Saudi Arabia's United Electronics reports rise in first quarter earnings, shares rally

Analyst says Q1 2019 results were remarkable for Extra, with revenue growth driven by market share gains and the consumer finance programme

Screens within the Saudi stock exchange showing trading data. Image used for illustrative purpose.

Screens within the Saudi stock exchange showing trading data. Image used for illustrative purpose.


Saudi Arabia’s United Electronics Company (Extra) reported a 58 percent jump in first quarter (Q1) net profit for 2019, triggering a surge in the company’s shares on Tuesday.

Q1 2019 net profit amounted to 34.01 million Saudi riyals ($9.07 million), compared to 21.57 million riyals for Q1 2018.

Alaa Tolba, senior research analyst at CI Capital, told Zawya by email that the company’s Q1 results were “remarkable”, attributing it to improved marketing and a consumer finance programme offering financing for products.

“The company’s efforts to distinguish itself via innovative marketing campaigns and unique services (such as the consumer finance programme), should support the market share gains and drive earnings growth,” Tolba said.

“We also see an upside from the new consumer finance subsidiary, which is pending SAMA’s (Saudi Arabian Monetary Authority) final approval,” she added.

Q1 2019 sales amounted to 1.06 billion riyals, up from 864.62 million riyals in Q1 2018, translating into a 22.6 percent increase.

“The strong revenue growth was driven by market share gains across all categories, as well as a strong contribution from the consumer finance programme,“ CI Capital’s Tolba said.

The company’s shares were trading 3.61 percent higher at 63.1 riyals by 14:09 GST, but have dropped 1.41 percent so far since the start of the year .

“We like eXtra and believe that enforcing 70 percent Saudisation in stores selling electrical and electronic appliances should trigger faster displacement of unorganised expat players, diverting traffic to eXtra,” Tolba said.

A government drive launched last year to ensure higher levels of employment amoung Saudi nationals in the retail sector has led to many smaller stores closing their doors, allowing formal retailers such as Extra to take a greater share of the market. (Read more here).

(Reporting by Gerard Aoun; Editing by Michael Fahy)


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© ZAWYA 2019

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