The contract value is of $106.7 million, with a duration of four years and the option for an extension. Delivery is due to start in September 2019 and the company expects that the financial impact of this contract will appear in its results from the third quarter of the current year.
Phase four of the Mohammed Bin Rashid Solar Park involves the building of concentrated solar power (CSP) units capable of generating 700MW of power. It is being built by a consortium led by Saudi Arabia's ACWA Power, the Silk Road Fund and main contractor Shanghai Electric. A groundbreaking ceremony marking the start of construction took place on site around 12 months ago.
Al Yamamah said in its announcement to the exchange that commercial operation of its solar power systems plant will start as planned during the second quarter of 2019.
“The factory will produce and deliver the steel structure system that will be used in the tracking system of CSP in Dubai Solar Park Project - Phase IV,” the company’s statement to the exchange added.
In a note on the contract win, Anoop Fernandes, a senior research analyst at Bahrain-based investment bank SICO, said that Al Yamamah Steel has two main segments - a construction materials business which made up around 86 percent of the firm's prior 12-month revenues, and an electricity infrastructure materials arm that made up the remaining 14 percent. The latter's trailing 12-month (TTM) revenue stood at 116.5 million Saudi riyals ($31.1 million).
“Hence assuming that this contract will be spread over four years (in a conservative scenario), revenue in the EIM segment is likely to double in FY20 (the company has a September year ending),” Fernandes said.
On Monday, Al Yamamah’s shares rose 2.8 percent and were trading 9.93 percent higher by 14:48 GST during Tuesday’s session, outperforming all of the other stocks on the Saudi market. Since the start of the year, the company’s shares have gained 10.99 percent so far.
Fernandes said that he thought the company’s TTM loss stands at 61.5 million riyals (before minority interest), and its first quarter loss (ending December 2018) amounted to 33.8 million riyals (before minority interest), of which the CM segment loss stood at 26.6 million riyals.
“While the award is good news, the company will need to see strong improvement in its CM business for a big improvement in earnings,” Fernandes said.
The company’s stock is trading at 16.16 riyals. SICO has a “Neutral” outlook on the stock.
(Reporting by Gerard Aoun; Editing by Michael Fahy)
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