JEDDAH: The Saudi stock market continued its upward momentum yesterday after surging 6.82 percent last week. Banking and petrochemical stocks led Tadawul All-Share Index (TASI) to its highest close in more than three months after the announcement of better-than-expected results of some of the listed companies.
Al-Rajhi Bank reported 8.1 percent increase in net profits while Almarai Co. said its net profit rose by almost 22 percent in the first quarter.
Saudi banks play a leading role in the upward movement of Saudi stock index. Abdullah Al-Rajhi, CEO of Al-Rajhi Bank, said the situation of Saudi banks are strong and can play their roles in the required manner. “The capitals of Saudi banks are very big. By the year 2008 there was an increase of SR50 billion in their capitals and reserves,” he pointed out. Al-Rajhi said the Saudi banks have been safe from global financial crisis and attributed it to Saudi Arabian Monetary Agency’s (SAMA’s) policies and monitoring regimes.
Almarai’s results reflect the company’s ability to successfully implement its five-year plans to enhance productivity and market share, develop new products and upgrade its overall performance.
TASI closed yesterday at 5,200.17 points after rising by 3.2 percent or 161.14 points.
The Tadawul index has increased 8.27 percent so far this year. Over SR6.31 billion worth of shares changed hands yesterday.
Overall market breadth was strongly positive, with 111 advancers and 9 decliners giving an AD ratio of 12.33.
“The recent strong gains are pushing the market toward overbought levels, and it may continue to be overbought for an extended period without a sell off,” Faisal Alsayrafi, managing director and CEO of the Jeddah-based Financial Transaction House (FTH), said.
Al-Rajhi Bank shares closed 6.27 percent higher at SR59.25 yesterday. Shares in Saudi Hollandi Bank jumped by 7.81 percent to SR40, Bank Albilad by 4.76 percent to SR25.30 and Riyad Bank by 4.09 percent to SR24.15.
Saudi Basic Industries Corp. (SABIC), the largest listed company, ended 4.60 percent higher at SR47.70 after its affiliate Saudi Arabian Fertilizers Co. (SAFCO) posted a 27.4 percent fall in first quarter profits. Despite fall in profits, SAFCO shares increased by 1.25 percent to close at SR101.
According to NCB Capital, SAFCO’s earnings dropped by 55 percent from SR17.1 per share in 2008 to SR7.7 per share in 2009, dragged by an estimated price-driven decline in sales of 48 percent. However, a superior cost structure will enable SAFCO to sustain its net margin at around 71.0 percent, translating into a 28.3 percent return on equity (ROE).
NCB Capital initiated SAFCO coverage with an “overweight” rating and a 12-month price target of SR113 with an expected upside potential of 22.5 percent.
Despite a 62 percent decline in urea prices since Q3, 2008, SAFCO’s 2009 EBITDA (earnings before interest, taxes, depreciation and amortization) margin is expected to be 78.9 percent, twice that of peers. Even if urea prices were to decline by a further 65 percent from current levels, the company would still break-even.
The NCB Capital said in its research that SAFCO’s ability to generate healthy cash flows has historically resulted in generous dividend payouts (SR13 per share or 76 percent payout in 2008). The company is expected to maintain a 70 percent payout. Dividend per share is forecast at SR5.50 and SR8.25 in 2009 and 2010 respectively, translating into 5.9 percent and 9.0 percent dividend yields.