Riyadh – Mubasher: AlJazira Capital said that the National Industrialization Company may see an improvement in profits in 2018 after selling the assets due to lower Opex and the cancellation of the tax on income.
The investment firm maintained its "Overweight" recommendation on Tasnee, with a probability for the target price to increase to SAR 26.5 per share based on deal closing, setting it at SAR 15.20.
On Tuesday, Tasnee's subsidiary titanium dioxide business Cristal announced signing a SAR 6.27 billion agreement to sell the company's assets to chemical company Tronox Ltd (TROX.N).
"We believe that the asset sales of Cristal would directly enhance the company’s performance and financial ratios due to weak margins and performance of TiO2 segment, which has been putting the profitability under pressure due to continued operating and net losses," AlJazira Capital said.
The company is expected to see margin expansion and lower Opex and other expenses for the total business, the report said, adding that despite the expected negative short-term impacts on Tasnee’s other income from the new deal, the combined business between Cristal and Tronox supports the long-term improvement in the TiO2 industry.
Going forward, Tasnee will be able to concentrate more on its petrochemical sector through valuable strategic expansions in the core business, while considerably deleveraging its balance sheet, according to the report.
