Net income: SAR149.6mn, -9% Y-o-Y, 3% Q-o-Q, -7% vs. EFGe Total revenue: SAR592mn, 2% Y-o-Y, 4% Q-o-Q, -4% vs. EFGe Gross profit: SAR212.7mn, 5% Y-o-Y, 11% Q-o-Q, 2% vs. EFGe Operating profit: SAR148.7mn, -7% Y-o-Y, 4% Q-o-Q, -6% vs. EFGe   Catering reported its 3Q16 results, with earnings falling for the third consecutive quarter (-9% Y-o-Y; -7% vs. EFGe), mainly on higher G&A costs (higher receivable provisions). Top-line was flattish (+2% Y-o-Y, -4% vs. EFGe) for the sixth quarter in a row, mainly as in-flight catering revenue (c71% of 3Q16 top-line) was relatively unchanged again (-1%) as Catering ended some export sale contracts (frozen meals), as per the company's disclosure, while Sky Sales (c10%) revenue was surprisingly flattish (+1%) despite several retail shops opening at some KSA airports. Business lounge revenue (c7%) remained the star performer, with growth of 16% Y-o-Y benefitting from new lounges in Riyadh, Dammam and Medina opened in 2014-15. Non-airline revenue (c9%) reversed a three-quarter decline advancing 12% Y-o-Y. Gross margin advanced c80bps Y-o-Y (gross profit +5% Y-o-Y; broadly in line), as lower cost of materials and goods and a reversal of utility fees offset higher staff, rent and depreciation charges. Operating margin, however, fell c2.5pp Y-o-Y (EBIT -7% Y-o-Y; -6% vs. EFGe), as G&A costs surged 48% Y-o-Y (+26% vs. EFGe) due to higher receivable provisions (cSAR5mn booked in 3Q16) and staff costs, as well as a reversal of some technical services fees in 3Q15 that was not repeated.   Overall, a disappointing results set, with no major surprises that confirm our concerns on in-flight catering revenue trends, as well as the sustainability of Catering’s profitability profile. We have a Neutral rating on the stock. (Earnings release, Hatem Alaa, Nada S. Amin)   Saudi Airlines Catering Company: SAR86.02 as of 17 October 2016, Rating: Neutral, FV: SAR110.00 per share, MCap: USD1,881mn, CATERING AB / 6004.SE