RIYADH, 13 January 2005 — Shares in the National Company for Cooperative Insurance (NCCI), which the government sold to investors last month, will start trading on the Kingdom’s stock exchange on Monday, according to information available on the bourse’s website.
NCCI stock was 11.5 times oversubscribed when the government sold 7 million shares, or 70 percent of the company’s capital.
More than 800,000 investors will each receive around nine shares, which sold for SR205 ($54.67) each.
NCCI is half owned by the Public Investment Fund (PIF), with the General Organization for Social Insurance and Pension Fund each holding 25 percent. The IPO included PIF’s five million shares and one million from each of the two other shareholders.
The NCCI flotation followed an SR1 billion share offering for mobile phone operator Ettihad Etisalat in October. Etisalat shares, which were sold at SR50 each, have soared to SR375 since they started trading last month.
Dr. Khan H. Zahid, chief economist and vice president at Riyad Bank, told Arab News that NCCI share price initially would rise only slightly as Haj season is just round the corner and will not make debuts like the Saudi Telecommunications Company (STC) and Etisalat when their shares started trading with big increase in prices.
However, Abdelmenem Jamil Addas, professor of financial markets at the College of Business Administration, Jeddah, is optimistic.
He said “the IPO’s price was fixed at SR205 per share. I predict that in the first day of trading in the secondary market, the price will trade at a range of SR350 to SR400 a share.”
NCCI is in a unique position, unseen in the Saudi stock market; it is the only and exclusive company that has been in operation for a long time in the market, thus, it has built a very solid and loyal customer base and has a monopoly over the car insurance industry throughout Saudi Arabia.
Given that car insurance is mandatory, the firm is expected to continue reporting impressive revenues, he added.
“NCCI is highly cash liquid and most importantly has a very efficient and effective management, unparalleled in the market. The NCCI stock must be considered as a prime stock, and classified in its importance behind bank shares. Given the big potential of the insurance industry, I expect the firm to dominate the car insurance market for the next five years. This will be reflected in its share price which I can safely forecast a target price of SR700 in the next 12 months. The IPO price is a bargain for such a stellar company”, Addas added.
