Saudi contracting firm Al-Mojil sinks into hole



Analysts have been waiting for Mohammad Al-Mojil to turn around, but with over-budget contracts and widening losses, this company is expected to run a rocky course for a while longer.

The dearth of analysts who cover Al-Mojil, a Saudi Arabian construction services provider, gives some indication of how prized, or disliked, this stock currently is.

Haissam Arabi, the chief executive at Gulfmena Investments in Dubai, said his company looked at the stock but found nothing inviting about it. "We just weren't sure it qualified as a turnaround story," Mr Arabi said. "It's not a stock a lot of people are playing with."This week, the company was fined 50,000 Saudi riyals for the late disclosure of its results for last year.

Al-Mojil's net loss for the year was 959.4 million riyals compared with a loss of 179.5m riyals a year earlier, a difference of 434 per cent. The company's loss in the fourth quarter alone was up 380 per cent compared with 2010.

Shareholders have taken a hit as a result. Loss per share for the 12-month period was 7.68 riyals compared with a loss per share of 1.44 riyals for the same period in 2010. Al-Mojil is also carrying significantly more debt this year. Short-term borrowing jumped from 490m riyals in 2010 to 1.2 billion riyals last year. Long-term borrowing also increased, from 25m riyals to 165m in the course of last year. In addition, the company's margins are being squeezed. They narrowed 10 per cent last year.

All of this results in an inverted pyramid heavy with obligations at the top and balanced on a limited-contract base. The company has relied on the state-owned Saudi Arabian Oil Company for construction contracts.

Those contracts it does have are not going well. Projects are running over budget, according to a review by the company. The stock has dropped 28.6 per cent so far this year after gaining 29 per cent last year. By comparison, the Tadawul All-Share Building & Construction Index is up 11 per cent since the start of the year.

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