GulfBase GCC Cap Indices
IndexLevelChg%
Large Cap4,019 -0.10
Med Cap3,848 -0.05
Small Cap4,895 -0.24
Micro Cap8,498 -0.25

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Ticker Price Volume
GFH 0.5 1,361,733
BKSB 0.14 70,617
DANA 0.62 13,288,208
DAMAC 3.85 372,716
DSI 0.39 34,049,322
ALINMA 16.47 22,194,374
SABIC 98.09 2,208,800

Yamamah Saudi Cement

Source: NBK Capital

Fair Value: SAR 71.733
Recommendation: Accumulate – Risk Level: 3**
Reason for Report: Initiation of Coverage


The outlook for the Saudi cement sector is mixed. Demand should be supported by the vast government spending program announced in several stages in FY2011. However, it could be dampened in the short term by issues of residential housing affordability and construction capacity constraints, and remains vulnerable to a sharp drop in the oil price. Supply, meanwhile, remains plentiful, and further new entrants are expected within the next three quarter. Although pricing has held up remarkably throughout FY2011, this has been partly on the back of massive clinker inventory build-up, a situation that may prove unsustainable

Our Fair Value shows an upside of 17% for Yamama Cement. Comparative valuation show the share trading at a discount to both the Saudi and GCC (ex-UAE) sector, despite superior profitability and prospects. We believe this is unjustified, even remaining mindful of the sector’s challenges. We initiate coverage on Yamama Cement with an Accumulate recommendation.

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