The receivables were sold to Al-Rajhi Bank in exchange for a cash inflow of SR160mn. The securitized portion accounts for approx. 41% of their last outstanding balance of installments sales.

Al Rajhi Capital Research said the deal has multiple positive implications for the company such as upfront recognition of future profits and cash flows, increased capacity to expand in installments sales as well as lowering debt. We revise our topline growth estimate for 2019e to 14.3% y-o-y (from 9.7% previously) and 9.4% for 2020e (from 7%).

Post factoring this securitization deal, Al Rajhi Capital then have a 34% increase in EPS in 2019. “Thereby, we revise our target price to SR80/sh. implying a rating of “Overweight” with an upside potential of 15.4%.”