Riyadh – Mubasher: AlJazira Capital said it will remain Neutral on Ma’aden with higher price target (PT) of SAR 37.0/share indicating a potential upside of 5.7%.
Ma’aden expected to post SAR 593.2 million in net income (0.51 EPS) for 2016, recording a decline of -0.2% y-o-y due to the impact of higher energy cost and low level in product price, said AlJazira Capital.
However, due to outlook of higher control on OPEX and production costs AlJazira Capital maintains “Neutral” on the stock with higher PT.
The company is trading at a forward PE and PB of 24.8x and 1.07x respectively based on AlJazira Capital's 2017 earnings forecast.
Ma’aden is considered to be one of the highly leveraged companies in the Saudi market, with long-term obligation of SAR53.5 billion.Almost 25% shares of the loan are expected to be settled in 2023E.
AlJazira Capital expects Ma’aden to remain highly leveraged in the near to medium term, and won’t have capacity to pay dividend in 2016/17 year.
However, the margins are expected to positively expand after the commencement of commercial production of Wa’ad Al Shamal, which may lower the impact of finance cost and depreciation on the company’s net income.
