The Abdullah Al-Othaim Markets (AAOM) is the No. 1 retail and wholesale grocery brand in Saudi Arabia. Boasting a sturdy market cap of SR10.11 billion, it offers a gross dividend yield of 9.79 per cent Over the last five years, its dividend has grown at an impressive 56.04 per cent. The subsidiaries are engaged in manufacturing and distribution of food, manpower services, and engineering and contracting services for buildings.
AAOM delivered a sturdy financial performance for 2022; revenues surged 13.66 per cent to SR9.56 billion due to improved shelf product availability, enhanced shopping experience, and a bit of price inflation. As a result, operating profit rose to SR392 million, marking a growth of 13 per cent.
AAOM sold two of its investments, namely, land in Medina and its investment in Abdullah Al-Othaim Investment Company in Q3-22. This generated non-recurring capital gains of SR701.2 million. Consequently, net income attributable to shareholders rocketed 257 per cent to SR1.08 billion. Earnings per share rose to SR11.9 from SR3.33 in 2021.
Strong on dividend
Given the heavy influx of cash from non-recurring sales, the company announced an extraordinary interim cash dividend of SR7.5 per share for the third quarter in November 2022, amounting to SR675 million. in February 2023, the Board of Directors gave the signal to distribute SR247.50 million as interim dividends to 90 million eligible shares for Q4-22.
This is evidence of the management’s commitment to deliver healthy returns to shareholders. AAOM’s profits and free cashflows have always been sufficient to cover dividends, making its dividend payout sustainable in the long run.
Industry’s heading for fresh growth
Saudi Arabia’s retail sales are forecast to grow nearly three times its current value by 2030. This would render the retail sector the second largest contributor to the Kingdom’s non-oil GDP. It is expected to hit SR1.16 trillion in 2023, accounting for about 14 per cent of the Gulf’s non-oil GDP. Within retail, food and grocery retail markets are forecast to reach $59.81 billion in 2023, marking an increase of 17.3 per cent since 2018.
Tech-enabled retailers are expected to flourish on account of lower acquisition costs, enhanced value offerings, and superior customer experiences.
AAOM is committed to its store rollout plan targeting the opening of 25-30 stores a year over the next three years. In its latest quarter alone, it opened 36 stores. It has devised a new retail strategy to drive traffic by broadening product offerings and providing superior value-for-money versus peers. It also enjoys a competitive edge due to its differentiated store format of corner shops and supermarkets.