Top 30 Saudi Arabian construction stocks
CW reveals Saudi Arabia's Top 30 construction stocks by market cap
Saudi Arabia’s construction sector is forecast to undergo something of a building boom, fuelled partly by a new wave of petchem projects, as well as a ramping up of government infrastructure spending. By Michael Fahy
Within the past few weeks alone, announcements have been made approving $16.5bn of transport spending that includes a new metro system for Makkah, a $3.2bn scheme to build hotels and apartments in the same city by Jabal Omar Developments, $370m to develop tourist facilities in Al Oqair, $186m to upgrade electricity supplies around Jeddah and Riyadh, $166.8m on six university projects and $164m on port upgrades.
A new report from Saudi Arabia’s National Commercial Bank shows that the value of construction contracts awarded in H1 2012 was up 50% on last year to $33.8bn.
It pointed out that government-backed, infrastructure-related projects, such as schools, hospitals, urban development and roads, contributed around $7.1bn to this figure as the government sought to invest more in infrastructure to boost the broader economy.
Petchem firms remain the key driver of construction spend, though – responsible for 53% ($17.9bn) of all contract awards during the six months, due to major projects such as the extension of the Rabigh II refinery on the Red Sea coast.
Small wonder, then, that construction-related stocks on Saudi Arabia’s Tadawul are enjoying something of a fillip. The index of cement company shares has increased by more than 12% since the start of the year, while property stocks have jumped by more than 30%.
Surprisingly, though, issues at some of the country’s larger contractors has meant the value of firms on the building and construction index have dipped by almost 9%. Over the next few pages, CW takes a look at the 30 biggest construction-related stocks on the market, and how they are faring in terms of their overall worth, profitability and how their shares have performed over the past 12 months. Company prices were taken in the week commencing 12 August.
1. Kingdom Holding Company
Market cap: $11.76bn
There was some debate as to whether the hugely diverse business owned by Prince Alwaleed should be included in this list at all. After all, there will not be many other competitors with significant shareholdings in a diverse range of businesses such as Apple, Citi, News Corp and Time Warner.
However, the company remains as a major investor in property – not least the 1km-high Kingdom Tower planned for Jeddah, which is set to be the world’s tallest building. The $15bn project was announced last year through a venture called Jeddah Economic City, in which Kingdom Holding is a partner.
It has already appointed privately-owned contractor Saudi Binladin Group to build the super-tall tower, which is set to include malls, hotels and apartments.
Kingdom Holding also owns the sprawling Kingdom Centre in Riyadh, which contains the 94,320m2 Al-Mamlaka shopping mall, and it is planning sprawling schemes in Jeddah and Riyadh worth $5.3bn and $14.66bn respectively.
The schemes will see almost 19million square metres of land developed in projects that will house thousands of people, as well as containing resorts, hotels, education campuses and commercial properties.
2. Jabal Omar Development Company
Market cap: $4.71bn
A quoted company set up with a very specific purpose – to redevelop Makkah into a more modern city, containing top-notch hotels, apartments and other facilities for pilgrims to the holy city.
The company is developing over 2.2million square metres of land close to the Grand Mosque. Its general executive director told Bloomberg earlier this month that it is planning to create ten new hotels within the next year. In total, some 38 new hotels towers and a giant shopping mall are planned for the site, which is being developed over five phases.
The company’s founders remain in charge of more than 20% of its shares, and a further 10% is owned by another firm on the list, Makkah Construction & Development Company.
With the country’s cabinet recently approving $16.5bn in transport spending, including funds for a metro project across the city containing 88 stations and 182km of track, the sprawling development it is proposing should have the necessary infrastructure in place to move all of the extra expected pilgrims around the city.
3. Southern Province Cement Company
Market cap: $3.77bn
The first of many cement companies to make the list is enjoying something of a purple patch. Southern Province Cement, which was set up in 1978, recently posted a 16.3% increase in profits for the first half of 2012 to $131.5m. The business currently operates three plants, namely in Jazan, Bisha and at Tahamah in the Makkah region.
The original plant opened at Jazan in 1981, and produces around 7,550t of clinker per day, while its second plant at Bisha, producing around 1.2million tons a year, opened in 1997.
More recently, the company opened its Tahamah plant at Al-Aradiah Al-Janoubiah in Makkah region, and it has completed the installation of a second line at the plant, which it attributed for part of the growth in profits during the first half of 2012.
However, weaker second-quarter profits were blamed on a decree by the Ministry of Commerce and Industry to reduce selling prices.
4. Saudi Cement Company
Market cap: $3.71bn
The oldest of the many cement companies listed on the Tadawul, and also the biggest in terms of sales. The company achieved revenues of $457.6bn in 2011, and is one of five companies listed which sold more than $266m worth of cement last year.
Saudi Cement Company was started in 1955, and operates two large plants within the Eastern Province, namely Hofuf and Ain Dar plant. The plants are 35km apart and 120km to 130km away from King Abdul Aziz Port in Dammam.
The Hofuf plant is the oldest, and was built in 1961, but has been expanded several times, and now has six kilns producing 7,825t a day. The Ain Dar plant has four kilns generating 6,000t a day. However, the combined total production facility of both sites is expected to rise to 34,325t a day after new extensions to the Hofuf plant are completed.
The company, which is chaired by Omar Sulamain Al-Rahji, also owns significant minority stakes in United Cement, Cement Products Manufacturing and Group World Cement. It has a headquarters building and an export facility in Dammam.
5. Dar Al Arkan Development
Market cap: $2.65bn
This is a development company that has been through something of a rollercoaster year. The company was downgraded by credit rating agencies and faced criticism from a group of shareholders, who set up a website titled ‘Dar Al Arkan in Crisis’, which alleged malpractice at the firm.
However, the company went on the offensive, detailing repayment plans which involved selling off land holdings in order to build cash reserves. It sold land on which it is building its Shams Al Riyadh project in the Kingdom’s capital to Saudi Basic Industries Company (SABIC) in March for $198m, and eventually confirmed on 16 July that it had paid all of the amounts outstanding on a $1bn sukkuk, which it said “contributed in fulfilling the residential demand in Saudi Arabia”.
It added that the “timely repayment of its debt obligations is a testimony to its strong financial position, as well as the effectiveness and efficiency of its cash-flow management strategies”.
The Riyadh-based company was set up in 1994 by six prominent business families from the city, and has since grown a reputation for master-planning major residential schemes. It has built more than 16,000 residential units across the Kingdom, and last month revealed plans to step up activities and build 50,000 units within the next four years.
6. Yamama Cement
Market cap: $2.5bn
This cement firm was established by Prince Mohammed Bin Saud Al-Kabeer in 1961. The company, based in Riyadh, has seen its sales grow from $310m in 2009 to $384.5m last year, when it sold more than 6m tons of cement. This meant its plant was operating at full capacity, and all of the cement sold was for use in the local market.
The company has also bought 20% of a new cement company in Yemen, though, which has been backed by $100m of capital. The Yemen Saudi Cement Company owns the new Batais Cement Plant in the Abyn Governorate near Aden city, which has a designed capacity of 1.4m tons a year.
It was expected to begin production at the end of 2011, but the political situation in the country meant this was delayed. It has also carried out a feasibility study into introducing a new production line with a capacity of 10,000t of clinker a day. This will replace five old lines with a capacity of 5,600t a day.
7. Yanbu Cement
Market cap: $2.21bn
One of the fastest-growing companies on the list, and a top performer on several measures, Yanbu Cement’s earnings a share is one of the highest of the firms surveyed. Its most recent half-year profit of $96m represented an increase of 43% on 2011. Little wonder, then, that the company’s share price has climbed by more than a third during the course of the year.
Yanbu Cement started production in 1979, and has continued to add capacity at regular intervals since.
A project to add a fifth production line at the plant, which virtually doubles capacity to 7m metric tonnes a year, was initially commissioned in 2008 and should have taken three years to complete, but a series of fires and resource shortages meant the completion date was knocked over until this year.
8. Emaar - The Economic City
Market cap: $2.18bn
This is a special-purpose vehicle set up in 2006 to deliver King Abdullah Economic City (KAEC), the 186million square metre city being built off the Red Sea to the north of Jeddah.
The city as a whole is being built around six components: a 14km2 seaport, a 62.5km2 industrial park, a 13.5km2 central business district, a 5km2 educational district, a 48km2 residential area and 27km2 of resorts containing seaside locations and luxury villas.
The development is being managed by Emaar, the UAE-based developer behind the Burj Khalifa and the Dubai Mall.
Emaar Middle East Company has a 5.8% interest in the company, but the biggest single shareholder is Dayim Modern Real Estate Management, which holds around 20% of the shares. The company recently posted an 87% increase in net income for the first six months of 2012, up to $36.8m.
9. Qassim Cement Company
Market cap: $1.86bn
This is a cement producer based in Buraydah City, employing around 650 people. The company has around $17bn worth of assets under management and grew profits in H1 2012 by 5% to $82m.
Its three biggest shareholders are funds: the Public Investment Fund owns more than 23%, the General Organisation for Social Insurance owns 19.9% and the Public Pension Agency owns 5.4%. The company is managed by Eng. Omer Bin Abdullah Al-Omer.
10. Makkah Construction & Development Company
Market cap: $1.76bn
This is a company set up to develop, manage and rent property around the holy mosque which, like Jabal Omar, is embarking on a major expansion as investment pours into the city.
It recently announced plans to expand the Hilton Makkah at a cost of $12m, and is building a new commercial centre, a shopping mall and a 20,000-capacity prayer hall. The business is chaired by Abdulrahman Abdulkader Mohammed Fakih.
Contractor Saudi Binladin Group is the company’s second-biggest shareholder, with a stake of over 10%. Its biggest shareholder is Mohammed S.H. Serafi, who owns 12.7% of this company and 7.3% of Taiba Holding Company (qv).
11. Knowledge Economic City
Knowledge Economic City (KEC) is a developer responsible for huge project in the Kingdom’s second holy city, Madinah.
The city is being built around King Abdulaziz Road. The first phase contains a large gated community of villas, a knowledge cluster of schools, colleges and higher education institutions, a civic centre, a souks complex, a hospitality and commerce tower, a visitor’s complex, a residential apartments centre and an exhibition centre known as Diwan Al Marifah. The latter was the first building to be completed on-site.
Around a quarter of the shares in KEC are owned by a foundation set up by King Abdullah to provide charitable housing, and a further 25% have been retained by the city’s various developers.
In March, the company appointed H.E. Iyad Amin Abdullah Madani as chairman and Dr. Abdul Raouf Mohammad Manna as vice-chair. Madani is vice-resident of King Abdullah’s Foundation for Housing Development, and was previously Minister of Media and Culture and Minister of Hajj, while Dr. Manna is MD of the Savola Group and a board director of several other firms. KEC’s shares have been the fastest-rising stock on Tadawul over the past 12 months, climbing by 167%.
12. Eastern Province Cement
Market cap: $1.22bn
This is the second of the major Eastern Province-based cement companies likely to benefit from the growth in investment in the Kingdom’s petchem sector over the next few months. The company is based in Dammam within its own purpose-built headquarters on King Fahd Road, while its plant lies around 165km to the north of the city.
The business is chaired by H.R.H. Prince Turki Ibn Mohmad Ibn Fahad Ibn Abdul Aziz and is run by Dr Zamil Al Mokrin. It is planning a new production line which will generate 1.5million tons of concrete a year, but as yet no timeframe is in place. Around 30% of the company’s shares are held by funds, with the rest in public hands.
13. Arabian Cement
Market cap: $1.13bn
Arabian Cement was set up in 1955, with its headquarters in Jeddah and its main plant at Rabigh on the Red Sea coast. The company owns 85% of Arabian Cement in Bahrain, and it also has a stake in a plant in Jordan.
It is also looking to add a new production line to its core plant in Bahrain, which will increase capacity by 7,000t a day. The new line is expected to open in 2014. Sales at Arabian Cement have more than doubled since 2009, and stood at $148.7m at the end of 2011.
In June, work at the company’s Qatraneh Cement Company subsidiary in Jordan stopped as a result of an illegal strike whereby workers closed the approach road to the site in a pay dispute. The dispute was settled after the country’s Ministry of Labour stepped in.
14. Najran Cement
Market cap: $986m
Narjan Cement is a new arrival on the Tadawul, which only floated in April this year. The company was set up in 2005 with $300m of capital. By the time it floated, its market cap had increased to $453m.
The proceeds of the float are being used to finance a third production line at its headquarters in the southern region. It will be capable of producing almost two million tons of cement a year, and was anticipated to be operational by the second quarter of this year.
15. Taiba Holding
Market cap: $879m
Taiba is a holding company for a group of businesses involved in building contracting, property development, sales and management. Subsidiaries include Taiba Contracting & Maintenace (TACOMA), TAWD for Properties Management & Marketing, Al Aqeeq Real Estate, Arabian Resort Areas Company (ARAC) and holiday villa sales company Quality Horizons.
The company is generating healthy profits: net profit for the six months to June 30 was $83.2m, and its earnings per share quadrupled to 2.08 riyals, up from 0.47 riyals in H1 2011. Major shareholders include Masek Holding Company (16.6%) and the aforementioned Mohammed S.H. Seraifi (7.2%).
15. Saudi Ceramics
Market cap: $879m
Saudi Ceramics is a company which, as the name suggests, principally makes tiles for sale both to trade and retail customers. However, it also makes a range of other products, including water heaters, taps, water basins, sanitaryware and ceramic road markers. The firm has 11 factories spread around Riyadh containing around 92,903m2 of space and employing 3,300 people. The business is run by CEO Abdulkarim Alnafie.
17. Saudi Real Estate Co.
Market cap: $879m
Saudi Real Estate is a property investor which owns around 700km2 of investment properties in Riyadh. The company is one of the longest-established developers in the Kingdom, having built the first mall in the country, Al Akaria, and the first gated compound in the country in the 1970s. It employs more than 400 people and is chaired by Eng. Ali Othman Al Zaid.
The company, majority-owned by the Public Investment Fund, has seen its share price increase by more than 20% in the past 12 months, despite the fact that its last full-year profits dropped by 18% in 2011 to $40m.
18. Astra Industrial
Market cap: $762m
Astra is an industrial group with several interests, including a pharmaceuticals arm and a polymer compounding business. It has several businesses involved in the construction sector, though, including a building systems company providing pre-engineered steel buildings from three factories in Riyadh, and one in Jubail which exports to around 36 countries.
The group also has a majority stake in Al Anma’a Steel, an Iraq-based company producing steel billets and rebar for both the steel and construction materials sectors. It is chaired by Sabih Taher Al Masri.
19. Tabuk Cement
Market cap: $616m
This is a cement supplier based in Tabuk, which last year signed a $58.3m deal with contractors to build it a new mill that will increase capacity to 4,000t a day. The project is set for completion in the early part of next year. In the first half of 2012, it grew net profits by 26% to $28.2m.
20. Al Jouf Cement
Al Jouf Cement serves the north-western part of the Kingdom, close to its borders with Jordan and Iraq. The company floated on Tadawul two years ago, raising $174m. Its plant currently produces around 5,000t of cement a day. However, the firm is in the midst of an expansion which will see a new line capable of producing 1.65m tons of cement, expected to open in 2014.
21 Arriyadh Development Company
Market cap: $587m
Arriyadh is a property developer that has built offices, car parks, commercial and residential buildings in downtown Riyadh. The firm, which has seen its share price climb by more than 50% over the past 12 months, has a number of corporate shareholders with significant stakes, including Development & Investment Services (10.7%), Emar Arabian Shield for Investment (9.6%) and Adyaar Holding Company (5.3%).
22. Saudi Arabian Amiantat
Market cap: $483m
This is a holding company with a diverse range of subsidiaries involved in producing building materials such as fibreglass, concrete, ductile pipes and plastic water pipes. The firm also makes rubber foam insulation pipes used in air-con and ducting systems.
The group is based in Dammam, and has around 30 pipe-making factories under its control, as well as six technology companies and four materials firms. It employs around 3,400 people globally, of whom 1,500 are based in the Kingdom. In the six months to 30 June, sales climbed by 10% to $478.6m, but profits fell by 10% to $17.5m.
22. Hail Cement
Market cap: $483m
Hail Cement floated on the stockmarket in September last year. It has a number of corporate shareholders, including the aforementioned Yamama Cement (6), which owns 6.1% of the business. Saudi Real Estate Company (18) and Al Mal Investment Company have similarly-sized stakes.
In January this year it announced plans for a $31.5m JV with contractors Teberak Trading and Mo B Company for an 80,000m2 housing campus for employees at its plant in Hail. The housing scheme includes 17 villas, 120 family apartments and 108 single rooms. It will be built in four phases, with the first phase due for completion by the end of the year.
24. Zamil Industrial Investment
Market cap: 477m
Zamil Industrial Investment is a holding company for a group with scores of construction-related businesses involved in everything from structural steel and cooling systems to coatings, glass, bricks and even a ladder maker.
The business is chaired by Dr. Abdulrahman Al Zamil, whose holding company retains 19.9% of its shares. The firm also has business units in the UAE, Egypt, Austria, India and Vietnam and Italy, and employs 12,000 people in 60 countries.
Around 30% of its revenues are derived from exports. Net profits for the six months to 30 June increased by 4.4% to $139.8m.
25. Abdullah AM Al Khodari
Market cap: $448m
The share price of this building contractor suffered recently as the company posted a series of below-par results. The company, which is chaired by Ali Al-Khodari and run by CEO Fawwaz Al-Khodari, saw its net profits fall by 27% in 2011 to $58.1m.
It blamed higher costs for the decline: manpower costs increased as it was forced to take on local labour due to visa approvals being blocked, while some projects faced cost overruns due to delays in assigning consultants.
Things have started to improve more recently, though. Last month, the company announced a 5% increase in net profits to $23m, and in April it announced that it had landed a $22m project to build an underpass intersection in Taif. The company floated on Tadawul two years ago, but an investment holding company owned by the family retains 60% of the shares.
26. Mohammed Al-Mojil Group
Market cap: $427m
The Mohammed Al-Mojil Group (MMG) has endured a tough few months. Still 50%-owned by its eponymous founder, it declared a $275m loss for Q4 2011.
A chief executive hired to lead a turnaround of the business last November, Ebrahim Zadeh, resigned after just six months in the post. The firm then appointed PwC as consultant to help with its restructuring.
It has since agreed a $120m refinancing with a club of seven banks, which has helped restore cash flow. Its shares were suspended temporarily after it failed to submit half-year results on time.
Earlier this month, the company appointed three new non-executives to strengthen its expertise, namely Ghunaim Al-Ghunaim, Christopher Nicholson and Steven Parkinson. The latter is described as “a seasoned expert in business restructuring”.
27. Red Sea Housing
Market cap: $355m
A developer with big plans for expansion, Red Sea Housing specialises in building large-scale housing from prefabricated units used by oil and gas companies to house workers on gated compounds.
Last month, it announced plans to spend over $500m on an eight-year growth strategy. This will include geographical expansion to cover markets in North and South America and Australasia, as well as developing an affordable housing model that can be used in any part of the world. The company also said it was planning to diversify into the building materials market.
Red Sea Housing said it would recruit experienced managers to deliver this growth, and would form subsidiary firms run by specialists. The company also has a 98% interest in a company based in Algeria and a 49% share of a business based in Qatar. It also has licenses to operate branches in Afghanistan and Equatorial Guinea.
28. United Wire
Market cap: $330m
United Wire began life in 1990 and, through a merger in 2006, became part of a network of eight factories producing metal wires throughout Saudi Arabia. Last year, the company grew sales by 50% to $228m, although profits dipped by 6% to $28.8m.
29. Saudi Cable
Saudi Cable is a Jeddah-based company which provides cabling for the engineering, power and telecoms sectors. The 37-year-old business has ten manufacturing sites employing more than 1,300 staff, including wholly-owned subsidiaries in Turkey and Bahrain.
The company suffered from something of an earnings slump from the middle of 2010, but has now posted three quarters of growth, and its shares are currently trading around 30% higher than this time last year.
30. Saudi Steel Pipes
Market cap: $317m
Saudi Steel Pipes is a supplier of large steel pipes to the construction and oil and gas sectors, and which has been in business for over 30 years. The Dammam-based business currently operates from a pair of factories which produce around 240,000t of steel pipes a year.
It also has plans in place to build a third factory to specialise in larger-diameter pipes for the oil and gas sector. Some 40% of its shares are held by privately-owned M&E contractor Al Rabiah and the Al Nasser Group, while a further 16% stake is owned by Hue Steel Company.