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4230

Governance: D

RED SEA

Red Sea International Co.

23.50 SAR / Share

As of: May 28, 2026

— P/E Ratio Trailing 12 Months

1.8x P/B Ratio Price to Book Value

— Dividend Yield Annual Dividend / Share

762.75M SAR Market Cap Total Valuation

1.22 Beta Systematic Risk Index

-1.3% Net Margin Net Profit / Revenue

The Story

Red Sea International is navigating a massive structural transformation, leveraging debt-to-equity conversions and strategic subsidiary actions to repair its balance sheet while managing operational headwinds and asset impairments.

Source: Annual 2025 (2026-05-20)

Value Creation -23.5% Excess Return on Capital (Spread between ROIC/ROE and Cost of Capital)

Cash Flow Payback — Estimated years of operating cash flows required to cover Enterprise Value

Performance & Distributions

Dividend Yield Trailing annual dividends paid relative to share price

—

Sustainable Growth Rate Rate at which company can grow internally using reinvested profits

+0.1%

Payout Ratio Percent of net profits distributed as dividends

—

Net Margin Net profit margin generated from total operational revenue

-1.3%

ROIC Return on Invested Capital

-13.8%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

—

P/B Ratio Market capitalization compared to corporate book value

1.8x

EV / EBITDA Operating multiple reflecting core operational leverage

6.3x

EV / SALES Asset pricing multiple relative to total topline revenue

0.3x

Growth Story

Red Sea International's revenue reached SR 3.37 billion in fiscal 2025, up from SR 2.98 billion in fiscal 2024, representing a massive expansion from the SR 419.6 million recorded in fiscal 2022. This growth is heavily anchored by the acquisition of First Fix, which contributed SR 2.73 billion to segment revenues. However, the company's historical five-year average return on capital of -13.79% and negative reinvestment rate of -1.02% yield a low sustainable growth rate of 0.14%. This indicates that while top-line expansion has been dramatic due to acquisitions, long-term organic growth capacity remains constrained by historical capital inefficiency and the need to stabilize core operations.

Profitability Dynamics

Despite the revenue surge, profitability remains under severe pressure. Operating income fell to SR 25.29 million in fiscal 2025 from SR 70.13 million in fiscal 2024, leading to a net loss of SR 42.94 million. This decline was exacerbated by SR 58.93 million in asset impairments, including a SR 10.8 million write-down of UAE manufacturing assets and a SR 48.1 million impairment on KSA camp properties. Consequently, the operating margin stood at a thin 0.75%, and the profit margin was negative at -1.27%. With a negative return spread of -23.52% (ROIC of -13.79% vs. WACC of 9.72%), the company continues to destroy economic value, though the planned initial public offering of First Fix and the divestment of Premier Paints Company represent tactical moves to unlock cash and streamline the portfolio.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

1.22

Cost of Equity Minimum required rate of return demanded by shareholders

9.7%

WACC Weighted average cost of total debt and equity funding

9.7%

Debt-to-Equity Ratio Proportion of corporate funding financed by debt creditors

58.0%

Risk Factors

Red Sea has historically faced severe liquidity and leverage risks, with accumulated losses reaching SR 332.24 million (69.7% of share capital) in fiscal 2025. However, a major capital restructuring in November 2025 converted SR 476.07 million of liabilities (deferred consideration and shareholder loans) into equity, creating a SR 295.7 million share premium and turning a fiscal 2024 working capital deficit of SR 250.7 million into a SR 180.3 million surplus. This restructuring restored compliance with bank covenants. Nonetheless, risks remain high: the company has a high relevered beta of 1.22, outstanding debt of SR 442.52 million, and significant customer concentration, with 81% of general construction revenue derived from just three clients.

Governance Disclosures

Rating: D

We track 3 key governance and oversight matters for this company in our database.

Significance: 6/10 Propping

Pledge of Sister Company Shares by Related Party to Secure Group Borrowings

The Group's SR 330 million bank facility, of which SR 275.5 million has been withdrawn, is secured in part by a pledge of shares of a sister company by a related party.

Significance: 9/10 Info Asymmetry

Concentration of Business and Large Balances with Related Party Modern Building Leaders

Following the debt conversion, MSB Holding Company became a shareholder with significant influence. Its group entity, Modern Building Leaders Company, has substantial balances with the Group, including SR 743.61 million due under trade and retention receivables, SR 537.45 million in contract assets, and SR 116.65 million in contract liabilities. Additionally, the Group's liquidity on certain projects is highly dependent on the cash generation capabilities of this related party as the main contractor.

Mitigating Factors: Pricing policies and terms of these transactions are approved by the Board of Directors/ Group’s management.

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In-Depth Analysis