Execution Company: Comprehensive Analysis and Its Role in the Saudi Financial

'Execution Company' is a multidimensional term in the Saudi market. On the Tadawul platform, the term execution simply means that the market or one of its sectors is in a position to execute buy and sell orders immediately, as indicated by 'Market Open - Execution'. This usage does not refer to a specific commercial entity but rather to an operational state of the financial market. At the commercial level, the term Execution Company may be used to label companies that provide project execution, contracting, facility management, or equipment rental services. However, as of 2024, there is no known or listed company on Tadawul bearing this specific name. Therefore, when mentioning 'Execution Company' in the context of the Saudi financial market, it is essential to distinguish between the technical condition of the trading platform and the private companies in the contracting and execution sector. This duality reflects the breadth of the term's meaning and its importance in understanding the dynamics of the local market.

The execution phase plays a pivotal role in daily trading operations on the Tadawul platform. When 'Market Open - Execution' is announced, the market is in an active state where traders can enter buy and sell orders, and orders are matched according to the displayed prices and demand. This phase is essential to ensure market liquidity and transparency, ensuring that transactions are completed quickly and efficiently. This situation allows investors to monitor live prices and make decisions based on real-time market movements. The term 'execution' also appears in certain sectors such as derivatives, sukuk, and bonds, where transactions are executed directly. This technical aspect directly impacts the investor experience and the overall efficiency of the Saudi market.

Beyond the technical concept, 'Execution Company' often refers to contracting companies or project service providers in the Saudi market. The activities of these companies include executing construction projects, managing and maintaining facilities, renting heavy equipment, and providing labor for engineering and industrial projects. With the increasing number of Vision 2030 projects, the demand for these companies has surged, playing a vital role in delivering advanced infrastructure and large housing and industrial projects. Execution companies typically enter into contracts with government or private entities to construct schools, hospitals, power stations, or residential neighborhoods. Competitors in this field include companies like Asas Al-Tanfeez, Tanfeezat for Facility Management, in addition to major contracting firms like Bin Laden and Al-Kifah, all contributing to driving Saudi development.

When attempting to evaluate the performance of execution companies (if listed or publishing financial reports), analysts focus on a set of key financial indicators. Among the most prominent are: stock price, market capitalization, price-to-earnings (P/E) ratio, earnings per share (EPS), and annual dividend yield. In the case of unlisted contracting or execution companies, annual revenue data, profit margins, signed contract volumes, and cash flows are examined. These indicators often reflect the demand for the company's services, its financial robustness, and its ability to capitalize on the construction boom. For example, if we take Hail Cement Company (Symbol 3001) as a reference in the construction sector, we find that improvements in its profit indicators or an increase in its stock price reflect a recovery in construction projects, which also positively impacts similar execution companies.

The construction sector in Saudi Arabia is witnessing strong activity supported by Vision 2030 projects, such as NEOM, the Red Sea Project, and Qiddiya. This sector is one of the fastest-growing and attracts substantial government and private investments annually. Execution companies play a central role in translating these investments into tangible projects. Additionally, the demand for construction materials, such as cement and steel, rises with the increase in project sizes, supporting companies like Hail Cement (3001). Execution companies face challenges such as fluctuating raw material prices, intense competition, and localization pressures. However, the sector offers significant opportunities for companies capable of innovating and providing integrated solutions in project management and execution efficiently.

Competition in the Saudi execution companies market is fierce, comprising players from both the public and private sectors. Notable competitors include large contracting firms like Bin Laden, Al-Kifah, and specialized companies in facility management and maintenance such as Tanfeezat for Facility Management (CICO). There are also smaller companies specializing in equipment rental or labor. The sector is characterized by a diversity of companies and a variety of services, where contracting services sometimes overlap with facility management and labor provision. Additionally, some companies rely on partnerships with government entities or investment funds, giving them an edge in winning major project contracts. Governance and adherence to regulatory standards are critical factors in the survival and growth of companies.

There is a complementary relationship between basic construction material companies such as cement companies and execution companies that rely on them as primary suppliers. Hail Cement Company (Symbol 3001) is a prominent example, serving as a key supplier for construction projects in Saudi Arabia. An increase in cement sales is often an indicator of a recovering construction market, and consequently, increased activity for execution companies. There is no direct ownership partnership between cement companies and execution companies, but the success of either party depends on the activity of the other. Monitoring the performance of Hail Cement's stock and its associated financial indicators provides insights into the level of demand in the execution and contracting sector.

The year 2024 witnessed continued momentum in the Kingdom's major projects sector, with the government announcing expansion plans in housing, infrastructure, and partnerships with the private sector. Projects such as NEOM, Qiddiya, and the Red Sea have emerged as drivers of demand for execution companies' services. New directives have also been issued to enhance job localization in the construction sector, prompting companies to develop more sustainable business models. On the other hand, observers note that competition is increasing with the entry of new local and international companies. No new listings for execution companies on Tadawul have been recorded so far, but the sector remains a focal point for investors due to the volume of announced future projects.

For accurate monitoring of news and performance of execution companies, it is advisable to rely on several official and reliable sources. Foremost among them is the Tadawul website, which provides updated data on the market and listed companies, in addition to the Saudi Press Agency (SPA) that publishes news on contracts and major projects. Reports from the Saudi Capital Market Authority provide information on disclosures and governance. For unlisted companies, news can be followed through their official websites or social media accounts, along with industry bulletins and reports from chambers of commerce. Monitoring general financial indicators for the construction sector (such as the TASI index) is a tool for understanding market dynamics that affect execution companies.

Execution companies in Saudi Arabia are subject to strict regulatory oversight, especially in government or major projects. The regulations require obtaining official classifications and licenses from the Saudi Contractors Authority and compliance with government procurement systems. Companies must also adhere to governance and financial disclosure standards, especially if they wish to list in the Tadawul market in the future. Implementing Saudization and job localization requirements poses an additional challenge but provides committed companies with better opportunities to win government contracts. Companies that adopt transparency in their financial reports and comply with regulatory systems often gain greater trust from partners and investors.

Saudi Vision 2030 has propelled the construction and projects sector to unprecedented heights, with government initiatives to stimulate local and foreign investment in mega projects. Execution companies benefit directly from this vision, as thousands of contracts are offered for the development of cities, healthcare facilities, educational institutions, and advanced infrastructure. The vision also encourages innovation and the use of modern technologies in construction and management, compelling execution companies to adopt digital solutions and develop their national workforce. With the expansion of public-private partnership programs, enormous opportunities are available for companies capable of meeting quality requirements and adhering to project timelines.

As infrastructure and housing projects continue to grow, the importance of execution companies in the Saudi financial market is expected to increase. We may witness new listings of companies on Tadawul in the coming years, especially with the expanding investor base and some companies' desire to raise additional capital. Adherence to regulatory standards and financial transparency will remain critical elements in determining the success of any execution company seeking a public offering. Additionally, advancements in construction and project management technologies will provide innovative companies with a competitive edge. Ultimately, the sector's environment will remain dynamic, influenced by government policies and local and global investment trends.