Savola Group (SAVOLA) shares advanced the most since July on bets the food producer’s move to raise it stake in Almarai Co. (ALMARAI), the Saudi Arabian company that operates a joint venture with PepsiCo Inc. (PEP:US), will boost profit.
Shares of the Jeddah-based company rallied 4 percent, the biggest gain since July 21, to 39.1 riyals at the close in Riyadh. Savola was the second-largest gainer on Saudi Arabia (RJHI)’s gauge, which rose 0.9 percent. The company raised its stake in Almarai to 36.52 percent from 29.95 percent in a 2 billion-riyal ($533 million) transaction completed yesterday.
“Savola seems to be getting a greater foothold in the foodstuffs business,” said Asim Bukhtiar, head of research at Riyad Capital. “This should impact earnings positively going forward.”
Savola third-quarter net income jumped 32 percent, beating analysts’ estimates, as the company expands its retail business in the Arab world’s largest economy and its sugar refining operations in Egypt. In 2010, Savola bought the assets of Casino Guichard-Perrachon SA’s Geant superstores in the kingdom. The company also purchased Tate & Lyle Plc (TATE)’s holdings in sugar refineries in Saudi Arabia and Egypt earlier this year, and stakes in two Egyptian food companies in 2011.
Almarai, which sells products including poultry, milk and juices, lowered its 2012 profit-growth forecast to 7 percent from as much as 10 percent, after third-quarter profit missed estimates. The company’s stock, which has surged 21 percent in 2012, slipped 1.1 percent to 69 riyals.
Savola’s full-year earnings are set to grow 11 percent, according to the average estimate of seven analysts compiled by Bloomberg. The company financed its purchase of Almarai shares with its own cash and Islamic banking facilities from the local banks, with Samba Capital acting as financial consultant.
Five analysts recommend investors buy Savola, while three have a hold rating on the shares and one says sell, according to data compiled by Bloomberg.
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