day initial public offering (IPO) of Mohammad Al-Mojil Group (MMG), Saudi Arabia's premier industrial construction and construction services company, opens on Saturday (today). The share price has been set at SR70, HSBC Saudi Arabia, the financial advisor and lead manager for the IPO, said earlier. Osama As'ad, director of Investment Banking at HSBC Saudi Arabia, said “international best practice standards were employed to arrive at the share price for this offering. The financial performance of the company, analysts' growth forecasts for the building and construction sector, and the size and scale of current and future projects in this sector were all taken into consideration when arriving at the final share price. Considering all these factors, the offering price has proved extremely attractive to institutional investors. “The offering price of SR70 represents a price-to-earnings (P/E) ratio of 11 when compared to MMG's 2007 earnings per share (EPS) of SR6.35. This is lower than the P/E ratio of the building & construction sector on the Saudi Stock Exchange (Tadawul), which has an average P/E ratio of 25, while the Tadawul has an average P/E ratio of 20. Benchmarking against the P/E ratios of international construction and engineering companies will lead to the same conclusions,” he added. Recent Saudi IPOs were priced with lower premiums, yet with P/E ratios as high as 15. It is therefore prudent to evaluate any offering's premium in light of this larger context, As'ad said. In 2007, the company's net income soared to almost SR 550 million, and revenues reached approximately SR 2 billion for the same period. Assets stood at more than SR 2.2 billion at the end of last year, while outstanding bank debt is equal to less than nine per cent of the value of these assets, a clear indicator of the company's financial strength. MMG had also won new contracts worth more than SR3.2 billion in 2007. He said “MMG has a 50-year track record of success, which was taken into consideration by HSBC and institutional investors involved in the book-building process in arriving at the pricing for this landmark offering. The company has demonstrated superior financial performance, averaging 95 percent annual net profit growth, derived from its core business.” He added that the “company has executed a range of major contracts for both Saudi Arabian and international companies involved in oil & gas, petrochemicals and engineering - earning its reputation as a leading provider of industrial construction and construction services. Since its founding, MMG has carried out major projects across the Kingdom without any loss of man hours due to injury or technical errors. In recognition of the company's superior performance and dedication, MMG has won a range of awards from both Saudi Arabian and international partners.” “As the first industrial construction firm serving the onshore and offshore oil and gas and petrochemical sectors to hold an initial public offering in the Kingdom, MMG represents a signal investment opportunity on Tadawul,” As'ad noted. The company will be listed in the building & construction sector on Tadawul and would represent initially around 20 percent of the market capitalization of this sector, leading to an expected leadership role for the company in the sector, he further said. __
