We maintain our ACCUMULATE rating on Yamama, raising our target price from SAR 57.74 to SAR 62.59 after it was reached in November. This only presents a 4.8% premium over its current closing price of SAR 59.75, however the potential return becomes rewarding when combined with its attractive dividend yield of 6%.
Yamama revenues fell by 4.0% y-o-y in Q3 2013 to SAR 294 million, affected by lower sales volume following a slowdown in construction activity during the month of Ramadan. Conversely, the company posted a 1.8% rise in revenues during the first nine months of 2013 to reach SAR 1,232 million. We estimate revenue to reach SAR 1,654 billion in 2013, increasing at a CAGR of 3.7% between 2013 and 2016. Yamama managed to report a 7.6% increase in bottom-line during the first nine months of 2013 to attain SAR 693 million. We estimate earnings to grow at a CAGR of 3.7% in the next three years, rising by 7.8% in 2013 to SAR 898 million.
A short term development to monitor is the government’s crackdown on illegal workers in line with its policy of Saudization; this may continue to negatively affect the construction activity of real estate developers in the near term.
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