ADNHC outlook 'promising' due to Abu Dhabi population and tourism growth
ADNH Catering (ADNHC) should see share price gains in the long term as it capitalises on Abu Dhabi's tourism growth, although its financial performance so far may still indicate risk.
ADNHC, a unit of Abu Dhabi National Hotels, listed on the Abu Dhabi Securities Exchange (ADX) in October. It has a trailing P/E (share price to earnings) of 14.7x, lower than GCC peers in the food services sector such as Tadawul-listed Catrion Catering, ADX's NCTH, Muscat-listed Al Jazeira Services and Kuwait-listed Kuwait Hotels, which have an average P/E of 25x.
Junaid Ansari, Director and Head of Investment Strategy and Research, Kamco Invest, said a company trading at a lower P/E is either undervalued or reflects a fundamental issue.
'If there are no issues, the company does not deserve to trade at a lower P/E and is expected to see a gain in its share prices that aligns its PE with the rest of the peers,' he said.
Century Financial put the catering and staffing services company's forward P/E at 13 compared to a sector-wide figure of 22.54, which was attributed to its recent financial performance.
The company's first full-year results since its IPO are to be published in February, but for the first nine months of 2024, revenue fell to AED 1.22 billion ($332 million), down from AED 1.3 billion in 2023, with profits also declining.
ADNHC announced on Wednesday that it had acquired school catering company Food Nation Catering.
Century CIO Vijay Valecha described the outlook as 'promising' as earnings per share are expected to rise from AED 0.069 in 2024 to AED 0.077 in 2026.
Valecha noted that Abu Dhabi's population reached 3.8 million in 2023, an increase of 83% on 2011, with the government expecting the population to double by 2040, boosting the top and bottom line. That, in addition to a booming tourism industry, increases the total addressable market, he said.
(Reporting by Imogen Lillywhite; editing by Seban Scaria)
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