Riyadh – Mubasher: Mubasher Financial Services (MFS) has given a ‘buy’ recommendation to Saudi-listed Al Babtain Power and Telecommunication’s stock, citing strong performance and healthy cash flows.

MFS opened a position on Al Babtain’s stock with a price target (PT) for SAR 35.59 per share with an expected total return (ETR) of +33%.

“Al Babtain looks attractive on both the fundamental and trading fronts, with average ROAE of 18.5% in the past three years and a current P/E of 7.4x [versus] a regional peers’ median of 17.6x. Interestingly, only 6% of this company’s shares allotted for foreign ownership is taken up, leaving an ample room for new foreign investors,” MFS said in a note.

Al Babtain has also generated a four-year compound annual growth rate (CAGR) of 19% in its earnings, which reached SAR 158.6 million in 2016.

Commenting on the Al Babtain’s position, the research firm noted that the Saudi company’s board had recently approved the establishment of a subsidiary operating in the supply, installation, and maintenance of renewable energy projects for residential, commercial, and industrial complexes.

The new unit would enable the Saudi firm to diversify its revenues sources and “cope with the new trend in power generation.”

Despite tightening its position in several regional markets, Al Babtain may face some risks such as oil price volatility, which has a significant effect on GCC governments’ spending, regional geopolitical instability, and volatility of commodity prices, the research firm highlighted.

In 2017, Al Babtain signed an SAR 121.6 million deal with Egypt’s Elsewedy Electrici to supply galvanised transmission towers in Upper Egypt. The contract will allow the Saudi energy firm benefit from infrastructure development in Egypt.