Riyad Capital reaffirms ‘buy’ rating on Saudi Kayan

Brokerage firm Riyad Capital reaffirmed its "buy" rating on Saudi Kayan Petrochemical Co., setting the target price at SAR 18, it said in a new report on Monday

“Saudi Kayan is progressing well and has good prospects of being as profitable as Yanbu National Petrochemical Co (Yansab) and thus command similar status going forward,” it added.

A key factor in Yansab’s (sister company of Saudi Kayan) ability to achieve high payout ratios and impressive margins (one of the highest in the industry) is the shared service organization (SSO) with SABIC.

"Since Saudi Kayan also has an SSO with SABIC, it stands to gain similarly to Yansab. It needs adequate time that is commensurate with its size in order for it to reap the full benefit of the SSO. We believe that in the long-run Saudi Kayan’s margins and payout ratio will reach similar levels as Yansab as well as its valuations," the report noted.

Riyad Capital advised “investors to take advantage of price dips to accumulate this stock for the long-term”.