Net income: SAR36.6mn, -1% Y-o-Y, -27% Q-o-Q, -12% vs. EFGe Revenue: SAR1.58bn, +17% Y-o-Y, -22% Q-o-Q, -1% vs. EFGe Gross profit : SAR283.1mn, +28% Y-o-Y, -16% Q-o-Q, 7% vs. EFGe Operating profit: SAR29.8mn, -8% Y-o-Y, -42% Q-o-Q, -23% vs. EFGe   Al Othaim Markets reported disappointing 3Q16 results, with flattish earnings (-1% Y-o-Y), missing our estimate by 12%, as high SG&A costs growth erased strong revenue growth and gross margin gains. Top-line increased an impressive 17% Y-o-Y and was broadly in line with our estimate (-1%), driven by new supermarket openings and continued strong LFL sales growth (in mid- to high-single-digits). Gross margin improved c1.5pp Y-o-Y to 17.9% (ahead of our 16.6% estimate), likely on higher rebates, given strong revenue growth. Gross profit was thus up an impressive 28% Y-o-Y and 7% above our forecast. Operating profit, however, was down 8% Y-o-Y (-23% versus EFGe), despite strong gross profit growth and higher rental income due to high SG&A cost growth affected by higher staff costs, increased promotions to support store openings and higher transport and electricity costs post subsidy reforms. EBIT margin thus fell c50bps Y-o-Y to 1.9%.   Overall, a repeat of last quarter’s trends, which we believed could have been affected by a record number of store openings in 2Q16. While the continued solid LFL and gross margin trends are encouraging, the high SG&A costs (growth has been very high for nearly four quarters) is alarming. We have a Buy rating on the stock and will be revising our numbers to reflect the results. (Earnings release, Hatem Alaa, Nada S. Amin)   Al Othaim: SAR78.27 as of 20 October 2016, Rating: Buy, FV: SAR127.00 per share, MCap: USD939mn, AOTHAIM AB / 4001.SE