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Al Rajhi Capital raises SISCO TP to SAR 23/shr

Al Rajhi Capital raises SISCO TP to SAR 23/shr
SISCO gained higher net profit by 57.4% YoY in Q1-20
SISCO HOLDING
2190
-1.47% 24.78 -0.37

Riyadh - Mubasher: Al Rajhi Capital raised its target price (TP) of the Saudi Industrial Services Company (SISCO) to SAR 23 per share from SAR 21 per share and maintained an ‘Overweight’ rating.

In the first quarter (Q1) of 2019, SISCO gained higher net profit by 57.4% year-on-year (YoY) at SAR 26.6 million, beating Al Rajhi’s estimates of a SAR 4 million loss.

The port segment witnessed a marginal negative contraction of 0.6% YoY, falling to SAR 124 million in Q1-20 from SAR 125 million. The logistics segment revenue slid by 12% annually, while water desalination and distribution segment revenue increased by 12% YoY, standing at SAR 24 million. 

The transhipment volumes increased compared to getaway in March, April, and May, hence, Al Rajhi predicts this trend to continue this year. Accordingly, the forecast for transhipment was modified to the total volume handled to 55% in 2020 from 40% earlier. 

Moreover, the research firm expects that the disruptions due to the coronavirus (COVID 19) are mostly priced in and that the operation of NTP on 1 April will increase SISCO’s market share and will improve the port segment's overall revenue and gross margins.

As for near term outlook and revised assumptions, Al Rajhi has cut its initial forecast of total container volume in 2020 from 2.5 million twenty-foot equivalent unit (TEUs) to 1.95 million TEU's as the main season of Ramadan and Hajj were impacted in 2020. 

Increase in value-added tax (VAT) is expected to lower the consumer spending which will impact the overall throughput volumes in the kingdom in the near term.

In the logistics segment, the bonded warehouse is expected to be 95-100% utilised. Water segment performed well in Q1-20 but industrial waste-water treatment is likely to remain under pressure in Q2-20.

SISCO enjoys a strong cash position to endure the current crisis even though there are headwinds in the near term due to a challenging economic outlook, Al Rajhi revealed, expecting the demand for logistics and warehouses to rise significantly, backed by the increasing focus on e-commerce.