Saudi Ministry of Education to showcase innovations at 2025 Geneva International Exhibition    7,523 violators of residency, labor, and border security laws deported in a week    Video contradicts Israeli army account of deadly March 23 strike on Gaza paramedics    Saudi Arabia spends over $241 million to implement de-mining projects in 3 countries    Italy's Meloni government approves controversial security decree expanding police protections and penalties    Egypt submits new Gaza ceasefire and prisoner exchange proposal: Report    'Everything is possible' — Ronaldo focused on titles, not 1,000-goal milestone after Riyadh Derby win    Saudi, US military leaders discuss enhanced defense cooperation in Riyadh    King Salman Global Academy for Arabic Language launches program with Indiana University    Ronaldo brace powers Al Nassr past Al Hilal in Riyadh derby thriller    Ed Sheeran weaves Persian music into new song, Azizam    Al-Jadaan: Crown Prince's directives confirm government's ability to bring back balance to real estate market    Veteran Bollywood actor Manoj Kumar dies at 87    Foreign investors are allowed to engage in real estate business outside Makkah and Madinah Commercial speculation should not be the purpose of real estate transaction    Aubameyang fires Al Qadsiah into King's Cup final with stoppage-time winner over Al Raed    Musk's X is suing India, as Tesla and Starlink plan entry    Tesla sales plunge after backlash against Elon Musk    Danilo Pereira fires Al Ittihad into King's Cup final with dramatic stoppage-time double    Screen time in bed linked to insomnia, study finds    Mexico bans junk food in schools to fight childhood obesity epidemic    Sweet sales surge ahead of Eid as Saudi chocolate imports top 123 million kg in 2024    Bollywood actress vindicated over boyfriend's death after media hounding    Grand Mufti rules against posting prayers and preaching in mosques on social media    King Salman prays for peace and stability for Palestinians in Ramadan message King reaffirms Saudi Arabia's commitment to serving the Two Holy Mosques and pilgrims    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Saudi retail outlook remains strong
Published in The Saudi Gazette on 06 - 12 - 2012

RIYADH – The Saudi retail sector outlook remains strong with macro as well as micro factors supporting growth, said NCB Capital in a new report Wednesday. Volume expansion through opening stores, margin support from economies of scale, and consolidation of fragmented markets are key drivers of growth. On the other hand, wage inflation pressures, execution risk and competition are key concerns for the retail sector.
The recent amendments to the Saudization program “Nitaqat” will continue to lead to wage inflation and impact margins of the Saudi retail sector.
The latest amendment in November 2012 increased the cost of foreign work permits to SR200/month (SR2400/year), from SR100/year.
“We believe the retail sector will be one of the most affected by Saudization rulings given the relatively low percentage of Saudis working at these companies. However, we acknowledge that the effective minimum wage rule of SR3,000 a month for Saudis working in the private sector and increased hiring of Saudis will support retail spending, particularly in the discretional sector,” said Farouk Miah, Head of Equity Research at NCB Capital.
NCB Capital upgraded Al Hokair to Overweight with a PT of SR116.6.
The increase in estimates is driven by increased visibility and comfort on expansion plans, continued growth in Saudi Arabia, and stability and possible expansion in margins. Growth into the value fashion segment is a potential catalyst. Execution risk, volatility in other income and corporate governance remain key concerns.
NCB Capital remains Overweight on Extra with a PT of SR108 and Neutral on both Jarir with a PT of SR155 and Al Othaim with a PT of SR93.8. NCB Capital believes Extra will benefit from the consolidation of a fragmented sector and potential margin expansion.
“We believe Jarir is a high quality company although many positives are currently priced in. Al Othaim is well positioned in a strong growing sector, although lack of store expansion has held back growth,” Miah said.
Extra, Jarir and Al Othaim are well positioned to benefit from fragmented sectors which are dominated by independent stores, the report added, which is the main driver enabling these companies to aggressively expand store count and revenues. For Al Hokair, growth in the mid-level branded fashion segment should remain steady with significant potential in the value-segment and expansion abroad.
The sector trades at an attractive 2013E P/E of 12.6x given the growth outlook of the sector. Al Othaim is at a discount given growth concerns with Al Hokair at a discount given the risks present in its expansion
Though the e-commerce potential is significant in the Kingdom, any meaningful growth is at least 5-10 years away, the report said.
“The primary reasons for this include the poor postal system in Saudi Arabia, low credit card penetration, and the importance of shopping outings for many Saudi families,” Miah noted.
Despite the obstacles, NCB Capital however, said many retail companies are investing in their online presence. Extra has initiated sales of products through its website and Jarir is currently working towards this. Al Othaim has also recently commenced an online order service, although on a small scale. — SG


Clic here to read the story from its source.