‘Shareek’ currently includes 24 major companies, to boost profits: NCB Cap

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The ‘Shareek’ program currently includes 24 major companies from various sectors such as banking, oil, telecommunications and petrochemicals, NCB Capital said in a recent report.

More companies are expected to join the program during the coming period, the report added.

Participating companies are committed to invest certain amounts in the next 10 years, which will differ from one sector to another. The requirements and investment details will be discussed in each case separately between the program and the relevant entity.

The agreements are projected to be announced as of next June, and the largest contributions will be made by major firms whose projects require huge investments, such as Saudi Aramco and Saudi Basic Industries Corp. (SABIC).

The companies joining the program will benefit from government support, which might include grants, loans, subsidies, and more appropriate laws and regulations.

In the next decade, Shareek program will contribute to the companies’ profit growth as it will reflect a major transformation promising for local companies.

The companies with projects worth huge investments will be among the biggest beneficiaries of this program, mainly firms operating in the field of oil and gas, petrochemicals, and heavy industries. This will help them to seize attractive investment opportunities.

‘Shareek’ will also support digital transformation and encourage investments in the technology sector.

NCB Capital pointed out that shifting corporate growth targets might require higher financing, which will result in a reconsideration of dividend distribution policies.

Local firms are expected to reduce dividends to finance potential investments. In the short-term, investors in such local firms might be negatively affected by the potential reduction in dividends.

Meanwhile, in the future, they will be compensated by capital gains when stock prices start to reverse the potential growth through higher payouts.

Companies will increase their capital expenditure plans to achieve the goals set in the program, as the financial sector, especially banks, will be a key enabler for financing these plans. Thus, banks will do their best to strengthen their financial positions to increase loans.

According to the data compiled by Argaam, Crown Prince Mohammed Bin Salman launched, last week, the ‘Shareek’ program to strengthen the partnership with the private sector, with the aim of supporting local firms and enabling them to reach local investments worth SAR 5 trillion by the end of 2030.