Al Rajhi Capital initiates SISCO coverage with “Overweight” rating; sets TP at SAR 27/share

Al Rajhi Capital initiated coverage for Saudi Industrial Services Co (SISCO) with an “Overweight” recommendation and a target price of SAR 27 per share.

The brokerage firm said in a research note that SISCO aligns well with the government’s initiative to make Saudi Arabia a leading regional logistics hub and increase the traffic through Red Sea as a part of Vision 2030.

The company recently earned a concession contract from Saudi Ports Authority (Mawani) to develop and operate Jeddah Islamic Port from 2020 for a period of 30 years.

“As per the contract, the company will invest SAR 1 billion over the next 3 years to double the handling capacity from 2.5 million TEU to 5.2 million TEU by 2024, thus making it the largest port service provider on the Red Sea,” the note said.

Moreover the reinstatement of inspection fees in 2019 and removal of expat levy fees for industrial companies from 2020 further provide a significant push to the company’s net profit margin in the near term.

“The dividend pay-out ratio in the range of 40-50% makes it further appealing for the long-term investors,” it further noted.

Al Rajhi Capital forecasts SISCO to post a net profit of SAR 99.1 million in 2019, and SAR 138.9 million and SAR 179.7 million in 2020 and 2021 respectively.