JEDDAH: The Saudi stock market dropped slightly yesterday after major listed companies announced their second quarter results. The Tadawul All-Share Index (TASI) fell 27.56 points to close at 9,080.87 points.
Out of 123 companies traded, 32 stocks showed positive performance, while 78 companies were in the red. The stock market turnover was over SR6.56 billion yesterday.
The Capital Market Authority (CMA) announced yesterday that trading in the shares of Saudi Arabian Mining Company (Maaden) will commence on July 28. For the first day of trading, entry and maintenance of orders will commence at 10:00 a.m., and trade execution will commence at 10:30 a.m. and will continue until 3:30 p.m. For all subsequent trading days, the order entry and trading hours in the shares of Maaden shall be that of the standard Tadawul trading day, unless otherwise announced. Tadawul said in a statement on its website that order entry and trading hours in all other companies listed will remain as currently arranged. This procedure is in line with Tadawul's approach of ensuring that investors and traders can enter, maintain and execute their orders securely and smoothly.
Maaden's recent SR9.25 billion initial public offering (IPO) was over two times oversubscribed.
The Jeddah-based BMG Financial Advisors (BMG), meanwhile, assigned Fawaz Abdulaziz Al-Hokair Company a "buy" recommendation. The BMG valued Al-Hokair at SR65.33, 60.3 percent above the current market price of over SR41.
The BMG's DCF (discounted cash flow) valuation yielded a fair value of SR77.30 per Al-Hokair share, whereas the comparison-based valuation generated a fair value of SR37.41 per share. By assigning a 70 percent weight to the DCF valuation and a 30 percent weight to the comparison-based valuation, BMG arrived at a target price per share of SR65.33, 60.3 percent higher than the current market price of SR41 per share.
The Kuwait-based Global Investment House (Global) has recommended a "buy" on the stock of Yamamah Saudi Cement Co. Ltd. (YSCC). The value of YSCC's shares derived from the weighted average of the DCF and relative valuation methods is SR79 per share. The stock closed at SR66 on the Tadawul yesterday.
The value of the stock has a potential upside of over 19 percent from its current price level. At current price, YSCC shares are trading at a P/E multiple of 10.4x and 9.4x for 2008 and 2009 respectively.
YSCC is currently the biggest cement producer in Saudi Arabia as well as in the Gulf Cooperation Council (GCC). The company owns 33 percent of Cement Product Industry Company which has a capacity to produce 30 million bags every year. YSCC revenue rose during 2003-07 at a compound annual growth rate (CAGR) of 16 percent. During 2007, the company was able to earn revenue of SR1.19 billion, which was higher by 25 percent than the previous year.
YSCC net profit rose by 22 percent to SR731 million from 2007 as against SR601 million in 2006. The company recently announced its first half 2008 results in which its earning rose by 13 percent to SR425 million as against SR376 million in the first half of 2007.
The BMG said in its research report that the massive, liquidity-fueled infrastructure investment taking place in Saudi Arabia is attracting investment in capacity by existing and prospective cement producers. Saudi Arabia's combined cement capacity is expected to increase from 31 million tons in 2007 to 43.6 million by end-2008 and to 49 million tons by end-2009. This additional capacity is expected to be met with an expected 3-year CAGR of 23 percent in local consumption. Local consumption grew by 8.4 percent in 2007 to 26.8 million tons.
BMG also recommended "buy" for Saudi Cement Co. (49.5 percent upside), Yamamah (43.2 percent upside) and Arabian Cement Co. (36.7 percent upside) on proximity to mega projects and capacity expansion. However, BMG issued a "reduce" recommendation for Eastern Province Cement Co. (11 percent downside), on market share pressures and no volume growth forecasts.
Negative note
The BMG Saudi index ended the week's last trading session on a negative note, recording a 0.4 percent drop in its closing level, which reached 497.38 points.
The market's total turnover, however, reached SR2.6 billion ($687 million), up by 13.1 percent from SR2.3 billion ($608 million) registered in Tuesday's trading session.
Most sectors ended the session in red zone, with only the insurance sector registering an increase by 1.4 percent, and the telecommunications sector standing still.
Eighteen shares recorded losses, whilst seven gained more ground, of which Malath Cooperative Insurance and Reinsurance Company recording the best performance, up by 6.7 percent to SR106.75 per share. The session's worst performer was Saudi Fransi Cooperative Insurance Company, plunging by 10 percent to SR97.25 per share.
By Khalil Hanware
© Arab News 2008
