Almarai Co. (ALMARAI), Saudi Arabia’s largest food processor by market value, rose to a one-month high as JPMorgan Chase & Co. (JPM:US) initiated coverage with an overweight recommendation based on a pick up in sales and margins.
The shares climbed 1.5 percent to 66 riyals, the strongest level since Dec. 8, at the close in Riyadh, on 97 percent of three-month average daily volume. JPMorgan set Almarai’s 12- month share-price estimate at 87 riyals. The stock helped the gauge’s 1 percent gain to 7,126.71, the highest since Sept. 17.
Almarai, which is benefiting from a pick up in domestic demand for poultry and dairy products, may post a 15 percent advance in profit this year, JPMorgan said. Saudi Arabia, whose $727 billion economy expanded 6.8 percent in 2012, is the most- populous nation in the six-nation Gulf Cooperation Council. The company trades at 16 times estimated 2013 earnings, compared with 22 times for BRF-Brasil Foods (BRFS3) SA, the world’s largest poultry exporter, data compiled by Bloomberg show.
“Almarai offers an appealing risk-reward balance to play the region’s demographic and income growth,” JP Morgan analysts including by Muneeza Hasan said in e-mailed report today. The company’s shares trade at a 14 percent discount to global peers, based on 2013 earnings, they said.
Almarai may next week report a 9 percent increase in 2012 profit to 1.4 billion riyals ($373 million), according to the average estimate of 14 analysts on Bloomberg.
“We expect near-to-medium term performance to come from continued healthy volume growth and a quarter-on-quarter pick up in poultry business sales and margins,” JPMorgan said.
Four analysts recommend buy Almarai, while 12 say hold and two advise to sell, according to data compiled by Bloomberg. The shares advanced 12 percent in 2012, outpacing the benchmark index’s 6 percent gain.
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