Riyad Capital has maintained its “buy” rating on Saudi International Petrochemical Co. (Sipchem), as fundamentals have improved and the stock is currently offering an upside of 18 percent.
However, the brokerage slightly lowered Sipchem’s target price to SAR 18.50 from SAR 19.
“The investment case factors a combination of attractive valuations and an improved operational outlook on Sipchem’s business lines amid an expansion of methanol capacity by 2019,” the investment bank said.
The petrochemical producer is likely to swing to a net profit of SAR 85 million in Q3 2017 against a net loss of SAR 59 million in the same period last year.
Revenue is expected to jump by 58 percent year-on-year (YoY) to SAR 1.08 billion in the same period.
Dividends are forecast to reach SAR 0.50 per share this year ahead of improving to SAR 0.75 per share and SAR 1 per share in 2018 and 2019, respectively.
Riyad Capital added that it expects a possible merger with Sahara Petrochemicals Co. to be positive if it materializes.
“We see a continued possibility of a merger between Sipchem and Sahara, which is expected to bring in large operational synergy,” the investment bank added.
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