Consumer Stocks Tipped to Unlock Saudi Earnings-Season Gains

(Bloomberg) -- Investors looking to back winners in Saudi Arabia's second-quarter earnings season should focus on consumer and retail companies rather than petrochemicals, analysts in the region say.

Extra spending by Saudis after the government's June 21 decision to reverse a cut to state salaries and benefits, and increased food sales for feasts related to the holy month or Ramadan should boost company revenue figures. Dairy producer Almarai Co. and clothing retailer Fawaz Abdulaziz Al Hokair & Co. are among those set to benefit the most, according to Al Rajhi Capital.

“We expect consumer-spending related sectors to do well,” said Mazen Al-Sudairi, head of research at Al Rajhi Capital in Riyadh. Petrochemicals should come under pressure because of weaker product prices and a number of plant shutdowns, he said.

Saudi Arabian food and beverage companies' shares are regarded as among “the most attractive in the region,” according to analysts at Aljazira Capital. Below are some stocks investors should pay attention to before their second-quarter results, according to analysts at Al Rajhi, Aljazira, Arqaam Capital and EFG-Hermes.

Al Othaim	Retail	Could see revenue rise 16% YoY on the back of its focus on non-discretionary products and aggressive store expansions Company was added on July 5 to EFG-Hermes's MENA Top 20 List after the foreign ownership limit was restored to 49%
Fawaz Al Hokair	Retail	Expected to benefit from Ramadan falling entirely in the 2nd quarter, with revenue expected to grow 4.1% YoY
Almarai	Food	Expected to show strong uptake in its flagship dairy and juice segment Poultry business seen continuing to improve, reaching break even in 2017
Al Jouf Agriculture	Agriculture	Low-risk company, with strong balance sheet to support expansion in olive-oil project
Saudi Zain	Telecoms	Seen capturing mobile revenue share from competitors Mobily and STC
Al Hammadi	Healthcare	Expected to post strong revenue growth due to low base in the 2nd quarter of 2016, when only one of its hospitals was operational
Mouwasat Medical Services	Healthcare	Sales and earnings to increase on improving utilization of Riyadh Hospital and Jubal Hospital expansion

To contact the reporter on this story: Filipe Pacheco in Dubai at fpacheco4@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, John Viljoen, Brian Lysaght

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