High-Conviction Small-Cap Opportunities in the Resilient Non-Oil Sectors of the Middle East

The Middle East's non-oil sectors are undergoing a transformative phase, driven by structural reforms, digital innovation, and trade liberalization. As Gulf Cooperation Council (GCC) nations advance their economic diversification agendas-anchored by initiatives like Saudi Vision 2030 and the UAE's National Strategy for Artificial Intelligence 2031-small-cap companies are emerging as key beneficiaries. These firms, often undervalued relative to their fundamentals, are well-positioned to capitalize on the region's shift toward productivity-led growth. This analysis identifies four high-conviction small-cap opportunities in logistics, tourism, and industrial sectors, supported by robust financial performance and alignment with macroeconomic tailwinds.

1. ALEC Holdings PJSC: A Logistics and Infrastructure Powerhouse

ALEC Holdings, a UAE-based construction and infrastructure company, exemplifies the resilience of the GCC's non-oil sectors. In the first nine months of 2025, the company reported revenue of AED8.9 billion, a 66% year-over-year increase, with Q3 2025 revenue surging 82% to AED3.5 billion. Net profit more than doubled to AED432 million in 9M 2025, with a net margin expanding from 3.7% to 4.8%. The company's EBITDA grew 83% to AED706 million, reflecting strong operational efficiency.

ALEC's growth is fueled by the UAE's infrastructure boom, including projects like the Dubai Metro expansion and Abu Dhabi's renewable energy initiatives. With a debt-to-equity ratio of 66%, the company maintains a balanced capital structure, enabling reinvestment in high-impact projects. As the UAE targets 77% non-oil GDP contribution by 2025, ALEC's alignment with infrastructure and logistics demand positions it as a compelling long-term play.

2. Saudi Ground Services Company: Aviation and Hospitality Resilience

Saudi Arabia's non-oil GDP growth of 4.2% in H1 2025 has been bolstered by private consumption and investment in hospitality and retail. Saudi Ground Services, a provider of airport ground handling, is a prime example of this trend. In Q3 2025, the company reported sales of SAR683 million and net income of SAR101 million, up from SAR81 million in the same period last year. Its steady profit growth reflects the expansion of Riyadh and Jeddah airports, which are central to Saudi Arabia's goal of becoming a global aviation hub.

The company's performance is further supported by the Kingdom's 113% increase in non-oil exports since 2020, driven by trade liberalization and logistics modernization. As Saudi Arabia aims to double non-oil exports to $100 billion by 2030, Saudi Ground Services' role in facilitating air cargo and passenger traffic makes it a strategic asset.

3. Bet Shemesh Engines: Aerospace and Defense Innovation

While not a GCC company, Bet Shemesh Engines (based in Israel) is a critical player in the Middle East's industrial supply chain. The firm specializes in jet engine components and has seen a 24% revenue increase in Q2 2025, reaching $77 million. A $3.3 billion long-term contract with a strategic customer-expanding its framework agreements by 50%-underscores its relevance in the post-pandemic aviation recovery and defense demand.

The company's alignment with global aerospace and defense trends is particularly relevant to the Middle East, where countries like the UAE and Saudi Arabia are investing heavily in military modernization and civil aviation infrastructure. With a net debt-to-equity ratio of 30.9% and five-year earnings growth of 52.2%, Bet Shemesh Engines offers a compelling risk-reward profile for investors seeking exposure to the region's industrial renaissance.

4. Al Majed for Oud: Retail and E-Commerce Expansion

Al Majed for Oud, a Saudi Arabian wholesale and retail trade company specializing in perfumes, has leveraged the Kingdom's retail boom. In 9M 2025, the firm reported a 23.5% increase in net profit to SAR175.3 million, with Q3 net income rising 33% to SAR232.4 million. This growth is attributed to store expansion and off-season promotional campaigns, reflecting the rise of e-commerce and consumer discretionary spending.

Saudi Arabia's retail sector is projected to grow by 5.3% in 2025, driven by Vision 2030's focus on tourism and youth demographics. Al Majed's digital transformation-enhancing online sales and logistics-positions it to capture a larger share of this expanding market.

Structural Tailwinds and Investment Thesis

The GCC's non-oil sectors are underpinned by structural shifts, including digital infrastructure investments, trade diversification, and fiscal discipline. For instance, the UAE's SMEs accounted for 37% of retail spending in 2025, with a growing share of transactions occurring online. Similarly, Saudi Arabia's focus on 294 high-potential non-oil export products highlights its commitment to long-term economic resilience.

These trends create a favorable environment for small-cap companies like ALEC Holdings, Saudi Ground Services, Bet Shemesh Engines, and Al Majed for Oud. Their strong financial metrics, coupled with alignment with regional economic strategies, suggest undervaluation relative to their growth potential.

Conclusion

The Middle East's non-oil sectors are no longer peripheral to the region's economy but central to its future. As structural reforms accelerate, small-cap companies with robust fundamentals and strategic positioning are set to outperform. Investors who identify these opportunities early-while valuations remain attractive-stand to benefit from the GCC's ongoing transformation.