Al Arabia (1K) | Hold | Geopolitical hit to Saudi advertising revenues

Research evidence excerpt

Al Arabia (1K) | Hold | Geopolitical hit to Saudi advertising revenues

itiatives such as digital billboards, interactive displays, andn Based on the above, we take a neutral investment stance.

programmatic advertising.

Catalysts n (-) High minimum guaranteed payments on concessions could

n (+) Effective execution of the Remat Al-Riyadh contract, and squeeze margins, while high capex needs could contribute to

capturing high-yielding advertising contracts. rising net debt.

n (+) Securing long-term financing to fund investment. n (-) An economic downturn or negative impacts from

n (-) Contract execution or ramp-up delays. technology (e.g. from augmented reality wearable devices)

could negatively impact advertising rates and margins.

Key data charts

FCF Sales split by region Sales split by division

700.0 12.0%

600.0 10.0% Saudi Arabia 3.3%4.3% 1%

500.0 8.0%

400.0 Advertising 6.0%

300.0

4.0% Egypt 200.0

2.0% 100.0

0.0 0.0%

-100.0 -2.0% UAE 92.4% 99%

-200.0 -4.0% Other

21 22 23 24 25 26E 27E 28E

Att. FCF (m) (LHS) Att. FCF Yield

SWOT analysis

Strengths Weaknesses

n Dominant position in KSA market, notably in Riyadh. n Leveraged financial structure with long term contractual commitments.

n Long duration contract portfolio across multiple formats. n Significant capex investments required to ramp up contracts.

n Positive macro environment: good demographics plus structural change. n Annual lease prepayments drive high working capital needs.

n State-of-the-art technological solutions. n Dependent on successful execution of the Al-Riyadh contract.

Opportunities Threats

n Geographical diversification in Egypt and UAE, with client synergies. n Minimum guaranteed contract structure could impact margins.

n Higher returns switching from static to digital billboards.