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7202

Governance: A

SOLUTIONS

Arabian Internet and Communications Services Co.

213.60 SAR / Share

As of: May 28, 2026

16.8x P/E Ratio Trailing 12 Months

5.5x P/B Ratio Price to Book Value

4.7% Dividend Yield Annual Dividend / Share

25.63B SAR Market Cap Total Valuation

0.97 Beta Systematic Risk Index

11.8% Net Margin Net Profit / Revenue

The Story

SOLUTIONS by stc serves as Saudi Arabia's premier enabler of digital transformation, leveraging its deep relationship with stc and the Public Investment Fund to deliver high-margin ICT services with exceptional returns on capital.

Source: Q1 2026 (2026-05-05)

Value Creation +28.3% 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

4.7%

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

-1.4%

Payout Ratio Percent of net profits distributed as dividends

78.6%

Net Margin Net profit margin generated from total operational revenue

11.8%

ROIC Return on Invested Capital

36.9%

Market Pricing Multiples

P/E Ratio Market value compared to corporate net earnings

16.8x

P/B Ratio Market capitalization compared to corporate book value

5.5x

EV / EBITDA Operating multiple reflecting core operational leverage

8.0x

EV / SALES Asset pricing multiple relative to total topline revenue

1.9x

Growth Story

Anchored in the metaphor of 'A Well-Irrigated Oasis', the company's growth story is one of capital-efficient expansion. Revenue has grown steadily from SAR 11.04 billion in FY 2023 to SAR 12.06 billion in FY 2024, SAR 12.73 billion in FY 2025, and reached SAR 12.91 billion on a TTM basis. Despite this steady top-line expansion, the company's 5-year average reinvestment rate stands at -3.80%, leading to a sustainable growth rate of -1.40%. This negative reinvestment rate indicates that the business is highly capital-efficient, requiring minimal capital expenditure (TTM Capex of SAR 191.09 million) to support its operations. The growth is largely organic and fueled by its strategic position within the stc ecosystem, rather than heavy capital deployment, allowing it to expand its top-line while returning cash to its capital providers.

Profitability Dynamics

Under the metaphor of 'The High-Yield Engine', SOLUTIONS exhibits exceptional profitability, characterized by a 5-year average ROIC of 36.94% against a WACC of 8.66%, creating a substantial value creation gap of 28.28%. This high return profile is driven by strong operating efficiency, with a TTM operating margin of 20.96% (EBIT of SAR 2.71 billion) and a net profit margin of 11.82% (Net Income of SAR 1.53 billion). The company's asset-light model generates robust cash flows, supported by a current working capital of SAR 554.42 million and a cash balance of SAR 2.08 billion. This strong cash generation capability underpins its ability to fund operations internally and supports the Board's recent recommendation in April 2026 to capitalize SAR 1.20 billion of retained earnings for a 100% bonus share capital increase.

Risk & Capital Structure

Beta Systematic market risk indicator relative to the TASI index

0.97

Cost of Equity Minimum required rate of return demanded by shareholders

8.6%

WACC Weighted average cost of total debt and equity funding

8.7%

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

3.0%

Risk Factors

Guided by the metaphor of 'The Anchored Vessel', the company maintains a highly conservative financial risk profile, holding a net cash position with SAR 2.08 billion in cash against a total debt of SAR 778.64 million. Its relevered beta of 0.9714 reflects market-aligned systematic risk. However, business-specific risks are closely tied to its parent company and government relationships. Related-party transactions with stc are substantial, and sales to government and government-related entities rose to 29% of total sales in the three-month period ended March 31, 2026, up from 19% in the prior period. Additionally, the company carries significant off-balance-sheet commitments, with letters of guarantee and credit rising to SAR 1.55 billion as of March 31, 2026, which represents its primary financial exposure.

Governance Disclosures

Rating: A

We track 11 key governance and oversight matters for this company in our database.

Significance: 4/10 Tunneling

Key Management and Board Compensation

Total compensation for key management personnel and the Board of Directors amounted to SAR 47.1 million in 2025, which includes employment benefits, remuneration, and share-based payments.

Significance: 3/10 Asset Risk

Pledged Bank Balances for Subsidiary Debt

The Group maintains SAR 26.3 million in bank balances that are restricted as they serve as a security guarantee for short-term borrowing by one of the Group's subsidiaries.

Mitigating Factors: The restriction on these bank balances will end when the related facility is settled.

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In-Depth Analysis