Exploring Three Undiscovered Gems in the Middle East Market

The Middle East is undergoing a profound economic transformation, shifting away from its historical reliance on oil toward a more diversified, innovation-driven economy. Beneath the surface of well-known sectors like energy and tourism lie a handful of undervalued companies poised to capture the region’s next wave of growth. This article highlights three overlooked gems—YAMAMA Cement, Formula Systems, and National Agricultural Development (NADEC)—each emblematic of sectors critical to the region’s future: infrastructure, technology, and food security.

1. YAMAMA Cement: Building on Saudi Arabia’s Megaprojects

Sector: Infrastructure & Real Estate
Growth Metrics: 38% YoY earnings growth (2023), market cap of SAR7.41 billion.

YAMAMA Cement is a prime beneficiary of Saudi Arabia’s Vision 2030, which aims to transform the kingdom into a global investment hub. The company’s dominance in the construction materials sector is fueled by megaprojects like NEOM and the Red Sea Development, both of which require vast quantities of cement. With a debt-to-equity ratio of just 35.7%, YAMAMA operates with financial discipline, a stark contrast to its more leveraged peers.

2. Formula Systems: Digitizing the Middle East’s Future

Sector: Technology & Utilities
Growth Metrics: 12.6% CAGR in earnings (2019–2023), P/E ratio of 17.2x (below sector average).

Formula Systems (FORTY), an Israeli IT solutions provider, is riding the wave of digital transformation across the Middle East. Its expertise in cybersecurity, cloud infrastructure, and enterprise software makes it indispensable to governments and corporations modernizing their operations. With a stable cash flow and dividend hikes to ₪3.45/share, Formula Systems offers both growth and income potential.

3. NADEC: Nourishing Saudi Arabia’s Agricultural Ambitions

Sector: Food & Agriculture
Growth Metrics: 156.4% YoY earnings growth (2023), debt-to-equity ratio reduced to 4.8%.

NADEC, Saudi Arabia’s National Agricultural Development company, is a testament to the kingdom’s push to achieve food security and reduce imports. Specializing in dairy products, protein bars, and agricultural supplies, NADEC has slashed its debt while expanding operations. Its one-off gain in 2023 aside, the company’s long-term strategy aligns with Vision 2030’s goal of diversifying the economy.

Why These Gems Offer Value Now

1. Infrastructure Boom: Regional infrastructure spending is projected to hit $350 billion by 2030, with companies like YAMAMA positioned to capitalize on projects in Saudi Arabia and Israel.
2. Tech Adoption: Middle Eastern tech firms like Formula Systems are outperforming global peers, with sectors like cybersecurity growing at 15–20% annually.
3. Agricultural Self-Reliance: NADEC’s surge reflects a broader trend: Saudi Arabia aims to increase domestic food production from 12% to 50% by 2030.

Risks and Investment Strategy

Geopolitical tensions, oil price fluctuations, and currency volatility remain risks. Investors should prioritize firms with debt-to-equity ratios below 30% and P/E ratios under 20x, avoiding oil-linked stocks. Diversification across sectors—infrastructure, tech, and agriculture—can mitigate risks while capturing growth.

Conclusion

The Middle East’s economic renaissance is far from over. Companies like YAMAMA Cement, Formula Systems, and NADEC exemplify the region’s shift toward sustainable, non-oil growth. With YAMAMA’s 38% earnings growth, Formula’s undervalued P/E, and NADEC’s 156% surge, these gems offer a 15–25% upside potential in 2024–2025. Investors who look beyond oil will find fertile ground in sectors powering the region’s next chapter. As the data shows, the Middle East’s best returns are not in its past—but in its future.