Saudi Basic Industries Corp. (SABIC) rose the most this month, leading gains in Saudi Arabia’s benchmark index, after third-quarter profit at the world’s biggest petrochemicals maker beat estimates.
The shares advanced 1.4 percent, the most since Sept. 30, to 90 riyals at the close in Riyadh. That pushed Saudi Arabia’s Tadawul All Share Index up 0.9 percent to 6,811.19, the highest in more than a week. Sabic’s third-quarter net income was 6.31 billion riyals ($1.68 billion), down 23 percent from a year earlier. Still, that beat the average 5.84 billion-riyal estimate of six analysts, according to data compiled by Bloomberg. Net income rose 19 percent when compared with a second-quarter profit of 5.3 billion riyals.
Sabic announced “a strong set of results” quarter on quarter and “valuations are attractive,” Digvijay Singh, equities analyst at VTB Capital Plc said in an e-mailed note today, reiterating his buy rating on the stock.
Sabic shares trade at a price-to-earnings ratio of 11.2 times, compared with 14.3 times for the Tadawul All Share Index (SASEIDX) and 14.6 for Dow Chemical Co. (DOW), the biggest U.S. chemical company. The company, which makes fertilizers, plastics and steel, has also added output capacity through units and joint ventures.
Sabic’s $3.4 billion venture with ExxonMobil Corp. (XOM) plans to produce 400,000 tons of rubber products a year from al-Jubail and export them to Asia and the Middle East from the second half of 2015. Sabic also has an ethylene and polycarbonate venture with China Petroleum (386) and Chemical Corp.
“We believe that acquisitions will enhance the company’s current return on investment capital, by increasing capacity utilization of its existing overseas capacities through the cycle,” Singh said in the note.
Fifteen analysts including Singh recommend investors buy Sabic shares, while one has a hold rating, according to data compiled by Bloomberg.
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