Samba rated a strong buy

Kuwait’s Global Investment House has upgraded shares in Samba of Saudi Arabia to a strong buy on the basis of the low market valuation of the stock.

“… the stock has slid by 21 per cent over the past 12 months,” Global Investment House says in a note published today. Our fair value for Samba comes at about SR 27.5 a share, which is 52.4 per cent above the bank’s current market price of SR 18 a share as on 24 August. Samba is one of the cheapest banks in Saudi Arabia… Also, the stock is trading near its seven-year low which provides an excellent opportunity for investors to enter into a position in the stock at appealing valuations.”

“Samba is relatively shielded from the risky building/construction sector despite a corporate heavy book; the troubled sector forms slightly less than 12 per cent of Samba’s loan book,” Global Investment House said. “Driven by a conservative mindset, the bank has shown strong resilience which is well reflected in its asset quality ratios; the (non-performing loan) ratio was well contained at 0.93 per cent in 2Q16 while NPL coverage is at a very comfortable 165 per cent.”