins came in at 47.1% in Q4 19 vs 55.2% in Q4 18 and coming below our estimates of 64.0%. Based on our earlier meeting with management, we believe the strong growth in sales and lower margins is attributed to IFRS requirements regarding certain low margin transactions where the gross booking revenue is recorded in the top-line.
Operating income declined 33.1% yoy (-6.5% qoq) to SAR91mn. This is in-line with our estimates. Opex stood at SAR189mn vs SAR176mn in Q4 18, coming lower than our estimates of SAR234mn. Opex-to-sales stood at 32% in Q4 19 vs our estimates and the past 3 quarters average of 46%. We believe the opex efficiencies is a key highlight of the results.
In a precautionary measure amid the spread of COVID-19, Saudi has temporarily suspended the entry to the country for Umrah and visiting the Prophet's Mosque. The entry of tourist visa holders coming from countries where the virus is spreading has also been suspended. Moreover, the authorities suspended the use of a national ID card to travel between Saudi and GCC. It also restricted the entrance to the holy sites for GCC citizens. These measures are being evaluated on a continued basis.
Seera is expected to record a gain of SAR1.7bn as it receives its Careem sale proceeds. We expect Seera to report 75% (SAR1.3bn) of the amount in Q1 20 and 25% in 2021.
We are Overweight on Seera with a PT of SAR24.1. We believe the stock’s key driver going forward is the development of coronavirus.