SIGMIX: Comprehensive Details on Riyadh Cables IPO

An Initial Public Offering (IPO) is the process of offering a portion of a private company's shares for sale to the public, paving the way for listing on the financial market. In the Saudi market, this process is overseen by the Capital Market Authority and is a crucial step in transitioning the company to a new phase of transparency, governance, and expansion. The IPO provides an opportunity for individual and institutional investors to participate in the company's ownership, while enabling companies to raise additional capital to finance their expansion plans or strengthen their financial position. IPOs in the Saudi market have gained significant momentum in recent years, supported by government policies aimed at diversifying the economy and attracting investments. IPOs are subject to a set of regulatory rules that ensure fair distribution of shares among investors, with specific allocations for individuals and others for institutions. This advanced regulatory framework enhances market credibility and encourages companies to join Tadawul, while providing investors with greater confidence in the transparency of operations and financial discipline of listed companies.

Founded in 1984, Riyadh Cables Group has rapidly evolved to become the largest cable manufacturer in the Middle East and North Africa. The company operates 15 factories inside and outside Saudi Arabia, with an annual production capacity of 264,000 tons of various types of electrical cables. Riyadh Cables employs over 3,700 staff and its products cover markets in 37 countries across 5 continents, reflecting its global presence and success in meeting the demands of major projects in energy and infrastructure. The company specializes in producing low, medium, and high voltage cables, in addition to residential and industrial electrical connection cables. It is characterized by its flexibility in meeting diverse customer needs, supported by strong financial and operational capabilities. Riyadh Cables benefits from its location in the Kingdom, the largest cable market in the region, holding a market share of approximately 32% in the Saudi market and 22% in the United Arab Emirates. These achievements have made the company a significant target for investors as its public offering approaches.

Through the public offering of 22% of its capital, Riyadh Cables aims to achieve several strategic objectives, the most important of which are: increasing capital to finance future expansions, strengthening its financial position, and expanding its shareholder base. The company plans to use the proceeds from the IPO, expected to reach 1.5 billion Saudi Riyals, to support new manufacturing projects and develop production lines to increase market share locally and internationally. Management seeks to leverage the listing on the financial market to enhance transparency and business governance, thereby boosting investor and business partner confidence. This direction aligns with the goals of Saudi Vision 2030, which encourages national companies to expand regionally and globally. Additionally, the entry of new investors through the IPO enhances the company's ability to face competition in developing cable markets, especially with expectations of increased demand for electrical products in large energy and infrastructure projects both within and outside the Kingdom.

Riyadh Cables announced its intention to offer 22% of its capital for public subscription, equivalent to approximately 1.5 billion Saudi Riyals in the form of new shares. The final share price and exact subscription timeline have yet to be announced, as the company is still awaiting final regulatory approvals from the Capital Market Authority. The offered shares are expected to be distributed among individual and institutional investors in similar proportions, with priority given to Saudi citizens, although opportunities for participation may be available for certain categories of foreign investors according to regulations. The share allocation mechanism is determined based on clear policies that ensure fairness among categories, and is subject to strict oversight by regulatory authorities in the Saudi financial market. Investors will receive partial ownership rights in the company after the IPO, and Riyadh Cables is expected to begin publishing quarterly financial reports following full listing on Tadawul, enhancing transparency and disclosure to new shareholders.

The electrical cables sector is considered a vital industrial sector, serving energy, infrastructure, and construction projects. This sector is witnessing increasing demand driven by the expansion of urban and industrial projects in the Kingdom and the region, especially with the launch of numerous major projects under Saudi Vision 2030. The sector is characterized by high capital intensity, as factories require substantial investments in technologies and equipment, and profit margins are relatively moderate. However, sustained long-term demand for cables makes the sector attractive from a revenue preservation perspective. Riyadh Cables has maintained its regional leadership by expanding its production capacity and modernizing production lines, enabling it to compete with large global companies such as Prysmian and Nexans. Locally, the company outperforms its competitors in production volume and modern technologies, while smaller local and regional companies are still striving to keep pace with growth. The sector's performance is also linked to the activity of the materials and construction sectors, where any government stimulus or increase in real estate spending raises demand for cable products.

Available financial data shows that Riyadh Cables' revenues reached approximately 5 billion Saudi Riyals by the end of September 2022. Although the company was not yet listed on Tadawul, market capitalization estimates after the offering indicate a range of approximately 6.8 billion Saudi Riyals, based on the offering size (22%) and the targeted amount to be raised (1.5 billion Riyals). The company holds a backlog of approximately 176,000 tons as of the end of October 2022, reflecting continued strong demand for its products. Typically, profit margins for cable companies range between 5% to 10% of revenues, giving Riyadh Cables a financial strength that supports its future growth. The company has not yet released detailed data on net profits or annual distribution rates, but with the anticipated listing, it will be obligated to publish its periodic financial statements and clarify key performance indicators such as the price-to-earnings (P/E) ratio and distribution rates. These indicators will allow investors to evaluate the company compared to its peers in the Saudi industrial market.

Riyadh Cables enjoys a strong position in the Saudi market, controlling about 32% of the local cable market due to its massive production capacity and product quality. The company also holds a market share of 22% in the United Arab Emirates and is working to expand its presence in other markets by exporting its products to 37 countries worldwide. This international spread gives Riyadh Cables flexibility in dealing with demand fluctuations and enhances its competitiveness against major global companies. The company also benefits from its relationships with major construction and energy firms in the region, providing it with renewed opportunities to participate in large infrastructure projects. Through its investments in modern technologies and product development, Riyadh Cables maintains its ability to meet the high technical requirements of new projects, enhancing its attractiveness as a reliable industrial partner for both investors and clients.

Although Riyadh Cables has not yet been listed on Tadawul, its financial and operational position can be compared to listed industrial companies such as Hail Cement (Tadawul: 3001). The average price-to-earnings (P/E) ratio in the Saudi industrial sector typically ranges between 10 and 15, and leading industrial companies achieve annual dividends averaging between 30% and 50% of net profits. Upon listing, Riyadh Cables will be subject to the same financial disclosure and governance standards, allowing investors to monitor its performance and compare it to its peers. Riyadh Cables may also benefit from the Saudi market's trend toward supporting major industrial companies and expanding the investor base, which could enhance its market liquidity post-listing. The company is likely to focus on enhancing its profitability and cash distributions to attract investors seeking opportunities in the industrial sector.

The listing of Riyadh Cables comes at a time when the Saudi industrial sector is experiencing growth and increasing competitiveness. Among the main challenges the company may face are fluctuations in raw material prices, intense local and international competition, and stringent regulatory compliance requirements post-listing. Additionally, changes in demand for energy and infrastructure projects may affect growth rates in the future. Conversely, the new liquidity from the IPO provides the company with the opportunity to invest in new expansions and adopt modern technologies, which could enhance its ability to increase market share and develop advanced products. Furthermore, the transparency and governance imposed by the Saudi financial market will help the company build investor and partner confidence. With ongoing renewable energy projects and urban expansion in the Kingdom, the opportunities for Riyadh Cables remain promising for increasing its revenues and expanding its global presence.

The Riyadh Cables IPO process is subject to a set of strict regulatory procedures overseen by the Saudi Capital Market Authority. The Authority requires companies to publish a comprehensive prospectus that includes all financial and regulatory details, as well as disclosure of the offering objectives and plans for using the IPO proceeds. Investors wishing to participate must carefully read the prospectus and understand all risks and rights associated with the investment. The Authority warns against relying on rumors or unofficial recommendations and emphasizes the importance of consulting a licensed financial advisor before making any investment decisions. Companies or brokers are prohibited from providing any direct investment advice or stock price forecasts post-listing, and their role is limited to providing official information and data only. Riyadh Cables is committed to publishing periodic financial reports post-IPO, enhancing transparency and allowing investors to track the company's development and financial performance.

The Riyadh Cables IPO is receiving widespread attention from investors and analysts in the Saudi market, due to its importance in enhancing the industrial sector and increasing the number of companies listed on Tadawul. The offering is expected to contribute to raising liquidity levels in the financial market and encouraging other industrial companies to consider listing options. Additionally, the entry of new investors may improve the company's governance and enhance its competitive capacity. At the sector level, the Riyadh Cables IPO could encourage small and medium-sized companies in the cable sector to develop their products or enter into strategic partnerships, thereby enhancing innovation and raising quality standards in the local market. Given the government's focus on supporting renewable energy and infrastructure projects, the entire sector is likely to benefit from increased investments and business expansion, positively impacting the national economy.

In recent years, Riyadh Cables has announced plans to open new factories in the Gulf and expand its operations in global markets. Media reports indicate that the company continues to sign new contracts with energy and construction companies, enhancing its backlog of orders. The company is working with Riyadh Financial and Hama Capital as financial advisors to manage the IPO process and ensure compliance with all regulatory requirements. So far, the company has not set a final date for the IPO or the final issuance price, but it is expected that this will be announced once the necessary regulatory approvals are completed. As the listing process begins, the company will be obligated to publish quarterly financial reports and updates on operational and financial performance, providing investors with a clearer view of the company's development and future opportunities.

It is beneficial for investors to review listed industrial companies such as Hail Cement (Tadawul: 3001) to compare financial indicators and regulatory requirements post-listing. Hail Cement achieves an average price-to-earnings (P/E) ratio around 10-15, and its annual dividends are considered attractive in the Saudi market. With the listing of Riyadh Cables, it will be subject to the same standards, and its disclosure and transparency requirements will be similar. Investors can follow the Hail Cement stock page (/stocks/3001/) to see how to handle financial indicators and quarterly reports, and to learn about market expectations for industrial companies. Riyadh Cables is expected to follow a similar pattern in reporting and disclosures, enhancing market discipline and providing a safe and transparent environment for investors.