Saudis plugged in with smartphones and iPads

Saudi Arabia's electronics market is booming, as the kingdom adopts smartphones and tablets in droves. But how will a new entrant change things?

Saudi Arabia's retail market has been on a roll this year, with stimulus measures in the kingdom leaving many young adults with ever-greater sums of money burning a hole in their pockets.

But as the sector becomes more competitive, which companies are positioned to win out?

A good bet is Jarir Marketing Company, a bookshop, electronics vendor and retailer of office and school supplies, said analysts at Riyad Capital.

Shares in the company have risen 43.7 per cent to 217 Saudi riyals each so far this year, as Jarir finds itself well placed to take advantage of new government spending on schools. But the company is benefiting most from electronics, which account for about 70 per cent of total sales, as a generation of young Saudis laps up devices such as iPads and iPhones.

Sales rose during the third quarter to 1.2 billion riyals, an increase of 64.4 per cent compared with the same period last year.

The company's brisk trading earned it a "buy" recommendation from Riyad Capital.

"Rising disposable income and the ongoing employment and education programmes will sustain demand over our forecast horizon," analysts wrote in a research note.

But the market is looking increasingly crowded after a 396 million riyal initial public offering last week by United Electronics Company, also known as eXtra.

The income from eXtra's flotation will finance an expansion to grab market share in the smartphone and tablet markets.

"We believe eXtra will exert key competitive pressure in the electronics segment, particularly with its online shopping channel, which can canvas remote locations without a brick-and-mortar presence," analysts from Riyad Capital wrote in their report.

Record sales of iPhones and iPads lead to lower margins than other products, Al Rajhi Capital warned in a research note, but that is a nice problem to have.

The real problem is valuations: at about 16.4 times earnings, analysts warn that little upside potential remains.

twitter: Follow our breaking business news and retweet to your followers. Follow us