The 3 most attractively priced bank stocks in Saudi Arabia
After looking at the Saudi Arabian index, and the banking sector in particular, in Part 1 and 2 of this series. We’ll now look at the 3 most attractively priced bank stocks in Saudi Arabia (KSA) (GULF).
These are Riyadh Bank (RIBL) (1010.SR), The Saudi Investment Bank (SIBC) (1030.SR), and Bank Al-Jazira (BJAZ). So far this year (as of September 27), these stocks have delivered a total return of 7.52%, 10.83%, and 31.63%, respectively to investors. One year total returns for these stocks equaled 21.75%, 65.26%, and 79.34%, as of September 27. These banks look strong from a capital adequacy point of view as well. Tier 1 capital for all three is robust with their ratios standing at 15.9%, 16.95%, and 16.19%, respectively.
The investment case
What makes the investment case strong for these stocks is their price multiple. Against an average price-to-book value for the sector standing at 1.54, these stocks are trading at P/B ratios of 0.96, 0.87 and 0.87, respectively. Price multiple (price-to-book ratios) for each of these stocks has been declining, while book value per share has been on a rising trend over the past 5 years (see chart above).
May consider to HOLD
Now, while valuations already seem attractive at present, investors may want to consider holding for a while as year-end price expectations for these stocks stand at levels lower than the present. Moreover, analyst ratings from a buying perspective for RIBL stood at 2.58/5 with 75% HOLD recommendations, and 3/5 for both SIBC and BJAZ with 100% HOLD recommendations.
10 of 12 analysts that reviewed Riyadh Bank see its stock price dipping by 5% over the next 12 months. Consequently, current P/E for the stock stands at 12.09 against an estimated forward P/E of 10.82. Similarly, all 3 analysts who reviewed Saudi Investment Bank as per Bloomberg data, expect its price to edge lower by about 10% over the next 12 months. However, estimated year-end P/E for SIBC equates to the current P/E of 9.36 for this stock. With respect to Bank Al-Jazira, forward valuations indicate a dip in P/E from the current 9.69 to an estimated 9.42 by year-end, with an 8.8% dip in price expected over the next 12 months.
