NCB Capital Research Department
June 2009
Economic Research Dr Jarmo T Kotilaine Saudi Arabia Factbook [email protected]
Equity Research Pravin L Rajendran Gateway to the Kingdom [email protected] Farouk Miah [email protected] Ahmed Al-Qahtani [email protected] Tariq Al-Alaiwat [email protected] Reem Al Khalifa [email protected] Production Please refer to last page for important disclaimer Martin K Arokiaraj [email protected] We look for more
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JUNE 2009 SAUDI ARABIA FACTBOOK 2
KSA ECONOMY AND NATION 5
Outlook and direction 6
Gulf renaissance 6
KSA remains an attractive proposition 6
Oil price a short-term concern 7
Global recessionary fears 9
Economic performance 10
Strong hydrocarbons fundamentals 15
Beyond oil 18
International trade 22
SAUDI STOCK EXCHANGE 25
History and overview 26
The leading GCC equity market 26
Market composition 29
Market regulation and supervision 32
Execution of trades 32
Tadawul’s performance in 2008 33
Comparison with Global Emerging Markets 35
SECTOR PERFORMANCE 37-107
COMPANY PROFILES 109-259
Contents
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JUNE 2009 THE SAUDI FACT BOOK 4
KSA: Economy and Nation
Searching growth beyond oil
• Capital – Riyadh
• Population – 28.1mn (July 2008E)
• Land area – 2.3m sq km
• Climate – Hot and dry with mild winters
• Language – Arabic
• Currency – Saudi Riyal (SR) 1 = 20 qirsh = 100 halalas. The Saudi Riyal (SR) is pegged to the US Dollar (USD) at the rate of USD1=SR 3.745
• Nominal GDP 2007 – USD381.5bn
• Nominal GDP 2008E – USD467.5bn
• Time – GMT + 3:00 Hrs
• Fiscal year – Calendar year (January – December)
• Tadawul (stock market) market capitalization – USD246.5bn (as on 31 December 2008)
• Oil reserves – 264.3bn barrels; nearly 25% of the world’s proven oil reserves
Outlook and direction
A Gulf renaissance
Rapid growth pushes GCC Rapid economic growth over the past few years has made the Gulf Cooperation Council (GCC) further up the global economic region an increasingly significant bloc in global emerging markets. The GCC’s nominal GDP has ladder; the region had the tripled in value since 2002 and is expected to have exceeded USD1trn in 2008. High oil prices eighth-largest GDP in the in 2003-2007 fueled the expansion of the regional economy at an average annual rate of 7.4% emerging world in 2007 in real terms. This marked a dramatic acceleration over the 1998-2002 average of 2.5% and went hand in hand with the strategy to invest the petrodollar windfall in sustainable development. Diversification and greater global integration established themselves as key themes of Government policy. Infrastructure spending emerged as a particular priority, particularly in the areas of transportation, water desalination, and energy. At the same time, the investment environment underwent a dramatic improvement as ambitious regulatory reforms came to complement the region’s traditional macroeconomic stability.
After a string of golden years, when talk of a super-cycle began to generate expectations of the irreversibility of the boom, the near-term outlook has changed completely. The intensifying economic turmoil globally led to a sharp fall in oil prices, significantly tighter credit conditions, and lower confidence. According to April-09 IMF projections, Middle East is expected to grow by 2.5% and 3.5% in 2009 and 2010 respectively. We expect that the Saudi economy will almost certainly not exceed 1.0% real growth in 2009; and the IMF now projects a 0.9% real decline in GDP. However, higher oil prices should push growth back to trend in 2010. The situation in the rest of the GCC will be largely comparable, with Kuwait and the UAE (particularly Dubai) especially hard hit.
KSA remains an attractive proposition
KSA’s strategy of The Kingdom of Saudi Arabia (KSA) is by far the largest economy in the Middle East. It diversification is strengthening accounts for nearly half of the GCC’s GDP and more than a third of the Middle East and North its business climate Africa GDP. As the world’s largest producer and exporter of oil, KSA has been a leading beneficiary of buoyant crude prices in recent years, earning approximately USD548.5bn from oil exports during 2003–07. Saudi authorities have also endorsed the need to capitalize on the windfall to foster economic diversification and sustainable growth. The authorities have anchored these steps in greater global integration, not least the country’s accession to the WTO in Dec 05. This move has encouraged foreign investment in various sectors such as telecommunications, banking, infrastructure, tourism, metals, and mining. Liberalization of the telecom sector resulted in the entry of new companies in KSA’s fixed-line telephone and mobile segments. The Saudi Government further raised the ceiling on foreign ownership in domestic banks to 60% from 40% in 2007 and opened the insurance sector to greater foreign investment.
The Saudi authorities have taken impressive steps to create an attractive business climate and the progress to date has been recognized by external observers and foreign investors alike. The World Bank has identified Saudi Arabia as a leading reformer globally and the Kingdom has risen from 67th to 16th position in the World Bank’s Ease of Doing Business Index in less than three years. It is now the highest-ranked Middle Eastern country. The improved business environment has triggered an unprecedented FDI boom in recent years. At home, the development of the financial sector has facilitated ambitious investments by Saudi corporations and significantly boosted the role of non-oil sectors as well as private entrepreneurship in the economy. These efforts have in turn fueled rapid growth with the country’s real GDP expanding
JUNE 2009 SAUDI ARABIA FACTBOOK 6 OUTLOOK AND DIRECTION
at a CAGR of 5.0% in 2002-2007. GDP growth in 2008 accelerated to 4.2% from the previous year’s 3.5%, despite a sharp slowdown in the second half of the year.
KSA’s impressive economic The progress of regulatory and institutional reforms has complemented the established robust profile is supported by three macroeconomic health of KSA. Saudi Arabian Monetary Agency (SAMA), the Kingdom’s central main factors bank, has been highly successful in ensuring price stability, while fiscal policy has built on • Regulatory and cautious assumptions about the oil price. For years, the Saudi Government has used its largely institutional reforms oil-driven surpluses to pay down the country’s external and public sector debt burden, which • Large petrodollar reserves was accumulated during the period of low oil prices of 1980s and 90s. Domestic Government • Strong demographic debt in 2008 declined to 13.5% of GDP, compared with a peak of 119% in 1999. profile Although Saudi Arabia was a key beneficiary of the global imbalances that accumulated during the recent boom, it was relatively successful in preventing the mounting surpluses from derailing its macroeconomic stability. The greatest source of concern was the takeoff in inflation in 2006- 2008, partly because the dollar peg limited SAMA’s autonomy in countering the price pressures. Otherwise, with some 90% of budget revenues coming from oil, the petrodollar windfall largely translated into large fiscal surpluses, which peaked at SR590bn, or 33.7% of GDP in 2008, compared with a surplus of 12.5% of GDP in 2007. The reserves amassed by SAMA and other entities have placed the Saudi economy well, preparing it to weather even severe economic turbulence in the near future. SAMA’s net foreign assets reached SR1,702bn at the end of Nov 08 from SR1,171bn in 2007.
An important driver of the attractiveness of the Saudi economy is its sheer size and regional importance. For instance, with a market-cap of USD246.5bn as on 31 Dec 08, Tadawul accounts for more than 45% of GCC’s aggregate market capitalization. From the perspective of investors, the Kingdom boasts the largest market in the region – a young population of just under 30 million – and some of the largest corporate houses. Major new infrastructure projects with increased private-sector participation are under way, particularly in power, water, housing, transport, roads, and railways.
Oil price a short-term concern
Oil prices went on a roller- Until recently, the rally in oil prices seemed almost unstoppable with especially emerging market coaster ride, touching the peak demand – typically less price sensitive due to price controls and subsidies – looking extremely of USD147 per barrel and then robust. Nonetheless, since an all-time high of USD147 per barrel of oil in July 08, the oil market dropping to USD40 per barrel dynamic had experienced a complete reversal. Heightened levels of uncertainty about the during 2008 extent and duration of the global crisis have weighed on market sentiment. As a result, oil prices temporarily dipped below the USD40 mark. However, recent months have been characterized by a relative stabilization and even a recovery of the oil price.
Slow replacement and Even if we see a relatively severe and drawn-out global economic crisis, we believe that the oil challenging topographies for market downturn will be limited in duration. A number of structural factors are pointing to rapidly oil extraction point towards a tightening markets. In the current environment, insufficient investments are being made into oil possible rebound in oil prices production globally to replace the production lost from mature fields, which are currently declining at the rate of 5% or more a year. The International Energy Agency (IEA) recently found that even with stable demand for oil up to 2030, production capacity would have to be increased by 45mn barrels per day. Problematically, much of the new production is in areas that are remote and in challenging geographic or climatic conditions. Moreover, the reserves are for the most part controlled by national oil companies who may be swayed by their controlling Governments’ desire to affect the price outlook.
JUNE 2009 SAUDI ARABIA FACTBOOK 7 OUTLOOK AND DIRECTION
Even with the multitude of projects on energy conservation and alternative energy sources, a While any uptrend in oil prices return to sustainable global growth is only possible if oil production can grow at a more or less in the future will benefit KSA… comparable rate as the real economy. The current investment environment is significantly jeopardizing that prospect and raising the risk of a swift oil price rebound once the extent of demand destruction becomes better understood and the economic situation begins to stabilize. KSA is well positioned to capitalize on this reversal. The Kingdom holds approximately a quarter of the world’s total proven oil reserves, approximately 264.2bn barrels. These reserves are estimated to be sufficient to last for 70-80 years at the 2007 production rate of 8.7mn barrels per day (bpd). KSA also remains one of the few producers which are in a position to act as a genuine swing producer with a number of new fields coming on line.
In the longer term, oil prices are expected to remain firm, driven by anticipated growth in demand, especially from emerging markets. The IEA projects an average oil price of USD100/b (in real 2007 dollar terms) between 2008 and 2015. Considering this factor and the ongoing economic diversification, KSA’s GDP is expected to grow at a healthy rate.
… growing contribution of the KSA’s non-hydrocarbon economy has benefited enormously from the favorable economic non-oil sector due to environment in the Kingdom and Government-supported structural reforms. The country’s non- Government’s sustained focus oil sector, which comprises around 46% of the total real GDP, continued to experience strong on diversification makes long- growth (4.2%) in 2008. In recent years, the growth in contribution to Saudi GDP from the non-oil term outlook positive sector has been consistently ahead of the hydrocarbons sector. By 2010, its share of GDP is expected to reach 49%. Major sectors driving growth are banking, insurance, transport, telecommunications, retail, and construction and building materials. In 2008, the transport and communications sector experienced the highest growth at 11.4% and the non-oil industrial sector and construction sector expanded by 5.4% and 4.1% respectively.
Even though many sectors of the Saudi economy will encounter short-term turbulence due to the global downturn, their longer-term outlook remains positive. The key near-term risk for the Saudi real estate sector is the possible though fairly manageable risk of regional contagion from the weakened real estate sector in the UAE. The banking sector remains in generally robust health, given the conservative stance taken by SAMA as the regulator as well as the limited exposure of Saudi banks to global markets. Nonetheless, it is clear that the rapid credit expansion of recent years will not continue, partly because of the economic slowdown and partly due to more restrictive lending practices by banks. Saudi banks adopted a selective lending approach in the last two quarters, mainly to keep loan-to-deposit ratios within a SAMA prescribed limit of 85% during 4Q-08 and to position themselves for a likely increase in NPLs following a sharp reversal of a robust boom. However, their well provisioned NPLs, adequate capital and internationally low loan to deposit ratios (as high as 140% in the UAE, for instance) continues to give them an advantage in the region.
Low penetration, coupled with Going forward, the financial sector outlook is strong owing to below-average penetration levels easing regulations, is likely to by regional and global standards, healthy capital adequacy ratios, and relaxation of foreign provide a thrust to the financial ownership rules. Elements of the sector remain significantly underdeveloped, most notably services and telecom sectors mortgages and debt capital markets. Mortgages have been a key driver of banking sector growth in mature markets and the impending passage of proper legislation will create the basis for their expansion in Saudi Arabia as well. The gradual maturation of the sukuk market should sustain the emergence of debt capital as a third pillar of the Saudi capital markets.
Similar structural factors will foster convergence-driven growth in other sectors. For instance, low broadband and Internet penetration, along with favorable demographics, will continue to
JUNE 2009 SAUDI ARABIA FACTBOOK 8 OUTLOOK AND DIRECTION
propel growth in the telecom sector. Most importantly, the Government’s commitment to economic diversification remains unwavering and the process will thus benefit from a continued infusion of public funds. The Government is encouraging privatization and public-private partnerships and plans to invest USD300bn in infrastructure development between 2008 and 2010. Enormous public investments are being made and planned in expanding and modernizing key sectors such as education and healthcare.
A particularly important driver of longer-term growth in the Kingdom is the dynamic demographic profile. The population of KSA has grown at a CAGR of 2.7% since 2004 while private consumption grew at a CAGR of 13%. Nearly 70% of KSA’s total population is below the age of 30. The prosperity and aspirations of this population are steadily growing. According to the IMF, KSA’s per capita nominal GDP grew from USD8,065 in 1999 to USD15,724 in 2007 and is expected to grow to just under USD28,000 by 2012. A growing workforce and increasing purchasing power, in turn, are expected to drive housing demand, domestic consumption and personal finances higher. Private consumption as a percentage of nominal GDP is set to increase from 28.3% in 2007 close to 50% during the coming decade, which would mark an important paradigm shift for the Saudi economy.
Global recessionary fears, falling oil prices hit KSA bourses
External demand shock, along The Saudi market, having initially decoupled from the Western markets, during the first year of with implications for the oil the credit crunch, experienced a sharp correction in the second half of 2008. In the course of price and liquidity, has the year, the Tadawul All Share Index (TASI) fell by 56.5%, due to the spillover effects of global fundamentally changed the recession and in particular the subdued sentiment caused by the sharply lower oil price. The mood in the Saudi capital correction was broad-based with every sector index yielding negative returns. markets In the wake of the correction, which in fact resumed a longer downturn from the market’s euphoric historic peak in February 2006, valuations of most KSA equities were at or near their 15-year lows. The P/E multiple contracted from 27.6 in May 2006 to 20.8 on 1 January 2008 and 10.7 on 28 December 2008. TASI’s 12-month trailing P/E declined by 49.0% in 2008. The multiple represents a 47% discount on its 15-year weekly average of 19.8x.
Exhibit 1: Saudi market valuations
12%
GCC (ex KSA) 10% China 2010 - 8% 2008 Russia India 6% Thailand CAGR
S.Korea Morroco GDP
l 4% KSA 09/05, 33.0
ea KSA R Brazil 2% Argen ina Mexico
0% 0x 5x 10x 15x 20x 25x 30x 35x 40x Forward P/E
Source: NCBC Research, Bloomberg, IMF
JUNE 2009 SAUDI ARABIA FACTBOOK 9 OUTLOOK AND DIRECTION
Looking ahead, however, when the global business cycle turns, KSA can easily be one of the first to benefit considering its strong position in the global oil sector. Hence, although KSA has a lower expected economic growth rate and a higher P/E valuation vis-à-vis its GCC peers, we believe that the market provides attractive investment opportunities. Economic performance
During the extraordinary economic boom of 2003–07, the KSA economy expanded at a CAGR of 15.5% in nominal terms and at a CAGR of 4.3% in real terms, primarily driven by strong oil revenues and the Government’s diversification initiatives. The non-oil sector grew at a real average annual rate of 4.9% during 2003–2007. In 2008, nominal GDP expanded by 22.0% to SR1,753bn, backed by strong and broad-based growth of 34.9% in the oil sector and 8.0% in the non-oil sector. In real terms, GDP grew 4.2% in 2008. Following a sharp correction in 2009, real GDP growth is likely to return to the range of 3–4.5% in the medium term.
Exhibit 2: Average nominal GDP growth rate (%) 05 – 08E Exhibit 3: Annual % change in real GDP and per capita GDP
35 8
30 6 25 4 20 2 15
10 0
5 -2
0 -4 UK US KSA India 2000 2001 2002 2003 2004 2005 2006 2007 2008 Brazil China Japan Russia
Euro Area Euro % change in real GDP % change in per capita real GDP Middle-East
Source: IMF – World Economic Outlook, April 2009, Middle East includes KSA Source: IMF – World Economic Outlook, April 2009
KSA’s robust growth performance, also by international standards, has historically taken place in an environment of exceptional price stability. The Kingdom experienced average annual deflation of 1.0% during the 1990s followed by a period of flat prices in the range of 0 to 1% during 2002-05. Thereafter, however, the situation began to change markedly. KSA’s Consumer Price Index (CPI) increased by 6.5% in December 2007 and reached a peak of 11.1% in July 2008. This increase was led by a surge in oil prices which generated huge trade and current account surpluses, a rise in FDI, high international commodity prices (including food prices), and depreciation of the US Dollar (to which the Saudi Riyal is pegged). With the dramatically changed economic environment, the inflationary pressures have begun to abate however. Inflation fell back to 9.0% in December 2008 and further declined to 5.2% in April 2009 on account of the steep decline in food and commodity prices and the recent strengthening of the US Dollar. The expected further easing of inflationary pressure will provide the Saudi authorities with an opportunity to use monetary tools more effectively to support growth and liquidity in the Kingdom.
Despite inflationary pressures, Despite inflationary pressures hovering around an average level of 10.0% in 2008, the Riyal’s peg Saudi Arabia did not abandon to the US Dollar forced SAMA to follow the US monetary policy and cut interest rates. A strong the Riyal’s Dollar peg macro environment, together with negative real interest rates, fueled credit growth by 25.8% YTD by October 2008. However, SAMA’s move to hike bank reserve requirements (from 9% in January 2008 to 13% in May 2008) helped curb liquidity, and consequently M3 grew by 14.1% YTD.
JUNE 2009 SAUDI ARABIA FACTBOOK 10 OUTLOOK AND DIRECTION
The dramatic change in the economic environment in the second half of the year led SAMA to quickly reverse its stance. It reduced statutory reserve requirements twice (in October and November 2008) back to 7%. This move enabled the banks to utilize about SR20bn of deposits for lending which were held with SAMA. The Government also deposited USD2.5bn and an equivalent amount in Saudi Riyals with banks. Furthermore, SAMA expressed willingness to inject upto SR150bn deposits into the system and reduced key interest rates.
SAMA adopted aggressive SAMA reduced the repo rate four times between Oct and Dec 08 from the level of 5.5%, at monetary policies to counter which it had stood since February 2007. On 19 Jan 09, the Central Bank lowered repo rates the liquidity crunch 50bp to 2% and reverse repo rate 75bp to 0.75%, which resulted in SAIBOR declining 46bp to 1.38% on the same day. The reverse repo rate also declined from 4.25% in December 2007 to 0.75% by January 2009. It was further lowered by 25bp to 0.5% on 14 April 2009.These measures are likely to enhance the liquidity position of domestic banks and help curb interbank interest rates that peaked in October 2008. Currently, interbank interest rates for Saudi Riyal stands at 0.88% (18 May 2009). However, this is not expected to bring about a significant increase in corporate lending, as banks have become more cautious in the environment of heightened uncertainty.
Exhibit 4: Inflation and interest rate (%)
12
10
8
6
4
2
0
-2
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Inflation Short and medium term interest rate
Source: EIU
The sharp reversals of monetary policy stand in marked contrast to the record year that 2008 proved to be in fiscal policy terms. In spite of the pronounced slowdown of the economy during the second half of the year, the high oil prices until July translated into the largest-ever budget surplus in the country’s history. Actual Government revenues in the course of 2008 rose to SR1,100bn against the budgeted SR450bn (144% higher). Government expenditures reached SR510bn in 2008, 24% higher than the budgeted figure for the year.
A huge budget surplus The overall fiscal surplus attained SR590bn in 2008, which was more than three times the 2007 provides plenty of room for the figure of SR178.5bn and 14.75 times higher than the budgeted surplus of SR40bn. This enabled Saudi Government to engage in the Saudi Government to further reduce outstanding debt levels and strengthen official fiscal easing reserves. Domestic Government debt, having peaked at 119.0% of GDP in 1999, continued to trend down from 18.7% to 13.5% of GDP. Government deposits with SAMA increased from SR517bn in December 2007 to SR1,082bn in October 2008. In addition, KSA’s net foreign assets increased to SR1,689.7bn in October 2008 from SR1,171.0bn in December 2007. KSA’s conservative policy in investing its reserves cushioned it against fall in global equity markets in
JUNE 2009 SAUDI ARABIA FACTBOOK 11 OUTLOOK AND DIRECTION
2008. However, investment income from these assets is expected to fall in 2009, as interest rates on foreign deposits and securities drop.
Exhibit 5: Budget balance and public debt
250 140
120 200 100 150 80
100 60 (USD bn)
40 Percentage 50 20 0 0
-50 -20 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Public debt (USD bn) Budget balance (USD bn) Budget balance as % of GDP Public debt as % of GDP
Source: Ministry of Finance (KSA), EIU
While overall public sector debt has declined markedly in recent years, Government borrowing has in relative terms become more reliant on external borrowing. External borrowings, totaling USD42.3bn, accounted for 19.9% of the total public debt in 1999 and compared to domestic borrowing of USD169.8bn. However, 2007 saw a reversal of the traditional dominance of domestic borrowing, with the proportion of external borrowing increasing to 60.7% of total debt. Short-term debt grew from USD19.6bn (46.4% of total external debt) in 1999 to USD35.8bn (37.6% of total external debt) in 2007.
Exhibit 6: External debt
70 28
60 26 24 50 22 40 20 30 (USD bn) 18 GDP % of 20 16
10 14
0 12 1999 2000 2001 2002 2003 2004 2005 2006 2007
External debt (USD bn) Short term debt (USD bn) External debt (% of GDP)
Source: EIU
The favorable debt situation Most domestic Government debt has been raised through bond issues subscribed to by local provides an additional source banks. KSA enjoys a strong credit rating, which was recently upgraded in recognition of the of comfort to investors macroeconomic strength of the country, which further boosted the substantial debt repayments in recent years. This has improved KSA’s profile as an investment destination and, among other things, significantly enhanced the ability of the Saudi corporate sector to raise funds.
JUNE 2009 SAUDI ARABIA FACTBOOK 12 OUTLOOK AND DIRECTION
Exhibit 7: Sovereign debt rating
S & P Moody’s Fitch Country Rating Outlook Rating Outlook Rating Outlook GCC Bahrain A Stable A2 Negative A+ Stable Kuwait AA Stable Aa2 Stable AA Stable Oman A Stable A2 Stable N/A N/A Qatar AA Stable Aa2 Stable N/A N/A KSA AA Stable A1 Positive AA Stable UAE AA Stable Aa2 Stable AA Stable Region (ex-GCC) Egypt BBB- Stable Ba1 Negative BBB- Negative Jordan BBB Stable Baa3 Stable N/A N/A Morocco BBB Stable Ba1 Stable BBB Stable BRIC China A+ Stable A1 Stable AA Stable India BBB- Stable Ba2 Stable BBB- Stable Brazil BBB+ Stable Ba1 Stable BBB- Stable Russia BBB+ Negative Baa1 Stable BBB Negative Argentina B- Stable B3 Stable B- N/A South Africa A+ Negative A2 Stable A Negative Thailand A Negative Baa1 Negative A Negative Vietnam BB+ Negative Ba3 Negative BB Negative Indonesia BB+ Stable Ba3 Stable BB Stable Korea A+ Stable A2 Stable AA Negative Malaysia A+ Stable A3 Stable A+ Stable Mexico A+ Stable Baa1 Stable A- Negative
Source: S&P, Moody’s, and Fitch
Economic fundamentals of KSA The strong credit rating is matched by favorable assessments of Saudi competitiveness. The compare favorably with other 2008-2009 World Economic Forum Global Competitiveness Index (GCI) report finds KSA to be GCC markets a regional leader.
Exhibit 8: KSA’s competitive position in GCC
Global Innovation and competitiveness Basic Efficiency sophistication index requirements enhancers factors Rank Score Rank Score Rank Score Rank Score Qatar 26 4.83 21 5.50 31 4.53 35 4.14 KSA 27 4.72 34 5.21 45 4.35 37 4.09 UAE 31 4.68 17 5.67 29 4.64 38 4.09 Kuwait 35 4.58 39 5.12 52 4.19 52 3.82 Bahrain 37 4.57 28 5.31 46 4.32 54 3.76 Oman 38 4.55 31 5.25 61 4.09 48 3.87
Source: World Economic Forum, The Global Competitiveness Report 2008-2009
2009 budget is marked by an The 2009 budget, unveiled on 22 Dec 08, continues the tradition of fiscal prudence, although, in expansionary fiscal stance and recognition of the growing economic weakness, it proposes deficit spending for the first time a commitment to sustainable after a series of surpluses since 2002. Reflecting the unfavorable oil price outlook, the budget growth foresees revenues of SR410bn, 9% lower than the 2008 budgeted revenue (SR450bn) and 63% lower than the 2008 actual revenues (SR1,100bn). The Government is estimated to have based its budget on an average annual oil price forecast of approximately USD40 a barrel. However, to show its commitment to support the economy, the Government announced
JUNE 2009 SAUDI ARABIA FACTBOOK 13 OUTLOOK AND DIRECTION
spending of SR475bn, 16% higher than the 2008 budgeted expenditure of SR410bn, thus implying a fiscal deficit of SR65bn. Of the total spending, a remarkably high 47% is expected to be capital expenditure, emphasizing the Government’s willingness to improve critical infrastructure and to continue to boost non-oil sector growth in the short run.
Budget spending prioritizes The Government has increased its spending on education and manpower to SR122bn, or education, healthcare, and 25.7% of the total spending. Key projects include the construction of 1,500 new schools, along infrastructure with the renovation of 2,000 others. The budget further provides for the establishment of a Princess Norah University for women, as well as a Medical City at Riyadh’s King Saud University. Healthcare and social services were allotted SR52bn (10.6% of the spending) to be used to build hospitals and primary care centers. Apart from developing social infrastructure, the Government also announced higher spending on physical infrastructure such as transport and telecommunication (SR19.2bn for road construction, ports, airports, railroad developments and new postal services) and water, agriculture and infrastructure (SR35.4bn to finance industrial cities in Jubail and Yanbu).
Exhibit 9: KSA - 2009 budget sectoral new appropriations of total USD126.7bn
Education 26% Others 32%
Health & social affairs 11%
Specialized Credit Institution Municipalty services 16% 4%
Water, agriculture & Transporta ion & infrastructure telecommunica ion 7% 4%
Source: Ministry of Finance, Government of KSA
JUNE 2009 SAUDI ARABIA FACTBOOK 14 OUTLOOK AND DIRECTION
Strong hydrocarbons fundamentals
Capitalizing on its vast KSA holds approximately 25% of the world’s total proven oil reserves and is the world’s leading reserves, KSA plans to increase producer. KSA’s known oil reserves are expected to be sufficient for approximately 70–80 years. its oil production capacity At an average price of USD96.6 per barrel in 2008, these reserves are worth USD25.5trn. Even assuming that prices revert to their 2000-2007 average of USD43.75 per barrel due to the current economic crisis, the value of the reserves would amount to USD11.6trn, which is approximately equal to more than 20 times the current annual Government expenditure.
• KSA has the world’s largest oil reserves (25% of the total); fourth largest natural gas reserves (252.6 trillion cubic feet)
• It is the world’s leading producer of crude oil; accounting for around 31% of OPEC’s production
• KSA is undertaking projects to expand its oil production capacity to 12.5mn bpd by 2010
• Outlook for 2009 remains bleak due to weak crude oil demand and oil price softness
• To counter falling oil prices in the short-term, KSA lowered its oil output to about 8.1mn bpd in January 2009, in line with the OPEC’s decision to cut production
• Long-term growth story remains intact; Asian markets will be the key growth driver
Saudi Arabia is increasingly the only real swing producer in the oil market, accounting for 31% of OPEC's total production target. Current investment plans look to boost this position further. KSA is planning to increase its production capacity to 12.5mn bpd by 2010 from the current capacity of 10.8mn bpd. As of December 2008, projects worth USD152bn were underway in the oil, gas and petrochemicals sectors, a substantial proportion of the aggregate project pipeline of USD492bn. The completion of these projects will enable the Kingdom to achieve its desired target.
Exhibit 10: World proven crude oil reserves by region (mn barrels)
2002 2003 2004 2005 2006 2007 North America 27,167 26,954 26,243 26,579 26,699 25,914 Latin America 117,528 117,045 118,700 118,141 123,717 134,691 Eastern Europe 118,350 121,954 124,451 128,597 129,056 129,049 Western Europe 18,081 17,656 16,810 16,716 15,372 15,110 Middle East 730,102 735,083 739,136 742,688 743,858 741,566 Africa 102,064 112,345 113,264 117,458 117,572 119,572 Asia & Pacific 38,441 38,442 38,763 39,000 38,857 38,282 Total world 1,151,734 1,169,480 1,177,466 1,189,178 1,195,130 1,204,182 OPEC 895,639 904,575 910,754 918,295 927,435 939,016 KSA 262,790 262,730 264,310 264,211 264,251 264,209 KSA as world % 22.8 22.5 22.5 22. 22.1 21.9
Source: OPEC – ABS 2007
Exhibit 11: Comparative estimate of remaining life of oil reserves of top five countries
Proven oil reserves Daily oil production Estimated remaining (bn barrels) (mn barrels) life of reserves (years) KSA 264.21 8.82 67.91 IR Iran 136.15 4.03 93.16 Iraq 115.00 2.18 155.97 Kuwait 101.50 2.57 104.54 United Arab Emirates 97.80 2.53 90.83
Source: OPEC – ABS 2007, U.S. – EIA
JUNE 2009 SAUDI ARABIA FACTBOOK 15 OUTLOOK AND DIRECTION
In spite of the ongoing diversification efforts, the Saudi economy looks certain to remain heavily Despite diversification efforts, reliant on oil for the foreseeable future. The contribution of the oil sector to the country’s GDP the Saudi economy remains primarily dependent on increased from 33.5% in 1999 to 54.5% in 2006. It contributed almost 82.5% (USD88bn) to the hydrocarbons budget revenues of USD106.67bn in 2007. With oil prices plummeting since last year and projections of demand destruction still being revised upward, the near-term outlook for the oil price is weak. Latest IEA figures forecast a 1 mbd drop in global oil consumption in 2009 to 84.8 mbd. Moreover, OPEC, which pumps approximately 40% of the world's oil, cut output by 4.2mn bpd during the second half of 2008 in a bid to counter falling prices, the largest-ever such cut. In line with the OPEC decision, Saudi Arabia lowered its oil output to about 8.1mn bpd in Jan 09. Despite production cuts by the OPEC since September 2008, it has failed to raise oil prices to the level sought by the members, as the global recession erodes demand. The average price in the first quarter of 2009 was USD43.32 per barrel, which was 56.0% lower than a year earlier. While production cuts are certain to be implemented to a degree, enforcing discipline has been a persistent problem for OPEC members in the past, which may limit the impact of the cuts on prices.
Exhibit 12: KSA - crude oil production (mn barrels)
4,000 10
8 3,000
6 2,000 4
1,000 2
0 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total crude oil production Daily crude oil production (RHS)
Source: SAMA
Weak crude oil demand and Going forward, oil prices will be critically dependent on the demand outlook. Beyond 2010, the price likely to depress KSA market outlook will be determined above all by emerging markets, with China, India and the economy in 2009, but a Middle East expected to account for 80% of incremental oil demand up to 2030, according significant pick-up expected in to IEA estimates. Demand from Asian emerging economies is set to double from the 14.8mn 2010 bpd level in 2004 to 29.8mn bpd in 2030. Growth in other key emerging regions is likely to exceed 70% over the same period. With a number of mature oil fields around the world declining, the oil market is likely to be fairly tight, which should sustain higher oil prices, themselves a precondition for additional investment in the sector.
Emerging economies to define KSA’s oil export market is dominated by Asia and the Far East, North America, and Western the dynamics of oil demand Europe. The share of Asia and the Far East has been steadily increasing. The importance of the growth Asian market will be a key driver of the likely expansion of Saudi production and exports in the coming years.
JUNE 2009 SAUDI ARABIA FACTBOOK 16 OUTLOOK AND DIRECTION
Exhibit 13: KSA’s exports of crude oil by destination (mn barrels)
North South West Middle Asia & Year America America Europe East Africa Far East Oceania Total 1999 534.20 26.95 454.33 68.97 73.66 921.77 7.80 2,087.68 2000 577.17 22.47 483.80 60.44 79.45 1,044.67 14.38 2,282.38 2001 560.06 36.76 405.86 57.44 64.62 1,067.98 10.38 2,203.10 2002 488.80 22.08 343.12 49.46 68.36 942.89 14.18 1,928.89 2003 596.92 23.84 434.86 72.69 96.34 1,149.87 6.33 2,380.85 2004 558.38 22.32 459.56 95.45 88.74 1,251.06 11.26 2,486.77 2005 530.93 23.79 440.67 112.87 86.02 1,435.34 1.62 2,631.24 2006 534.50 23.78 374.80 109.48 79.01 1,440.63 3.52 2,565.72 2007 571.78 22.34 306.04 113.06 71.76 1,453.23 2.95 2,541.16
Source: OPEC, SAMA
KSA is also well positioned to benefit from the growing interest in natural gas, driven by pollution concerns and efficiency considerations. KSA possesses gas reserves of 252.6 trillion cubic feet and ranks fourth in the world after Russia, Iran and Qatar.
Exhibit 14: KSA – gas statistics
2001 2002 2003 2004 2005 2006 2007 Reserves (trillion scf) 227,946 234,673 238,492 241,323 243,648 252,607 257,954 Number of discovered fields 12 12 13 14 14 - - Gas production (bn cu m) 57 61 68 76 81 85 - Gas consumption (‘000s barrels) 305,080 327,008 339,796 376,140 416,897 422,905 436,960
Source: Ministry of Petroleum and Mineral Resources, Govt. of KSA
KSA to witness strong growth Domestically, Saudi Arabia uses gas for electricity generation, water desalination, and as a in domestic natural gas petrochemical feedstock. Gas thus plays a critical role in the ongoing and projected demand from utilities and diversification ventures in the Kingdom. Saudi Arabia's natural gas demand is expected to reach industry 14.5bn cubic feet-a-day (cf/d) over the next 25 years, compared with around 5.5bn cf/d at present. Though Saudi Aramco plans to increase the exploration of gas, the growth in natural gas output under the current expansion plans may in fact fail to meet the soaring demand. Moreover, since much of KSA’s gas production is associated with oil production, the cut in oil output to support prices could lead to disruptions in natural gas supply for the industrial and utility sector.
JUNE 2009 SAUDI ARABIA FACTBOOK 17 OUTLOOK AND DIRECTION
Beyond oil
KSA’s non-oil sector growth Despite years of efforts by the Government to diversify its economy away from oil, hydrocarbons indirectly depends on its still represent up to 90% of the Kingdom’s export earnings. The ongoing economic disruption hydrocarbon resources highlights KSA’s pressing need for greater economic diversification as a stabilizing factor.
• Non-oil private sector grew 8.0% y-o-y in 2008, continuing a four-year positive trend
• Non-hydrocarbon economy largely benefited from the favorable economic environment, diversification initiatives and Government-supported structural reforms
• Aggressive monetary easing and an expansionary fiscal stance are likely to infuse liquidity and keep key infrastructure projects afloat
• Manufacturing, financial, and construction sectors are likely to display strong growth during 2008-10
• Saudi banks are relatively robust in the GCC, buoyed by healthy capital adequacy ratios and conservative loan disbursal norms
• A healthy demographic profile that includes 3.0% annual growth rate and a young population is driving robust domestic demand
• WTO accession encourages foreign investment and has created new investment opportunities in many sectors
Growing at 8.0% y-o-y in 2008, the non-oil private sector registered strong growth for the fourth year in a row. Yet, much of the incremental growth achieved in recent years has, to a significant degree, still been derived from the hydrocarbons sector. Many of the industrialization ventures rely on hydrocarbons as an input or a source of low-cost energy. The revenues and liquidity generated by the sector have also been critical in fuelling growth in other areas.
Exhibit 15: Non-oil GDP by major economic activities
(At 1999 constant prices ) (USD mn)
2006 2007 Annual growth (%) Agriculture, forestry & fishing 10,320 10,419 0.96 Manufacturing 18,701 20,276 8.43 Electricity, gas and water 3,364 3,522 4.71 Construction 14,531 15,568 7.13 Wholesale & retail trade, restaurants and hotels 16,777 17,817 6.20 Transport, storage & communication 12,028 13,299 10.56 Finance, insurance, real estate & business services 26,245 27,208 3.67 Community, social & personal services 7,858 8,134 3.52 Total 111,830 118,250 5.74
Source: SAMA, EIU
Diversification driven by a One of the leading beneficiaries of these structural reforms and improved business climate has buoyant economy and a huge been the Kingdom’s financial sector. A buoyant economy, regulatory reform, and a favorable petrodollar influx liquidity environment have supported the rapid growth of the sector in recent years. Even in the far more challenging operating environment since the middle of 2008, the Kingdom’s banks remain among the strongest in the GCC, supported by healthy capital adequacy ratios, well- provisioned balance sheets, and proactive Government support. The Saudi banking sector, with total assets of USD290bn as on 31 Dec 07, ranked second in the GCC, after the UAE, which registered total assets of USD336bn. The sector’s assets have grown at a CAGR of 19.0% to
JUNE 2009 SAUDI ARABIA FACTBOOK 18 OUTLOOK AND DIRECTION
USD347.3bn during the period 2003-2008, benefiting from the country’s strong economic growth, the government’s focus on economic diversification, massive investments and low credit penetration. Going forward, the low penetration of financial services in KSA – loans-to-GDP ratio of 41.6% in KSA, compared with more than 80% in the UAE and Bahrain – underscores the potential for growth in the sector. Additionally, the anticipated growth in population and the introduction of a comprehensive regulatory framework for mortgages are likely key catalysts for long-term credit growth in the Kingdom.
Moreover, the liberalization of the insurance sector and regulations mandating motor and health insurance are expected to boost expenditure on insurance. KSA is one of the most under-insured markets in the GCC with insurance penetration rates (gross written premium to GDP ratio) at only 0.6% in 2007 against UAE’s (1.9%), Oman (1.1%) and Qatar (0.9%). This indicates that the sector has potential for exponential growth going forward.
Manufacturing, financial and The Saudi telecommunications sector continues to be among the lucrative markets in the GCC construction sectors posses due to low broadband and Internet penetration as well as favorable demographics. At the same considerable convergence time, the rising population, a growing hotel and tourism industry and higher personal disposable potential income levels are important structural factors fuelling demand in the Kingdom’s real estate market. This along with the establishment of a proper regulatory framework for mortgages and the planned development of the six economic cities is likely to support growth in the construction sector over the long term. Overall, the manufacturing, financial and construction sectors are likely to be the prime growth drivers, going forward. We expect these sectors to expand at a CAGR of 9.5-13% in 2008-2010.
Favorable demographic profile, KSA’s population was more than 24.9mn in 2007, with average annual growth of approx 2.5% an important chapter in KSA’s over the period 1999-2007. In 2008, the population is estimated to have grown 2.3% to growth story 24,807,273 individuals. Of the total, approximately 73% are Saudi nationals. Population growth is set to remain robust in the medium term at 3% pa, driven in part by a continued influx of expatriates linked economic liberalization and growth.
Exhibit 16: KSA’s population and y-o-y change in population
48 2.7
43 2.6 38
33 2.5
28 Population (million) 2.4
23 Y-o-y change in popula ion (%)
18 2.3 1999 2000 2001 2002 2003 2004 2005 2006 2007 2010 2015 2020 2025 2030
Population in million Y-o-y change in population(%)
Source: EIU
In 2007, KSA’s working age population was 14.5mn (58.5% of total) with 59.4% of the population in the age group of 15-64. At the same time, approximately 42% of the population fell into the 0–15 age group. KSA’s demographic profile will thus ensure a steady supply of new entrants into the labor force, but the young population also highlights the importance of
JUNE 2009 SAUDI ARABIA FACTBOOK 19 OUTLOOK AND DIRECTION
appropriate policies to ensure that the workforce is educated and trained. The large share of the working-age population and favorable employment prospects should continue to boost per capita GDP significantly, which in turn indicates the substantial opportunities for consumption- driven demand and growth.
Exhibit 17: Population pyramid (estimated) Saudi Arabia: 2010 Saudi Arabia: 2030
80+ 80+ 75-79 75-79 70-74 70-74 Male 65-69 Female Male 65-69 Female 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 2.5 2 0 1 5 2 0 0.5 0.0 0.00.510152025 2 5 2.0 1 5 2 0 0.5 0.0 0 0 0 5 1.0 1.5 2 0 2 5 Population (in mn) Population (in mn) Source EIU, Central Department of Statistics and Information of Saudi Arabia
Recent developments suggest that the Government’s efforts to boost employment have started to yield results — the absolute number of economically active people has increased, while the unemployment rate has come down.
Exhibit 18: Labor force and unemployment
6 5 14
6 3 12 6.1 10 5 9 8 5.7 6 5 5
Labor force (millions) Labor 4 5 3 Unemployment rate (%) Unemployment
5.1 2
4 9 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 Labor force Unemployment rate - total Unemployment rate - Saudi Unemployment rate - non-Saudi
Source: EIU
WTO accession has KSA joined the WTO on 11 Dec 05, after more than a decade of negotiations. The Saudi encouraged foreign investment Government has taken a number of important steps to align various policies with WTO and created investment regulations. To accelerate liberalization further, KSA Government launched the 10 x 10 mission opportunities in many sectors (to position KSA among the top 10 of the world's most competitive nations by 2010 in 2005). The Kingdom has opened up a wide range of sectors to foreign investment. These include banking, insurance, wholesale, retail and franchise distribution services, telecommunications services, and the IT sector. The WTO accession is an important anchor to the broader reform, which led to the World Bank recognizing the Kingdom as one of the world's top ten reformers in 2006-07. KSA is currently ranked 16th in the World Bank's Ease of Doing Business 2009 index.
JUNE 2009 SAUDI ARABIA FACTBOOK 20 OUTLOOK AND DIRECTION
The significantly improved business climate, along with the Most Favored Nation (MFN) status obtained in connected with WTO accession, resulted in FDI worth USD18.3bn flowing into KSA in 2006, the highest among the GCC countries. FDI further grew by 33% to USD24.3bn in 2007. Energy and commodities-related investments accounted for a majority of this figure. Other factors contributing to the unprecedented growth in FDI include the removal of minimum capital requirements for foreign investors, a reduction in the corporate tax rate from 45% to 20%, and the opening of the inland transport, wholesale and retail distribution systems to foreign investors. Through the Saudi Arabian General Investment Authority (SAGIA), the Government is promoting private sector investments in the areas of education, energy, health, information and communication technology (ICT), life sciences, and transportation.
Congenial business Due to the ongoing liberalization measures, SAGIA forecasts FDI inflows of up to USD900bn environment provides a strong over the next ten years into sectors such as energy, power, financial services, and real estate. draw to foreign investment Exhibit 19: Improvements after WTO accession
Value Annual percentage change 2007 2000-2007 2006 2007 Merchandise trade Merchandise exports, fob (USD mn) 234,200 17 17 11 Marchandise imports, c.i.f. (USD mn) 90,217 17 17 29 Share in world total exports 1.68 Share in world total exports 0.63 Commercial services trade Commercial services exports (USD mn) 7,912 7 9 8 Commercial services imports (USD mn) 30,560 16 34 58 Share in world total exports 0.24 Share in world total imports 0.99
Source: October 2008, WTO
Privatization policy and Another key tenet of economic policy is efforts to foster private entrepreneurship. The Supreme initiatives likely to boost the Economic Council (SEC), established in 1999, formulates and monitors economic development Government’s revenues policies in order to accelerate the privatization program announced by KSA Government in 1994. In 2002, the SEC formally endorsed a privatization strategy that aims to improve economic efficiency, boost competitiveness, increase private sector investment, and attract domestic and foreign investors. These initiatives further promise to expand the revenue base of the Government budget by creating additional income streams such as privatization proceeds.
In pursuit of its objectives, the SEC initially focused on creating a comprehensive regulatory and institutional framework for the reforms. The Government set up the Communications and Information Technology Commission, the Saudi Electricity Regulatory Authority, and the Saudi Organization for Industrial Estates and Technology Zones, to regulate the relevant sectors. Furthermore, the Council of Ministers issued a list of 22 targeted economic activities and Government services to be privatized. The selection of these activities is based on their contribution to the national economy, particularly in terms of generating employment opportunities for KSA nationals, and the readiness of particular companies for privatization. The privatization process is further driven by the frequent inadequacy of services provided by public enterprises as well as the absorptive capacity of the capital market. Privatization targets include aviation, railroads, roads, industrial cities services, and several municipal, social, agricultural, and medical services. Among the main steps approved to date by The Ministerial Privatization Committee was the 2002 IPO of a 30% stake in STC, followed by the further divestment of a 50% stake held by the Public Investment Fund in 2003.
JUNE 2009 SAUDI ARABIA FACTBOOK 21 OUTLOOK AND DIRECTION
International trade
Recent years have been marked by a steadily increasing integration of Saudi Arabia in the global economy. Total exports jumped by 32.0% to USD278.9bn in 2007, supported by high oil prices and the various economic diversification initiatives. Imports grew from USD69.8bn in 2006 to USD90.3bn in 2007, buoyed by the oil price-fueled boom. Oil exports accounted for the majority of KSA’s total exports, while engineering products (machinery, electric appliances and equipment) constitute the leading category of imports. The strength of the hydrocarbons market allowed KSA to record a trade surplus of USD148.3bn in 2007. Official estimates put total exports of goods and services in 2008 at USD326.9bn. Non-oil exports of goods are expected to account for a still relatively modest USD30.7bn of this. Total imports of goods and services are expected to reach USD162.7bn.
Exhibit 20: International trade
350 100%
300 80% 250
60% 200
150
(USD bn) 40%
100 20% 50
0 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Total exports fob Total imports cif Crude oil as % of total exports Machinery as % of total imports
Source: Ministry of Finance, Government of KSA , SAMA, EIU
KSA’s major export destinations in 2007 included Japan (17.7% of total exports), the U.S (15.9%), South Korea (9.1%), China (7.2%), Taiwan (4.7%) and Singapore (4.5%). Oil exports form the major component of KSA’s total exports, while other products include barley, dates, dairy products, flowers, chemicals, and plastic products. Since Japan and the US are the two most important export destinations, an economic slowdown in those countries will inevitably adversely affect KSA’s exports.
The picture is similar on the import side. In 2007, the U.S accounted for 12.3% of total imports followed by Germany (8.6%), China (7.9%), Japan (7.3%), the United Kingdom (4.9%), Italy (4.8%), and South Korea (4.1%). Over the past two years, China has quickly established itself as an important import partner of KSA. Machinery and electrical equipment, transport equipment and base metals, in that order, are the three leading import categories, accounting for 60% of the total.
JUNE 2009 SAUDI ARABIA FACTBOOK 22 OUTLOOK AND DIRECTION
Exhibit 21: Major export partners (% of total exports) Exhibit 22: Major import partners (% of total imports)
25% 20
20% 16
15% 12
10% 8
5% 4
0% 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 1999 2000 2001 2002 2003 2004 2005 2006 2007 USA Germany China Japan Japan USA South Korea China
Source: SAMA, EIU Source: SAMA, EIU Currency and exchange rates
KSA follows a fixed exchange rate policy under which the Saudi Riyal is pegged to the USD at the exchange rate of USD1=SR3.745. The CPI-based Real Effective Exchange Rate (100 in 1997) fell sharply from 99.28 in 1999 to 82.22 in 2007. This dented the purchasing power of the Saudi Riyal and contributed to the onset of inflationary pressures in 2007. This led to growing pressures on GCC Governments to drop the peg and to consider measures such as trade- weighted exchange rates. This was indeed the course taken by Kuwait when it de-linked the Dinar from the USD in May 07. Among others, the Arab Monetary Fund advocated the idea of de-pegging in December 07. However, recent statements from various GCC Governments suggest that such steps are unlikely in the near term, not least because of the abating inflationary pressures and the recent recovery in the standing of the greenback. Instead, the focus appears to have shifted to the goal of adopting a shared currency at the beginning of the 2010s, even if the project remain fraught with political tensions and technical delays. The Dollar peg will probably remain the most logical instrument of exchange rate coordination up to that point, while the introduction of the GCC single currency will create an opportunity to review to exchange rate regime for the region as a whole.
Exhibit 23: CPI based Real Effective Exchange Rate (REER)
105
100
95
90
85
80 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E
Source: SAMA, EIU
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JUNE 2009 SAUDI ARABIA FACTBOOK 24
Saudi Stock Exchange
Cornerstone of GCC Equity Markets
History and overview
The leading GCC equity market
Tadawul’s operational systems Shares were first offered to the public in KSA in 1954 and by the end of 1975, the number of were far ahead of its times public companies had reached 14. In 1984, the Ministry of Finance and National Economy, the Ministry of Commerce, and SAMA formed a Ministerial Committee to oversee the development and regulation of the stock market. The country’s commercial banks, which were responsible for share trading, established the Saudi Share Registration Company (SSRC) in 1984. The new entity provided centralized trading facilities for joint stock companies along with the clearing and settlement of all transactions. Automated clearing and settlement was introduced in 1989 followed by the launched of the Electronic Securities Information System (ESIS) a year later. A comprehensive modern infrastructure for securities trading, clearing and settlements, Tadawul, was set up in October 2001.
A modern, comprehensive The establishment of Tadawul was backed up by a commitment to establish world-class regulatory framework was standards for the institutional architecture and regulation of the new market. Tadawul was created simultaneously with the placed under the supervision of the newly established Capital Market Authority (CMA) whose Capital Market Authority operations are governed by the 2003 Capital Market Law. Reporting directly to the King, the CMA enjoys financial, legal and administrative independence. Many of the practices adopted by Tadawul were in line with or even ahead of international standards (e.g. dematerialization and same day clearing and settlement since 1990). A special dispute resolution mechanism exists for the capital markets.
The state-owned Tadawul became a joint stock company -- Saudi Stock Exchange (Tadawul) Company -- in March 2007, with a capital of SR1.2bn (USD320mn). Tadawul is managed by a Board of nine members – the Governor of SAMA, two members, one each from the Ministry of Finance and National Economy and the Ministry of Commerce, four from licensed brokerages, and two from listed companies. Electronic trading in Tadawul was upgraded by the Nordic exchange operator OMX in 2007.
Between 1999 and 2007, the Saudi stock market experienced almost uninterrupted growth due to the country’s strong economic performance which in turn drove rapid earnings growth. The TASI surged by 451% from 2,029 at the end of 1999 to 11,176 at the end of 2007. Total market cap increased from USD61.1bn in 1999 to USD246.9bn at the end of 2008, while the number of transactions grew from 0.5mn to 52.1mn. The total number of shares traded rose more than hundred-fold from 0.5bn to 59.7bn. Returns from the index increased at a CAGR of 60.1% from Jan 03 to Dec 08, as surging oil prices translated into higher revenues.
Market corrected substantially The performance of the market during this decade has been marked by considerable volatility. A in 2006 due to negative particularly robust boom culminated in 2006 with high liquidity levels, backed by seemingly ever- sentiment and increased risk- increasing oil prices, and by foreign investors (primarily from developed countries) wanting to aversion benefit from the attractive interest rate differential. Though Tadawul imposed restrictions on share dealings by foreign investors, participation in open-end mutual funds was allowed. Although corporate earnings continued to grow, the pace was ultimately insufficient to sustain the market rally. In value terms, shares traded in the last quarter of 2006 fell by almost 49% in comparison to the same period in 2005. Increasing interest rates in developing countries reduced the attractiveness of the Saudi equity market for foreign investors as well as their appetite for risk, which they had until then willingly ignored in their quest for higher returns. The effects of an overvalued market and of foreign money leaving were felt by the GCC in late 2005
JUNE 2009 SAUDI ARABIA FACTBOOK 26 HISTORY AND OVERVIEW
and by the Saudi stock market in early 2006. Consequently, the Saudi stock market witnessed a massive correction in 2006, with the TASI shedding 52.5% y-o-y to end 2006 at 7,933. The correction helped re-align valuations to underlying fundamentals.
TASI rose by 451% in 1999- TASI regained traction in 2007 and jumped 40.8% to 11,176, primarily fueled by high oil prices 2007, before correcting again in and attractive valuations of Saudi stocks. Oil prices grew by 60.42% from 29 Dec 06 (USD55.95 2008, with corporate per barrel) to 28 December 2007 (USD89.76 per barrel). However, in 2008, TASI lost significant profitability under stress ground, as the global economic crisis slowly gripped KSA equity markets. The second half of 2008 belied all expectations of the Kingdom’s relatively closed domestic market protecting the economy from the global downturn and dashed the previously popular decoupling theory. Matching the crash of 2006, share values in KSA dropped by 56.5% in 2008, reflecting fears of a global recession. This resulted largely from panic selling by retail investors who continue to account for approximately 92% of the total turnover on Tadawul. The oil price crash and flight of liquidity particularly depressed the Petrochemical and Banking & Financial Services sectors, respectively, two heavyweight sectors accounting for over 70% of TASI’s total capitalization. Their losses during the year were 66.5% and 55.5% respectively. Concerns over KSA banks’ sub-prime exposure arising from write-downs by banks elsewhere in the region further dented investor confidence in the Kingdom, in spite of reassurances by the authorities. The stock exchange’s market capitalization fell by 52.5% to SR925bn while the number of transactions reached 59,683mn. In addition, TASI’s 12M trailing P/E multiple contracted by 49.0% during 2008.
Exhibit 24: Saudi stock exchange – summary statistics
Transactions Shares Mkt cap Mkt cap y-o-y Year (‘000s) traded (mn) (SR bn) (USD bn) TASI chg. (%) 1999 438 528 229 61.07 2,029 43.6 2000 498 555 254 67.73 2,258 11.3 2001 605 692 275 73.33 2,430 7.6 2002 1,034 1,736 280 74.67 2,518 3.6 2003 3,763 5,566 590 157.33 4,438 76.3 2004 13,320 10,298 1,149 306.40 8,206 84.9 2005 46,607 12,281 2,438 650.13 16,713 103.7 2006 96,096 74,440 1,226 326.93 7,933 (52.5) 2007 65,670 61,732 1,946 518.93 11,176 40.9 2008 52,136 59,683 925 246.67 4,803 (57.0) % change 10 – year 70.1 69.1 16.8 16.8 10.0
Source: Saudi Stock Exchange
Saudi retail investors dominate trading on the Tadawul, accounting for 93.5% and 92.8% of total trades and turnover, respectively. Saudi corporate and mutual funds account for only 1.9% of total turnover. The market thus continues to differ markedly from its more established Western counterparts due to the relatively marginal role of institutional investors.
JUNE 2009 SAUDI ARABIA FACTBOOK 27 HISTORY AND OVERVIEW
Exhibit 25: Breakdown of number of trades Exhibit 26: Breakdown of turnover
GCC Citizens Non-GCC GCC Citizens Non-GCC 1.1% Citizens 0 9% Citizens 1.9% 1.9% Mutual Fund Mutual Fund 0.8% 1.2% Foreigners Foreigners 0.1% 0.2% Corporate Corporate 2.0% 1.4%
Individual Individual 94.1% 94.4%
Source Tadawul Source Tadawul
The dominance of retail investors remains a significant source of volatility on the Saudi equity market. Efforts are being made to foster investor education, transparency and the quality and availability of research. Nonetheless, international experience demonstrates that only a greater role assumed by institutional investors can fundamentally ameliorate the situation.
The domestic institutional investor base is gradually expanding thanks to the expansion of the insurance sector and of mutual funds. While positive progress is likely and certain to profit from further de-regulation in the future, greater access by foreign investors constituted another potential way of accelerating the process. In this regard, progress to date has been very gradual. In 2007, the CMA issued a regulation ensuring equality between KSA nationals and citizens of other GCC countries with regard to investment and trading in the Saudi stock market.
SAMA’s guidelines for non- At present, non-resident non-GCC citizens are not allowed to directly trade in the Saudi equity GCC citizens allows market and can invest only through equity-based mutual funds or – as of 2008 -- through swap investments only through deals. The mutual funds must be managed by a local fund manager. Such funds are supervised mutual funds or equity swaps by SAMA.
Exhibit 27: Flow chart - Inflows in KSA through mutual fund route
Returns Non-GCC investors – Individuals, Natural Entities
Equity Mutual fund Funds flow Funds
Saudi Stock Market
Returns
Source: NCBC Research
Swap deals point to greater Under swap agreements, non-resident foreign investors are allowed to buy stocks through a foreign participation once the licensed intermediary, who would technically be the owner of the shares. However, shares market stabilizes bought through this arrangement would be for a maximum term of four years. The CMA must be notified of the details of such deals and be updated on a monthly basis. This development failed to muster the level of foreign capital inflows expected, as investors were not allowed to directly own a stock, with all the rights and entitlements associated with stock ownership.
JUNE 2009 SAUDI ARABIA FACTBOOK 28 HISTORY AND OVERVIEW
Ultimately, foreign interest in the Saudi market is likely to grow steadily and further liberalizing measures should gradually materialize. The eventual inclusion of Tadawul in some of the key emerging market indices would make KSA an essential part of the portfolios of a wide range of international investors. The country will further benefit from its statute as one of the largest emerging capital markets and home to an increasingly diverse economy with exceptional growth potential.
Market composition
Tadawul is the dominant market With a market capitalization of USD246.5bn as of 31 Dec 08, Tadawul is the largest GCC stock in the GCC, with the largest market accounting for 45.2% of the regional aggregate. It is the most liquid market in GCC with market capitalization and the an average daily turnover of USD2.08bn in 2008. Tadawul’s market cap accounted for 6.4% of highest liquidity the MSCI Emerging Markets index at the end of 2007. KSA’s equity market delivered a Return on Equity (RoE) of 24.1% when compared with 16.7% by the MSCI Emerging Markets Index and 18.9% by BRIC countries in 2007. However, post the credit crisis which began in 2008, the Saudi market has fallen by 56%, one of the sharpest corrections in the region.
Exhibit 28: Market cap (USD bn) and index movement y-o-y (%)
700 105%
600 85%
65% 500 45% 400 25% 300 5% 200 -15%
100 -35%
0 -55% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Market cap Stock index returns (RHS)
Source: Saudi stock exchange, NCBC Research
The adoption of a free-float On 5 April 2008, Tadawul became the first GCC market to introduce the free-float methodology methodology was a paradigm for index calculation. Based on Tadawul's data on free float of shares, we estimate the free-float shift in Saudi indexing market capitalization of the Saudi stock market to be SR372bn (USD99.47bn) as on 31 December 2008, which is 37.6% of the market cap calculated using the full-market capitalization method.
JUNE 2009 SAUDI ARABIA FACTBOOK 29 HISTORY AND OVERVIEW
Exhibit 29: Concentration of large cap companies fall significantly
100 84.8% 90
80 63.3%
70 82.9% 48.5% 60 60.9% 50
40 45.6%
Cumulative weight (%) weight Cumulative 30
20
10 Top 5 Firms Top 10 Firms Top 25 Firms Old Weight New Weight
Source: NCBC Research
In this new structure, the number of sectors expanded from 8 to 15 2007 with individual sub- indices for each. As of 31 December 2008, the banking sector had maximum weight (31.1%) in the index, followed by petrochemical (25.6%) and telecom (14.5%). Following the implementation of the new system, Saudi Basic Industries Corp, Kingdom Holding, and Saudi Kayan Petrochemical Company were the top losers in terms of index weightage, while STC, Al Rajhi Bank, Samba Financial Group and Saudi Electricity are the top gainers.
Banking and financial services Exhibit 30: Changes in top 10 companies sector companies have the Old New greatest weight in the Saudi Company Old rank New rank weights (%) weights (%) market Saudi Basic Industries Corp. 1 1 25.8 16.7 Saudi Telecom Co. 2 2 7.4 10.6 Al Rajhi Bank 3 3 7.3 9.1 Kingdom Holding Co. 4 8 4.1 3.2 Samba Financial Group 5 4 4.0 5.0 Saudi Electricity Co. 6 5 3.4 4.2 SABB 7 6 3.1 3.5 Riyadh Bank 8 7 2.9 3.4 SAFCO 9 10 2.7 2.4 Banque Saudi Fransi 10 9 2.7 2.7 Arab National Bank 12 12 2.2 2.2 Saudi Kayan Petrochemical Co 13 17 2.2 1.6
Source: NCBC Research
KSA the most active IPO market across the GCC
Liberalizing reforms have The Saudi Government’s economic reforms and privatization efforts have been a key driver of resulted in more companies stock market development in recent years. A total of 13 companies — three from the insurance going public sector, three from the industrial investment sector, two from the petrochemical industries sector, and one each from retail, agriculture, telecom, building and construction, and bank and financial services sectors – went public in 2008, raising a total of SR36.4bn. This compared to 26 companies in 2007. Although, stock markets in KSA have recently undergone a deep correction, IPO activity remained high during much of 2008, compared with other GCC peers. The Saudi Stock Exchange remained one of the world's busiest IPO markets, generating USD9.7bn in net proceeds in the first nine months of 2008.
JUNE 2009 SAUDI ARABIA FACTBOOK 30 HISTORY AND OVERVIEW
Based on offer size, the top three IPOs in KSA were those of the shariah-compliant commercial Islamic bank Alinma Bank (USD2.8bn), the mining company Ma’aden (USD2.5bn), and the wireless service provider Zain (USD1.9bn). Other major issues during the year included Al Othaim Markets, the Saudi Rabigh Refining and Petrochemicals Co., Saudi Reinsurance Co., Mohammad Al Mojil Group, and Methanol Chemical Co. The market capitalization of the offered companies at the end of 2008 was SR66.67bn, representing 7.21% of the total market capitalization.
Number of IPO’s in KSA Exhibit 31: Total IPOs in the GCC 2005–08 outstrips other GCC markets 30 26 25
20
15 13 12 10 10 66 4 4 5 333 3 3 2 2 2 22 1 1 1 0 0 0 2005 2006 2007 2008 Saudi UAE Kuwait Qatar Oman Bahrain
Source: Zawya, Tadawul, NCBC Research
Among GCC member countries, KSA topped the IPO list, followed by the UAE. Three companies listed on the Kuwait exchange in 2008 as against one in 2007.
Exhibit 32: Returns of companies listed in 2008
0% -10%
-20% -30%
-40% -36% -50% -44% -49% -49% -48% -52% -51% -52% -51% -52% -51% -51% -52% -52% -50% -52% -60% -56% BCI Zain UCA TASI MMG BUPA Alinma Al Sagr Saudi Re Al Othaim MA'ADEN Astra Indust CHEMANOL Petro Rabigh Arabia Insurance Arabia Halwani Brothers Trade UnionCooperativeTrade
Source: Tadawul, NCBC Research
All newly listed companies in All companies that listed on the Saudi stock exchange in 2008 have outperformed the TASI 2008 have outperformed the index, which was down 56.5%. Of the new listings, Methanol Chemicals Company was the best TASI performer; its IPO, priced at SR30 a share, was oversubscribed 6.01 times and the stock returned 16.7% on the first day of listing. The company had a market capitalization of SR1,344mn as on 31 December 2008.
JUNE 2009 SAUDI ARABIA FACTBOOK 31 HISTORY AND OVERVIEW
Market regulation and supervision
The Capital Market Authority (CMA) was established with the promulgation of the Capital Market Law in 2003 as the independent regulator of the Saudi capital markets. It is vested with the authority to regulate and develop the Saudi stock exchange, to regulate and monitor securities issuance and trading, and to protect investors. The CMA is supported in its functions by the statutory objectives of the Stock Exchange which, among other things, is required to:
• make listing requirements, trading rules and technical mechanisms fair, efficient and transparent and provide information for securities listed on the exchange;
• establish and enforce professional standards for brokers; and
• conduct periodic review of compliance by brokers to ensure financial security.
The Capital Market Law, which was drafted with a view to incorporating international best practice standards, has been of critical importance for fostering high governance and transparency standards in the Saudi market. It requires every joint stock company to submit quarterly and annual reports to the CMA. The annual reports must be audited. All material events must be reported to the CMA, which has the authority to force a company to disclose publicly any further information it deems appropriate after review.
Owning 5% or more voting shares by restricted purchase (buying exchange listed voting shares) or restricted offer (public offer of purchase of exchange listed voting shares) is considered a significant step. The CMA is authorized to develop, issue, and/or change rules for such activity. If ownership rises to 50% or more, the CMA may force the owner to purchase the remaining shares at a price no more than the highest price paid by the owner during the previous 12 months.
Execution of trades
The Tadawul settlement is done Trading hours on the Tadawul are between 11:00am and 03:30pm from Saturday to on a T+0 basis Wednesday. The Tadawul trading system provides real-time information and permits settlement on a T+ 0 basis. A trading day is divided into three different sessions – 10:00 am to 11:00 am (Open Order Maintenance – entering, amending or cancelling an order), 11:00 am to 03:30 pm (Open Trading – regular electronic trading process) and 03:30 pm to 04:30 pm (Pre-Close – cancellation of order while maintaining order validity, decrease in quantity without any price change). The different types of orders that can be placed on the Tadawul system are Hit, Take, Match, Market, Limit, Un-priced, Undisclosed Volume, All or None, Minimum Block and Minimum Fill.
A Hit order is an order to sell all shares at current best price available, while a Take order involves buying all shares at current best price available. A Match order creates an opposing order to an existing order, whereas a Limit order sells a specified number of shares at a specific price.
An Un-priced order differs from a Market order as the pricing protection is not available. To avoid the negative impact of large volumes, only a portion of some orders is displayed. This is achieved by placing an Undisclosed Volume order.
JUNE 2009 SAUDI ARABIA FACTBOOK 32 HISTORY AND OVERVIEW
The All or None order refers to trading the entire volume. A Minimum Block consists of specified minimum volume for each trade, whereas a Minimum Fill order refers to the minimum volume that must be available for trading to take place.
Orders may also exist for one day, current week, and current month or up to 30 days.
As of 31 December 2008, there were 32 brokerage firms operating on the exchange. Trading commissions charged by Tadawul are as follows.
• The maximum commission is 0.0012 of the trade value executed by the bank. The customer can negotiate a lower commission with the bank. This commission discount has to be agreed and documented in advance
• Minimum commission imposed is SR12 for any executed order equal or less than SR10,000
Tadawul provides investors with depository services as well. All trades are in the dematerialized form. The dematerialization of shares can be executed by banks, the depository itself, or through certificate data processing for portfolios. The electronic system facilitates pledging of shares, settlement (T+ 0 days) and clearing of shares by ownership transfer. It is a real time system which immediately reflects the effects of any corporate action (such as stock split and bonus issues) on an investor’s portfolio. The cash transfer is done electronically via SAMA's RTGS system – SRIE.
Tadawul’s performance in 2008
After the 2006 correction and the recovery in 2007, the Saudi stock market registered robust growth during the first half of 2008. Benefiting from the effects of escalating oil prices, the companies on TASI performed favorably. However, the second half of 2008 saw a sell-off, mirroring global trends triggered by the ongoing financial crisis that stoked fears of a recession in the Saudi economy. The TASI index closed at a level of 4,802.9 points as on 31 December 2008 (compared with 11,176 in December 2007), while the Tadawul’s market cap plunged from around USD513.5bn at the end of 2007 to USD246.5bn as on 31 December 2008.
Exhibit 33: Saudi stock market - average daily value (USD mn) Exhibit 34: Saudi stock market – average daily transactions and average daily volume (mn) (‘000s)
9,000 300 400
8,000 350 250 7,000 300 6,000 200 250 5,000 150 4,000 200
3,000 100 150 2,000 50 100 1,000 50 - 0 2003 2004 2005 2006 2007 2008 0 2003 2004 2005 2006 2007 2008 Avg. daily value Avg. daily volume (RHS) (mn)
Source Bloomberg, Tadawul Source Bloomberg, Tadawul
Both average daily volume and average daily transactions declined in 2008. The daily average value of shares traded on TASI fell by 24.2% y-o-y to SR7.8bn in 2008. Despite the challenging
JUNE 2009 SAUDI ARABIA FACTBOOK 33 HISTORY AND OVERVIEW
economic conditions, Tadawul was the most liquid market in GCC with an average daily turnover of USD2.08bn in 2008. In terms of trading volumes, the petrochemical sector was the most active in 2008, experiencing margin growth led by record oil prices in the first half followed by plummeting end-products prices and severe loss of demand in the second.
Exhibit 35: Pricing multiples – TASI
30
25
20
15
10
5
0 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08
P/E multiple P/BV multiple
Source: Bloomberg
With the downturn in the economic outlook and market performance alike, valuations in KSA have declined sharply. Tadawul’s P/E, which at the start of May 2006 was 27.6x, decreased to 22.2x on 30 December 2007, before reaching 10.7x on 28 December 2008. TASI’s 41% gains registered in 2007, as it recovered from the big crash of 2006, were wiped clean in 2008, where it lost 56.5% of its value, as the oil bubble burst. TASI’s 12M trailing price-to-earnings (P/E) and price-to-book value (P/BV) multiples contracted 49.0% and 59.2%, respectively, during 2008.
However, the multiples have improved considerably in the quarter under review. From a low of 11.2x on 03 March 09, the multiples are currently trading at a level of 18.4x (17 May 2009), translating into a correction of approximately 65%. This rally is largely led by improved market sentiments along with government support measures. Despite this correction, the market looks attractive on a 1-year forward P/E multiple; dropping from a high of 35.2x to 10.78x in 2008.
Insurance sector was the Exhibit 36: Sector wise performance and returns in 2008 worst performing sector in 2008
0 Banks/financial Petrochemical Cement Retail Energy/utilities Agri/food Telecom/IT Insurance inv Multi Industrial inv Construction Real estate Transport Media/publishing Hotel/tourism 0% (2,000) -10% (4,000) -20% (6,000) -30% (8,000) -40% (10,000) -50% (12,000) (14,000) -60% (16,000) -70% (18,000) -80% Net change % change
Source: Tadawul, NCBC Research
JUNE 2009 SAUDI ARABIA FACTBOOK 34 HISTORY AND OVERVIEW
The Petrochemical and Banking and Financial Services sectors, two index heavyweights accounting for over 70% of TASI’s total capitalization, were most affected by the slump in oil prices and tight liquidity conditions, losing 66.5% and 55.5%, respectively, in 2008. Increasing doubts over the Government’s ability to support funding growth in the non-oil sectors in light of the oil price crash and the consequent likelihood of a budget deficit sent other sectors also into a tailspin in end-2008. The biggest loser of 2008, however, was the insurance sector, which plummeted by 73.7%. This was followed by the Multi-investment sector, which crashed 67%, as its investments lost significant value, leading to capital erosion.
Comparison with Global Emerging Markets
KSA has shown superior KSA’s GDP growth rate exceeded the global growth rate in 2005-2007. This is reflected in the growth from 2005 to 2007, superior returns from the Saudi stock market, which increased at a CAGR of 34.72%, while that faster than that of the emerging from the MSCI Emerging Markets Index expanded at a CAGR of 17.95% during January 2003 markets to December 2007. This trend continued in 2008 with KSA’s GDP growing at 4.2% compared to the world GDP growth rate of 3.6%.
Globally, the Dow Jones Industrial Average (DJI), the FTSE 100, and the Nikkei 225 fell by 33.8%, 32.0%, and 42.1%, respectively, in 2008. The MSCI Emerging Markets Free Index shed 47.3%. Dubai and Russia were the worst hit, with their benchmark indices plummeting by 72.4%. But the most populous emerging markets of China and India were not far behind with the Shanghai Composite and BSE Sensex losing 65.4% and 52.4%, respectively.
Exhibit 37: Comparison – TASI v/s MSCI emerging markets index (% weekly return)
10%
5%
0%
-5%
-10%
-15%
-20%
-25% Feb-03 Sep-03 Apr-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08
TASI MSCI emerging market
Source: Bloomberg
In comparison to other global In a comparison of the TASI with the MSCI Emerging Markets Index, it is evident that the KSA markets, TASI’s performance market is clearly more volatile than emerging markets, on an average, since the market was weak correction began in the middle of 2008. An additional source of volatility in the Gulf was investor expectations of currency revaluations against the backdrop of inflationary pressures in 2008. The ultimate reversal of the speculative inflows contributed to a far tighter money market environment. In the last quarter of 2008, the 360-day price volatility jumped to 37.9 on 28 December 08 from 25.0 on 07 September 08. In the medium term, global cues are likely to upset the market, which may struggle to regain sustainable stability. Moreover, with the Saudi Riyal pegged to the US Dollar, it will be difficult for SAMA to shield KSA from developments in the US economy. However, in the long term, greater liberalization of foreign investment norms and a maturing market process should lower volatility levels.
JUNE 2009 SAUDI ARABIA FACTBOOK 35 HISTORY AND OVERVIEW
Exhibit 38: Volatility comparison (360 day volatility)
45
40
35
30
25
20
15
10 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08
Saudi stock index MSCI emerging market index
Source: Bloomberg
Overall, however, GCC markets have very low or negative correlation with other international markets as well as amongst themselves. For the period Jan-06 to Dec-08, KSA had a daily correlation of 0.15 with MSCI World, 0.69 with MSCI GCC and 0.08 with India. This is in part due to significant differences of the sectoral breakdown of the GCC and other emerging markets. Low correlations offer significant diversification benefits to international investors, thereby adding to the Saudi stock exchange’s attractiveness. Moreover, GCC markets have underperformed emerging and developed markets. Hence, they are now providing interesting absolute and relative value propositions.
Exhibit 39: MSCI EM Exhibit 40: MSCI GCC
Industrials IT Telecom 8% 11% 12% Cons Staples Materials 2% U ilities 26% 3%
Financials Energy 24% 2% Energy 19% Utilities 1% Cons Staples 4% Financials Telecom Materials 53% Industrials 8% 10% 17%
Source MSCI Source MSCI
JUNE 2009 SAUDI ARABIA FACTBOOK 36
Sector Performance
The Kingdom’s growth drivers
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JUNE 2009 SAUDI ARABIA FACTBOOK 38
Sectors Page No.
Banking and Financials 40
Petrochemicals 46
Cement 49
Retail 52
Energy and Utilities 56
Agriculture and Food 61
Telecom and IT 65
Insurance 69
Multi Investment 74
Industrial Investment 78
Building and Construction 82
Real Estate 87
Transportation 93
Media and Publishing 99
Hotels and Tourism 103 Sectors Banking and Financials
Leveraging the GCC growth story
Saudi banks strongest in the Strong macroeconomic conditions in KSA have fuelled the robust growth in the Saudi banking GCC and have a stable outlook sector in recent years. However, the Saudi economy witnessed dramatic changes in 2008. Negative global developments in 2H-08 affected the Saudi economy which had enjoyed buoyant liquidity in 1H-08. In response, the Government which had earlier focused on curbing inflationary pressures directed its efforts to ensure adequate liquidity by relaxing monetary policy and announcing an expansionary budget for 2009. This coupled with healthy capital adequacy ratios and well-provisioned balance sheets has ensured that even in the current global credit crisis, the Saudi banking sector remains the strongest in the GCC and has a stable outlook (Please refer to our Saudi Arabia Banking Quarterly report). Going forward, low penetration of banking services coupled with the anticipated growth in population and expected introduction of a mortgage law are the potential catalysts for long-term credit growth in KSA.
The Saudi banking sector comprises 20 banks—12 domestic and 8 foreign—that together have a network of 1,410 branches and 8,993 ATMs across KSA as on 31 December 2008. Alinma Bank, listed in June 2008, is expected to launch commercial operations by the end of 2Q-09. Also, J.P. Morgan N.A. Chase Bank opened a branch in the Kingdom in November 2008. Moreover, two foreign banks—State Bank of India and National Bank of Pakistan—have obtained licenses to commence business in KSA, but are yet to start operations.
Exhibit 41: Key financials of Saudi banks (2008) – SRmn; network of branches and ATMs
Loans & Customer Banks Branches ATMs Assets advances deposits Net profits National Commercial Bank 275 1,484 221,802 107,909 171,822 2,031 Samba Financial Group 65 476 178,891 98,147 134,228 4,454 Al Rajhi Bank 425 2,266 164,930 144,758** 120,298 6,525 Riyad Bank 201 2,027 159,653 96,430 105,056 2,639
Banks Banks The Saudi Investment Bank 33 247 53,250 29,566 40,702 513 Bank AlJazira 24 314 27,520 15,133 20,900 222
Established as Saudi Bank Albilad 61 420 16,052 10,157** 10,971 125
Domestic Banks SABB 68 452 131,661 80,237 98,522 2,920 Banque Saudi Fransi 75 274 125,865 80,866 92,791 2,806 Arab National Bank 131 842 121,307 74,662 92,743 2,486 JV with with JV Foreign Partners Saudi Hollandi Bank 43 169 61,436 38,017 43,012 1,224 Emirate Bank 1 5 Bank Muscat 1 3 National Bank of Kuwait 1 2 National Bank of Bahrain 1 GCC Banks Gulf International Bank 2 12* Deutsche Bank 1 Foreign Banks BNP Paribas J.P. Morgan Chase N.A. Bank 1 Non- GCC Total 1,410 8,993 1,302,271 775,872 931,045 25,837
Source: SAMA, Tadawul, Company data, NCBC Research Note: Financial statements of the banks are consolidated and include financial statements of its subsidiaries, including those located outside KSA. Total assets of NCB include assets of newly acquired bank -Turkiye Finans Katlim Bankasi A.S.* Four international banks namely, National Bank of Bahrain, Gulf International Bank, Deutsche Bank and BNP Paribas, operate 12 ATMs across KSA. # Alinma Bank has not been included in the above table as it is yet to commence operations. The bank reported total assets of SR15,556.4mn as of December 2008. ** Islamic banks – Al Rajhi and Albilad’s – loans and advances amount include credit disbursed as well as investment in securities, as the banks’ financial statement provide a combined amount under the heading net investments.
JUNE 2009 SAUDI ARABIA FACTBOOK 40 BANKING AND FINANCIALS
During 2003–07, total banking assets increased at a CAGR of 19.0% to SR1,302.3bn. The The Saudi Banking sector has sector ranked second among GCC peers in terms of total assets in 2008, after the UAE. The top reported impressive growth, four banks—National Commercial Bank (NCB), Samba Financial Group (Samba), Al Rajhi Bank increasing its banking assets (Al Rajhi), and Riyad Bank—controlled 55.7% of the country’s banking assets in 2008 compared at a CAGR of 19% over 2003- to 56.7% in 2007. NCB, the market leader in this sector for years lost ground in 2008, but 08 maintained its dominance, controlling 17.0% of the total banking assets compared with 19.4% in 2007. Strong macroeconomic conditions led to robust growth in aggregate lending by the banking and non-banking financial sector, which expanded at 23.6% CAGR in 2003–08 to SR775.9bn while the customer deposit base of these commercial banks increased at a CAGR of 18.3% during this period to SR931.0bn in 2008.
During 2008, credit off-take was 25.2%, backed by increased demand from the corporate segment. The liquidity environment remained robust in 1H-08 because of high oil prices and the strong macroeconomic environment. However, negative global developments in 2H-08, including falling oil prices affected the Saudi economy. As a result Saudi banks became more cautious on the lending front and credit off-take slowed to 2% in November 2008 from the September 2008 levels, before declining to -1.3% MoM in December 2008. Going forward, the expected introduction of a mortgage law is likely to provide impetus to credit off-take in personal lending. EIU expects lending to the private sector to increase at 18.1% CAGR to SR1256bn during 2007-12.
Exhibit 42: Market shares of Saudi banks in credit and customer deposits, 2008
20%
15%
10%
5%
0% NCB Samba Al Rajhi Riyad SIBC BJAZ Albilad SABB BSF ANB SHB Bank
Credit Customer Deposits
Source: NCBC Research, Company data Note: NCB’s net loans and deposit s includes loans and deposits of Turkiye Finans Katlim Bankasi A.S; Al Rajhi and Albilad’s loans and advances amount include credit disbursed as well as investment in securities..
Significant growth opportunities KSA’s banking sector is under-penetrated in terms of loan-to-GDP and deposit-to-GDP ratios exist in the Saudi banking sector compared to GCC peers. The country’s loan-to-GDP ratio grew to 42.5% in 2008 from 30.7% in due to the low penetration of 2003, while its deposit-to-GDP ratio increased to 48.3% in 2008 from 45.0% in 2003. The banking services and expected penetration of banking services was quite low in the KSA (17,670 individuals per branch) in population growth 2008 as compared to Oman (6,329) and the UAE (6,874). This, along with the anticipated growth in Saudi population, is likely to generate significant opportunities for Saudi banks to expand their branch network and tap the expected demand for financial services.
Despite the low penetration, the Saudi banking sector is the largest in the GCC in terms of market capitalization. Moreover, the Saudi banking sector is the leader in the region in terms of revenue. As illustrated in Exhibit 44, Saudi banks trade at lower P/E ratios compared to their peers in Kuwait and Bahrain.
JUNE 2009 SAUDI ARABIA FACTBOOK 41 BANKING AND FINANCIALS
Exhibit 43: Revenue of GCC banks, 2005 – 2008 (USD mn) Exhibit 44: Comparison of RoE and P/E of GCC banks, 2008
6,000 30%
5,000 25%
4,000 20% 3,000
RoE (%) RoE 15% 2,000
10% 1,000
P/E 0 5% 2005 2006 2007 2008 46810121416 KSA Kuwait Qatar Oman UAE Bahrain KSA Kuwait Qatar Oman UAE Bahrain
Source: Gulfbase, Reuters, Bloomberg, NCBC Research; Source: Gulfbase, Reuters, Bloomberg, NCBC Research; The companies list is not exhaustive Size of the bubble represents market cap. as on 31 Dec 2008
As on 31 Dec 08, Al Rajhi had the largest market capitalization among the 11 listed banks constituting the index (Exhibit 45). Though NCB is one of KSA’s leading banks, it is not mentioned in the table as it is a privately held entity. While Alinma Bank is yet to commence operations, the bank was listed on the Tadawul in June 2008 after completion of the SR10.5bn Initial Public Offering (IPO).
Exhibit 45: Sector details – public banks % weight in Index Avg. NIM (%), Avg. RoE (%), as on Dec 2008* 2005 – 2008* 2005–2008* Alinma Bank (Alinma) 1.80 N/A N/A Al Rajhi Bank (Al Rajhi) 9.09 6.75 38.03 Samba Financial Group (SAMBA) 4.99 3.56 31.11 The Saudi British Bank (SABB) 3.50 3.37 30.99 Riyad Bank (RIBL) 3.44 3.30 22.57 Banque Saudi Fransi (Saudi Fransi) 2.74 2.73 29.89 Arab National Bank (Arab National) 2.19 3.42 29.36 The Saudi Investment Bank (SIBC) 0.81 2.39 20.13 Saudi Hollandi Bank (Saudi Hollandi) 1.14 2.71 22.89 Bank AlJazira (BJAZ) 0.49 2.96 29.77 Bank AlBilad (AlBilad) 0.91 3.82 4.11
Source: Bloomberg, Tadawul, Reuters, Company data, NCBC Research * start periods may differ based on availability of data
Average net interest income of Exhibits 46 and 47 depict the performance of Saudi banks in terms of net interest income and Saudi banks increased 10.9% net interest margin during 2005 – 2008. For most part of 2008, net interest margins narrowed YoY to SR3057.6mn in 2008 due to the increased competition for expanding deposit base. Moreover, from October 2008 owing to the expansion in their onwards, interest rate cuts announced by SAMA contributed to the overall narrowing of the loan books margins. Although, banks’ margin contracted, expansion in loan books enabled the banks to increase their average net interest income 10.9% YoY to SR3057.6mn in 2008. Saudi Fransi and RIBL’s net interest incomes increased 22.8% YoY to SR2,821mn and 21.4% YoY to SR3,965mn, respectively, while SIBC was the only bank to report a decline of 3.4% YoY to SR1,019.9mn in 2008. However, with the exception of the Saudi Hollandi Bank, all banks witnessed a contraction in their net interest margins over 2007 levels.
JUNE 2009 SAUDI ARABIA FACTBOOK 42 BANKING AND FINANCIALS
Exhibit 46: Net Interest Income of Banks, 2005 – 2008 (SR mn) Exhibit 47: Net Interest Margin (%) of Banks, 2005 – 2008
10,000 8
8,000 6
6,000 4 4,000 2 2,000
0 0 2005 2006 2007 2008 2005 2006 2007 2008 Al Rajhi SAMBA SABB Al Rajhi SAMBA SABB RIBL Saudi Fransi Arab National RIBL Saudi Fransi Arab National SIBC Saudi Hollandi BJAZ SIBC Saudi Hollandi BJAZ Albilad Albilad
Source: Tadawul, NCBC Research Source: Tadawul, NCBC Research
The P/B multiple for all banks substantially declined in 2008 because of the meltdown in the Saudi markets. Despite this, Al Rajhi Bank continued to command the highest P/B and RoE multiples in 2007 and 2008.
Exhibit 48: Comparison of P/B and RoE, 2007 Exhibit 49: Comparison of P/B and RoE, 2008
35 35 SAMBA SABB Saudi 30 30 Hollandi SABB Arab National 25 25 Al Rajhi Saudi Fransi 20 20 RIBL Arab National SAMBA Al Rajhi RoE (%) RoE
15 (%) RoE BJAZ 15 Saudi Fransi RIBL SIBC 10 Saudi Hollandi 10
5 5 SIBC P/B Albilad Albilad BJAZ P/B 0 0 345678 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Source: Bloomberg, Reuters, Tadawul, NCBC Research Source: Bloomberg, Reuters, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
Islamic banks such as Al Rajhi, BJAZ, and Al Bilad are preferred by investors which is evident from high trading volumes as compared to conventional peers (Exhibit 50).
JUNE 2009 SAUDI ARABIA FACTBOOK 43 BANKING AND FINANCIALS
Exhibit 50: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
2,500 2,401
2,000 1,627 1,473 1,500
1,000
542 500 366 336 157 194 97 90 0 Al Rajhi SAMBA SABB RIBL Saudi Arab SIBC Saudi BJAZ Albilad Fransi National Hollandi
Source: Reuters, NCBC Research
As the Saudi riyal is pegged to the US dollar, interest rates in KSA moved in line with the US Federal Reserve (US Fed) rate. Consequently, while interest rates reached their peak in 2H-08, they have steadily declined in response to the steps undertaken by SAMA to mitigate the impact of the global financial crisis on the Saudi Banking sector. This is reflected in KSA’s reverse rates which have declined by 450bp from 5.0% (November 2007) to 0.50% (April 2009).
Interest rates started increasing from June 08 owing to increasing demand for credit in the Kingdom. Furthermore, as the global financial system experienced liquidity crisis, interbank interest rates peaked in 2008—the SAIBOR rate increased to 4.67% (on 12 October, 2008) and Libor rate to 4.75% (13 October, 2008). The global liquidity squeeze, coupled with non- availability of finance from foreign banks, increased the demand for Saudi riyal loans. Consequently, Saudi banks became conservative / selective in financing the development projects. This caused the cost of debt (in SAIBOR) over the Libor rate to increase to 194bp as of 12 November 2008 (average spread in 2008 was 50bp).
Steps taken by SAMA to boost In light of the worsening global economic scenario, SAMA started taking aggressive measures, liquidity has helped reduced the such as frequent rate cuts and relaxing reserve requirements (beginning in October 2008) to cost of debt from 194bp in ensure adequate liquidity to meet domestic credit demand. As a result, the Repo rate declined November 2008 to 5bp in May to 2.0% in January 2009 from 5.5% in November 2007 and the statutory reserve requirement 2009 limit declined to 7% in October 2008 from 13% in May 2008 of demand deposits, which released SR20.4bn for banks to lend. In addition, SAMA guaranteed bank deposits and deposited funds worth USD2.5bn and an equivalent amount in Saudi Riyal to ensure liquidity in both the currencies. The steps by SAMA are expected to help stabilize the financial sector while boosting liquidity and reducing loan costs. These steps have resulted in a decline in interbank interest rates from their 2008 peaks—the SAIBOR rate is at 0.88% and LIBOR at 0.83% as of 18 May 2009 (Exhibit 51). Consequently, the cost of debt (in SAIBOR) over the LIBOR rate has come down to 5bp as of 18 May 2009 (average spread of 19bp year-to-date).
JUNE 2009 SAUDI ARABIA FACTBOOK 44 BANKING AND FINANCIALS
Exhibit 51: Movement in interbank interest rates, Jan 03 – May 09
7 1000
6 800
5 600 4 400 3 200 2
1 0
0 -200 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09
Spreads bps (RHS) SAIBOR (%, LHS) LIBOR (%, LHS)
Source: Reuters, NCBC Research
Although, Saudi banks have been less exposed to the US sub-prime market compared to other GCC banks, a fall in the value of investments held, negatively impacted bottom lines of the banks in 2008. Fitch Credit Ratings Agency, in a Dec 08 report, cited adverse impact of the global credit crisis on profitability and market capitalization as key reasons for lowering the standalone individual credit rating on eight Saudi banks. Six banks—Arab National, Saudi Fransi, NCB, RIBL, SAMBA, and SABB—were downgraded by Fitch from “B” to “B/C”, while two banks—Saudi Hollandi and SIBC—were downgraded from “B/C” to “C”. However, Fitch reaffirmed the Kingdom’s banking industry status as the strongest in the GCC and maintained a stable outlook on the banking sector underpinned by strong Government support.
The Saudi Government, concerned about economic growth, has been taking aggressive measures since October 2008 to sustain banking sector growth. To that end, the Ministry of Finance announced an expansionary budget for 2009, with increased spending on the infrastructure sector and other social projects. In November 2008, the Saudi Government announced plans to implement a SR1,500bn development and investment program in the oil and Government sectors over the next five years. We expect rising levels of government spending will drive overall economic growth, thereby boosting the banking sector. Furthermore, introduction of a mortgage law is likely to provide impetus to credit off-take in personal lending.
Outlook for the Saudi banking In addition, SAMA’s recent initiatives such as direct deposits with commercial banks, reduction sector remains positive in light in key lending rates, and relaxation of reserve requirement limits reflect the Central Bank’s of the steps undertaken by willingness to ease the monetary policy to ensure liquidity. In addition, SAMA’s willingness to SAMA to boost liquidity and inject up to SR150bn into the banking system would help the Government keep liquidity at continued government measures healthy levels. EIU expects total lending by the banking and non-banking financial sector in Saudi Arabia to remain strong, growing to SR1,695bn by 2012 and it estimates total banking deposits to increase at 10.1% CAGR during 2007-12, to SR964bn by 2012. Although, competition to attract more deposits may put pressure on net interest margins of banks, their expanded loan books are likely to drive net interest income growth. Hence, despite the difficult global economic climate, we expect a positive outlook for Saudi banks in 2009, based on their strong balance sheets and expectations of continued Government support.
JUNE 2009 SAUDI ARABIA FACTBOOK 45 Petrochemicals
Cost advantage fuelling growth KSA’s petrochemical industry, concentrated mainly in the industrial cities of Jubail and Yanbu, is one of the heavy weight sectors of the KSA economy. The Saudi petrochemical sector has grown from one company (KSA Fertilizers) in 1965 to 13 listed companies in 2008. At present, Saudi Basic Industries Co (SABIC) is the largest petrochemical company in the sector with an estimated capacity of approximately 44mn tons (mt) per annum (as of 2008). Historically, robust demand for petrochemical products has helped the sector sustain growth. Since inception, the Saudi petrochemicals industry has received several incentives from the Government; the most important being low-cost raw material, giving KSA companies an edge over their global peers. KSA operates from a position of significant strength in the GCC petrochemical industry, accounting for majority of the region’s petrochemical production. By 2010-end, KSA, which holds close to 21% of the world’s proven oil reserves, is expected to meet around 13% of the global demand for petrochemical products, increasing from 8% in 2006. KSA also possesses gas reserves of 253 trillion cubic feet and ranks fourth in the world after Russia, Iran and Qatar. Natural gas produced in KSA is priced at USD0.75 per mmbtu, much lower than the global price of USD4-5 per mmbtu, and the Kingdom benefits from its low feedstock cost.
Saudi petrochemical sector To capitalize on the feedstock advantage, GCC petrochemical players undertook significant enjoys an absolute feedstock capacity expansion plans. Total petrochemical projects worth USD114bn are currently under- advantage, relatively young progress or planned in the GCC, of which, 54% are in KSA (MEED Projects). Some of these cracker fleet and economies of projects are under renegotiation, due to the decline in commodity prices in 2H-08. scale Petrochemical companies in KSA also enjoy a dual pricing system under the country’s agreement with the WTO. This has helped these companies to get superior prices for their products in the international market, thus lifting overall profitability.
However, the global petrochemical sector is currently facing a downtrend. Lower demand for petrochemical products in both developed and developing nations has depressed utilization rates. We believe that the Saudi petrochemical sector is on a better platform, compared with global peers, due to its absolute feedstock advantage, relatively young cracker fleet, and an expanded production base offering economies of scale.
Exhibit 52 shows the 13 companies comprising the petrochemical sub-index of Tadawul
Exhibit 52: Sector details % weight in Avg. NPM (%), Avg. RoE (%), Index as on 1Q05 – 4Q08* 2005 – 2008* Dec 2008* Saudi Basic Industries Corp (SABIC) 16.71 20.8 29.9 KSA Fertilizers Co (SAFCO) 2.43 65.0 37.9 Saudi Industrial Investment Group (SIIG) 0.49 33.7 14.5 Sahara Petrochemical 0.24 NM 5.5 Yanbu National Petrochemical Company (YANSAB) 0.90 NM 7.4 Nama Chemicals 0.12 5.7 3.1 Saudi International Petrochemical Co (Sipchem) 0.56 37.3 20.6 National Industrialization Co (NIC) 0.65 17.4 15.4 Alujain Corporation 0.08 NM (4.0) Advanced Polypropylene Company 0.24 12.6 7.0 Saudi Kayan Petrochemical Company 1.58 NM 1.1 Rabigh Refining and Petrochemical Co 1.47 NM (16.5) Chemanol 0.15 5.8 3.7 Source: Bloomberg, Saudi Stock Exchange (Tadawul), Reuters * start period may differ based on availability of data
JUNE 2009 SAUDI ARABIA FACTBOOK 46 PETROCHEMICALS
The combined revenue of all the 13 companies increased 26.2% YoY in 2008; SABIC, accounted for approximately 84% of the total revenue of the sector in 2008. SABIC reported revenue growth of 20.8% YoY in 2008, largely supported by high petrochemical prices, in line with the surge in crude oil prices in 1H-08. However, the average net profit of nine companies declined 12.1% YoY in 2008, with SABIC accounting for approximately 78.8% of the decline. Rabigh Refining and Petrochemical, Alujain, Sahara Petrochemical and Yanbu National Petrochemical reported losses in 2008. SABIC’s net income declined 18.5% YoY in 2008.
Led by slump in demand, 4Q-08 experienced a major reversal in trend, led by sharp decline in demand for petrochemical operating rates fell to historic products, resulting in prices moving southwards. The ongoing economic slowdown is affecting lows while prices tanked industrial activities worldwide, leading to demand for petrochemicals softening in key markets and in turn lowering operating rates for the Saudi petrochemical players as well. SABIC’s revenue slid 37.7% YoY to SR24,714mn in 4Q-08. Revenue of NIC and SAFCO also plummeted 71.1% and 16.3% YoY, respectively, in 4Q-08. SABIC’s profit margin contracted by 1,603bps YoY in 4Q-08 and its net profit dived 95.5% YoY. Net profit of National Industrialization Company and Sipchem also declined sharply by 87.0% YoY and 86.5% YoY, respectively, in 4Q-08.
The petrochemical sector reported net losses of SR271.5mn in 4Q-08 (compared with a gain of SR8.9bn in 4Q-07). Going forward, with petrochemical prices plummeting in the wake of turbulent market conditions, the margins of the petrochemical companies in KSA may remain under pressure.
Exhibit 53: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 54: Profitability (%) of companies, 2005 – 2008
12,000 160,000 100
10,000 80 140,000 60 8,000
40 6,000 120,000 20 4,000 100,000 0 2,000 -20 0 80,000 -40 2005 2006 2007 2008 2005 2006 2007 2008 SAFCO SIIG SPC Nama SABIC SAFCO SIIG SPC Sipchem NIC Chemanol SABIC * Nama Sipchem NIC Chemanol
Source: Reuters; Companies marked * are on secondary axis; Source: Reuters; SPC’s margin for 2008 is not included as it is not meaningful; Top eight companies (operational on 01 January 2008) by market cap have been considered. Top eight companies (operational on 01 January 2008) by mcap have been considered
The price multiples of Saudi petrochemical companies were at their peak during 2005. This was due to the anticipated growth in the sector because of lower feedstock costs and increasing demand from developing countries. Furthermore, the Government promoted foreign investments in the sector through joint ventures in a bid to achieve capacity expansion and technological up-gradation. However, the multiples fell significantly in 2008 following a downturn in the global stock markets. In 2008, Nama Chemicals had the highest P/E multiple of 93.7x followed by Saudi Kayan Petrochemical Co. (85.2x). As illustrated below, SAFCO had the highest RoE (60.9%) and P/B multiple (2.8x) in 2008. SABIC’s RoE contracted 1,025bp to 22.7% in 2008.
JUNE 2009 SAUDI ARABIA FACTBOOK 47 PETROCHEMICALS
Exhibit 55: Comparison of P/B and RoE, 2007 Exhibit 56: Comparison of P/B and RoE, 2008
60 70
60 SAFCO 50 40 SAFCO 40
30 Sipchem SABIC 20 SABIC NIC RoE (%) RoE (%) RoE SIIG 20 Sipchem
10 NIC APC SPC APC P/B P/B Yanbu Kayan Yanbu 0 0 Alujain SIIG SPC -10 Rabigh -20 -20 2345670.5 1.5 2.5
Source: Bloomberg, Reuters, Tadawul, NCBC Research Source: Bloomberg, Reuters, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
Saudi Kayan Petrochemical Company recorded the highest average daily trading volume in 2007-08.
Exhibit 57: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
20,000 19,496
15,000 13,757
10,000
5,921 4,736 5,090 5,000 2,718 1,924 2,002 2,012 1,826 2,206 724 1,194 0 NIC SIIG SPC APC Nama Kayan Yanbu SABIC Alujain Rabigh SAFCO Sipchem Chemanol
Source: Reuters Knowledge, Tadawul
Though oversupply situation is With hydrocarbon prices trending lower, the outlook for petrochemical prices also looks bleak. likely to further depress Moreover, as massive capacity expansion projects are in progress in the Middle East, they are margins, low cost structure expected to trigger an overcapacity situation once they go on-stream in 2011-12. This, in turn, remains a huge positive will likely depress utilization rates further, exerting pressure on prices. We expect the Saudi petrochemical sector to experience margin erosion, although to a much lesser extent vis-à-vis global peers, given access to cheap feedstock advantage and higher economies of scale. Moreover, in the long term, we expect demand to regain momentum once the global economy recovers, with major growth coming from the Asian countries, particularly China and India.
Overall, although the outlook for 2009 remains negative based on declining demand and prices, as seen in 4Q-08, we believe that the long-term outlook for the Saudi petrochemical sector is positive owing to its feedstock advantage, joint venture opportunities with global peers, expanding production base, and proximity to the high-growth Asian and Middle Eastern markets. However, allocation of low cost feedstock for the upcoming new production facilities would be a challenge for Saudi players.
JUNE 2009 SAUDI ARABIA FACTBOOK 48 Cement
Oversupply concerns
The Saudi cement sector has transitioned from a single company industry (Arabian Cement Co) in 1955 to one comprising twelve cement companies with an estimated total production capacity of 44mn tons as at the end of 2008. Currently, there are twelve cement producers operating in the Kingdom. Of these, four new cement plants—Riyadh Cement, Najran Cement, Madina Cement, and Western Cement—commenced production during 2008, and together produced 3.7mt of cement in 2008 (please refer to our KSA Cement Monthly and Cement Quarterly).
Cement price realizations fell In June-08, the Saudi Government imposed restrictions on the export of cement/clinker to from SR259 per ton in 3Q-08 to foreign countries, with the exception of Bahrain. As a result, cement production in the Kingdom SR234 per ton in 4Q-08 dropped 4.6% YoY in 2H-08, as capacity buildup and export restrictions played spoilsport. This buildup has led to a fall in cement production and higher inventory of clinker, which in turn have had an impact on cement prices. Average price realization declined from SR259 per ton in 3Q- 08 to SR234 per ton in 4Q-08.
KSA dwarfs GCC peers in production capacity. Companies operating in KSA enjoy the benefit of subsidized fuel (energy and fuel account for 30–40% of the total production cost of cement companies) which, in turn, lowers their cost of production, compared with that of other cement producers in the GCC region. Even though cement prices in KSA are not regulated, official prices in the local market are determined by a mechanism since 1991. However, the Saudi Government does intervene occasionally to prevent large price fluctuations. Increased competition to the existing eight publicly traded players in the cement sector will see a spike in production, which will lead to excess capacity and likely bring down cement prices in the longer term.
Exhibit 58 indicates that KSA’s cement sector performed better than that of the entire region on revenue during 2005–2008. The sector also fares well on RoE, with attractive P/E multiples.
Exhibit 58: Revenue of GCC cement companies, 2005 – 2008 Exhibit 59: Comparison of RoE and P/E of GCC companies, (USD mn) 2008
2,500 40
2,000 KSA 30
1,500 Oman
20 1,000 Qatar RoE (%) RoE
500 10 Kuwait UAE 0 P/E 2005 2006 2007 2008 0 KSA UAE Kuwait Oman Qatar 0 10203040506070
Source: Reuters; Source: Reuters, NCBC Research; The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
Of the twelve cement producers operating in KSA, eight are listed on Tadawul. Exhibit 60 outlines the performance of the eight listed companies.
JUNE 2009 SAUDI ARABIA FACTBOOK 49 CEMENT
Exhibit 60: Sector details % weight in Index Avg. NPM (%), Avg. RoE (%), as on Dec 2008* 1Q-05 – 4Q-08* 2005 – 2008* Saudi Cement Company 0.62 50.6 25.5 Yamama Saudi Cement Co. Ltd 0.50 63.8 31.1 Southern Province Cement Co 0.71 63.5 31.6 Yanbu Cement Co 0.44 56.5 25.6 The Qassim Cement Co 0.39 72.0 29.9 Eastern Province Cement Co 0.37 64.0 23.3 Arabian Cement Co 0.27 45.3 20.1 Tabuk Cement Co 0.19 55.5 20.3
Source: Bloomberg, Tadawul: Company data; * start periods may differ based on availability of data
Exports plunged 18.9% YoY Cement production by the twelve companies in the KSA grew 8.6% YoY to 32.9mt, whereas due to the ban imposed by the their total domestic sales grew 11.4% YoY to 29.9mt during 2008. The combined domestic sales government in June 2008 of the eight listed cement companies aggregated 26.6mt during 2008, declining 0.9% YoY from 26.8mn tons a year ago. Cement exports in KSA fell by 18.9% YoY to 2.8mn tons during 2008. Eastern Cement (SR253 per ton), Yanbu Cement (SR253 per ton), Yamama Cement (SR251 per ton) and Southern Province Cement (SR250 per ton) were the companies having better price realization than the industry average, in 4Q-08.
In 4Q-08, Tabuk Cement saw the largest decline in revenue in the sector of 38.0% YoY to SR47.2mn, followed by Qassim Cement with 31% YoY decline to SR165.4mn. The decline in revenue can be attributed to lower sales volumes and mounting pressure on cement prices primarily due to lackluster demand.
Exhibit 61: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 62: Profitability (%) of companies, 2005 – 2008
1500 100
90 1200 80 900 70
600 60
300 50
40 0 2005 2006 2007 2008 30 2005 2006 2007 2008 Saudi Cement Yamamah Southern Province Saudi Cement Yamamah Southern Province Yanbu Cement Qassim Cement Eastern Cement Yanbu Cement Qassim Cement Eastern Cement Arabian Cement Tabuk Cement Arabian Cement Tabuk Cement
Source: Reuters, Bloomberg Source: Reuters, Bloomberg
The price multiples of cement companies in KSA were at their peak during 2005. However, the multiples corrected significantly in 2008, similar to that in 2006, following the stock market correction. As of 31 December 2008, the sector’s P/E and P/BV multiple stood at 8.3x and 1.9x respectively, compared with P/E and P/BV multiples of 16.5x and 6.2x respectively in 2007. As illustrated below, Southern Province Cement had the highest RoE (33.6%) and P/B multiples (2.8x) in 2008.
JUNE 2009 SAUDI ARABIA FACTBOOK 50 CEMENT
Exhibit 63: Comparison of P/B and RoE, 2007 Exhibit 64: Comparison of P/B and RoE, 2008
45 40 Qassim Cement Qassim 40 Cement Southern Yanbu Cement Province 35 Yamamah 30 Yanbu Cement Southern 30 Province Tabuk Cement Saudi Cement RoE (%) RoE RoE (%) RoE 25 Eastern Saudi Cement Yamamah Cement 20 20 Eastern Cement Arabian Arabian 15 Cement Cement Tabuk Cement P/B P/B 10 10 0 5 10 15 20 01234
Source: Bloomberg, Reuters, Tadawul, NCBC Research Source: Bloomberg, Reuters, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
Tabuk Cement had the highest average daily trading volumes in 2007-08.
Exhibit 65: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
500 489
409 400
300 227 180 200 164 121 123 98 100
0 Saudi Yamamah Southern Yanbu Qassim Eastern Arabian Tabuk Cement Cement Province Cement Cement Cement Cement Cement
Source: Reuters, Tadawul
Near-term demand fears and Going forward, ongoing construction projects (including the construction of the six planned oversupply concerns could economic cities), public infrastructure projects, and expansion projects in sectors such as impact utilization rates and power, utilities, and petrochemicals are likely to help the cement industry in KSA sustain growth. price realizations Demand drivers for residential and commercial construction, the two main segments of cement usage, are likely to remain intact. To cater to anticipated growth in demand, some of the cement producers are enhancing production capacity. In addition, newly established cement companies have also commenced production. As a result, KSA’s total production capacity is set to increase. We estimate KSA’s cement production capacity to reach 55mn tons by 2010. Consequently, both the demand and supply of cement seem positioned well in the long term.
However, on doing a reality check on the execution of planned infrastructure projects, given the slowdown in economic activity and project financing, we believe that the expected supply of cement could exceed the likely demand. It is feared that many of the projects (valued ~$600bn), planned and underway in Saudi Arabia, could face delays, or even be shelved. In the near term, this could hurt utilization rates, and consequently price realizations, as seen in 4Q-08. Should the KSA Government lift its export restrictions, we expect better prospects for the cement industry.
JUNE 2009 SAUDI ARABIA FACTBOOK 51 Retail
Betting on increasing consumer base, spending
The retail sector in the Kingdom of Saudi Arabia, the largest is the Middle East, is largely being driven by the growing population, higher per capita income and growing organized retail. The two largest cities Riyadh and Jeddah drive the Kingdom’s retail sector growth. Key players in the retail sector include Savola, Al Othaim, Fawaz Al-Hokair Group, Jarir Bookstore, Fitaihi Group, Saudi Automotive Services Company, and Carrefour.
Favorable demographics Supply of retail goods in KSA is still limited. Most supermarkets sell only food items. In addition, coupled with increasing the Kingdom is not self-sufficient in terms of supply of retail goods, such as textiles, footwear, preference for international and furniture, and relies on imports from countries, including China, Europe, Italy, and the US. brands, is likely to propel However, in spite of the increase in prices of imported goods, demand for these products is growth rising primarily due to the increase in population and income levels. KSA’s retail sales were estimated at around SR198.6bn (USD53bn) in 2008, more than half of GCC’s total retail sales of USD100bn in 2007. EIU forecasts retail sales to be close to SAR230bn in 2009 and expects the uptrend to continue, going forward. Non-food retail sales are expected to touch SAR28.2bn.
Saudi Arabia’s organized retail sector, which includes large retail chain operators, has registered significant growth in the past two years, supported by the opening of the sector to foreign investment in March 2007. The increased investment in the sector helped large retail companies to aggressively expand their retail operations in the country. However, the unorganized sector, including single-outlet operations, lagged large retailers in terms of growth, as they were hampered by: a) limited availability of finance; and b) spike in purchase cost of commodities. Going forward, intensifying competition in KSA’s retail sector is likely to trigger a wave of consolidation, with giant retailers acquiring single-store outfits.
Sales volume also grew steadily, driven by a rapidly growing population and increased spending power of consumers brought about by the rapid economic expansion. By the end of 2008, Saudi Arabia’s total population was close to 24.8mn (according to General Statistics and Information Department) and this figure is expected to reach 30.3mn in 2012 (Source: FAO, UN), supporting growth in this sector. Over 70% of the country’s population is in their twenties. The entry of this population into the country’s workforce, coupled with the increasing preference of consumers for international brands, is likely to propel growth in Saudi Arabia’s retail segment. In terms of goods, demand for textiles, clothing and footwear, furniture, and white goods is increasing with the rise in individual purchasing power. Modern retail formats such as hypermarkets and supermarkets are becoming increasingly popular.
JUNE 2009 SAUDI ARABIA FACTBOOK 52 RETAIL
Exhibit 66 indicates that Saudi retail sector performed better than other GCC countries on revenue during 2005–9M-08. The sector also fares well on RoE and has higher P/E multiples (Exhibit 67).
Exhibit 66: Revenue of GCC Retail companies, Exhibit 67: Comparison of RoE and P/E of GCC companies, 2005–07 (USD mn) 2008
2,800 0.4
2,400 0.3 Bahrain
2,000 0.2
KSA 1,600 0.1 P/E 1,200 0
ROE(%) -10 -5 0 5 10 15 20 800 -0.1
-0.2 400 Kuwait
-0.3 0 2005 2006 2007 2008 -0.4 KSA Kuwait Bahrain
Source: Reuters Source: Reuters, NCBC Research The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
Exhibit 68 indicates the performance of the eight listed companies on the Tadawul. Abdullah Al- Othaim Market Company was listed in 2008.
Exhibit 68: Sector details % weight in index Avg. NPM (%), Avg. RoE (%), as on Dec 2008* 1Q-05 – 4Q-08* 2005 – 2008* Abdullah Al-Othaim* 0.1 2.3 N/A Saudi Automotive Services Co 0.06 29.0 14.34 National Agriculture Marketing Co 0.02 (2.5) (3.15) Ahmed H. Fitaihi Company 0.06 9.4 2.08 Jarir Marketing Co 0.56 15.0 44.53 Aldrees Petroleum & Transport Services Co 0.07 5.2 18.57 Fawaz Abdulaziz AlHokair Company * 0.24 15.2 25.54 Alkhaleej Training and Education Company * 0.05 11.0 N/A
Source: Reuters, Tadawul * start periods may differ based on availability of data
Revenue of all retail companies, except Alkhaleej, registered strong growth during 2008, supported by an increase in demand. The Fitaihi Group recorded the largest growth in revenue (62.4% YoY) to SR194.3mn and Abdullah Al Othaim Markets Co. reported the highest revenue of SR2,915.3mn during 2008 among peers. Abdullah Al Othaim Markets Co. also posted the highest net income of SR67.1mn. Net profit margin of all the companies, except Fitaihi Group and Abdullah Al Othaim Markets Co. fell during 2008. Net margin of AlHokair Co. contracted the most (1032bp YoY) during the year.
In 4Q-08, the combined revenue of all the companies grew 93.9% YoY to SR2,284mn. Jarir’s revenue grew by 51.5% YoY, the highest in the sector, to SR668.8mn during the quarter. The total profit of the sector increased 16.2% YoY to SR172.0mn while average profit margin dropped 502bp to 8.3% in 4Q-08. National Agriculture Marketing Co. recorded the largest contraction (1,919bp) in net margin during the quarter.
JUNE 2009 SAUDI ARABIA FACTBOOK 53 RETAIL
Exhibit 69: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 70: Profitability (%) of companies, 2005 – 2008
500 3,000 20 120
2,500 100 400 10 2,000 80 300 1,500 0 60 200 1,000 40 -10 100 20 500
-20 0 0 0 2005 2006 2007 2008 2005 2006 2007 2008 National Agri Fitahi Group Jarir SASCO National Agri Fitahi Group Aldrees AlHokair Company Alkhaleej AlHokair Company Alkhaleej Al Othaim Al Othaim SASCO * Jarir* Aldrees*
Source: Reuters, Bloomberg Source: Reuters, Bloomberg Companies marked * are plotted on secondary axis; Companies marked * are plotted on secondary axis;
Price multiples of Saudi retail companies fell during 2006 following the stock market correction. In 2005, the price multiples were at their peak, supported by a growing economy, several IPOs, and a fast developing capital market. In 2008, the return on equity for all the companies, barring National Agriculture Marketing Co., Ahmed H. Fitaihi Co. and Al Othaim, declined considerably. The average RoE of these companies was 9.5% in 2008, compared with 21.6% in 2007. Jarir had the highest ROE (54.0%) and the P/B multiple (2.0x) in 2008 (Exhibit 72).
Exhibit 71: Comparison of P/B and RoE, 2007 Exhibit 72: Comparison of P/B and RoE, 2008
60 70 AlHokair 60 50 Jarir 50 40 Jarir 40
30 AlHokair 30 RoE (%) RoE Al Othaim
RoE (%) RoE Alkhaleej 20 20 Alkhaleej Aldrees Aldrees SASCO SASCO 10 10 National Agri Fitahi Group P/B P/B 0 0 012 00.511.522.53 -10 National Agri -10 Fitahi Group
Source: Bloomberg, Reuters, Tadawul, NCBC Research Source: Bloomberg, Reuters, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 54 RETAIL
As evident from Exhibit 73, Fitaihi Group has the highest average daily trading volume in 2007- 08.
Exhibit 73: Avg. daily trading volume of stocks (in 000s) , Jan 2007 – Dec 2008
3,500 3,215
3,000 2,735 2,735
2,500 2,293
2,000 1,822
1,500
925 1,000
462 500 63 0 SASCO Thim'ar Fitahi Group Jarir Aldrees AlHokair Alkhaleej Al Othaim *
Source: Reuters *Al Othaim trading started 14 July 2008
The slowdown caused by the ongoing global financial crisis is affecting the KSA economy as well. In the short term, we expect consumer spending, the single-largest growth driver for the retail sector, to be stagnant. Consequently, companies selling high-end consumer durables are likely to experience revenue growth slowdowns. However, in the long term, the demand for goods is likely to be on an uptrend. With oil crashing, cost of production has eased. Added to that, growth in population is expected to result in more new houses being built in KSA. This is expected to boost demand for electronic appliances, television sets, refrigerators, and washing machines.
Companies selling high end To cater to growing demand, existing retail players are moving toward consolidation and consumer durables are likely to expanding the number of outlets to enhance their profitability. Liberalization of the retail sector experience revenue growth by the Saudi Government has created significant opportunities for foreign companies. This is slowdowns likely to affect the competitiveness of existing retail firms. Though the outlook for demand and supply is favorable, the pricing outlook remains cloudy. The Government’s decision to introduce VAT on certain goods is likely to result in price escalation and in turn impact demand over the long term. With liberalization of the economy, the already fragmented retail space will likely see further competition, depressing margins of companies. Nevertheless, in the long term, we believe that companies will see revenue growth because of favorable demographics and an anticipated rise in per-capita income in KSA
JUNE 2009 SAUDI ARABIA FACTBOOK 55 Energy and Utilities
Privatizing is the key to growth
Electricity consumption in KSA has increased rapidly in recent years driven by a robust industrial sector, growing population, and improvement in living standards. Moreover, lower tariffs fixed by the Government, hot weather conditions, and a surge in power-intensive industrial development also supported demand growth. KSA’s energy and utilities sector currently has only two listed companies — Saudi Electricity Company (SECO) and National Gas and Industrialization Co. (NGIC). Both companies are part-owned by the Government. Apart from these two companies, there are few other state bodies that contribute to electricity generation. These include Saline Water Conversion Corporation (SWCC), Marafiq, and Saudi Aramco. In addition, Tihama Power Generation Co. (a private entity owed by Saudi Oger Ltd. and International Power Plc), owns four plants.
Electricity consumption in the Kingdom increased at a 3.0% CAGR from 6,214 Kilowatt hour Electricity consumption per capita is expected to grow at (kwh) per head in 2003 to 6,994 kwh per head in 2007. The EIU expects electricity consumption 4.1% over 2007-12, according in the Kingdom to increase to 8,556 kwh per head in 2012 (CAGR of 4.1% during 2007-12), to EIU backed by growth in the country’s industrial sectors and population.
Exhibit 74: Per capita electricity consumption in Kwh, 2007A–2012E
9,000
8,400 8,556
8,234 7,800 7,939
7,646 7,200 7,349
6,994 6,600
6,000 2007 2008 2009 2010 2011 2012
Source: EIU (report dated 29 August 2008)
GCC countries are expected to A similar trend is visible across the GCC countries. To cater to growing demand, GCC countries spend almost USD217 bn on are targeting to expand installed capacity to 96,700 MW by 2010 from 59,700 MW in 2006. electricity projects, of which They are also enhancing the electricity transmission network that includes the setting up of GCC almost 80% will be spent by Interconnection Grids across the GCC to benefit from differences in peak electricity demand. KSA and the UAE The first phase of this grid is expected to commence operations in 2Q-09 and would link KSA, Kuwait, Qatar and Bahrain while the second phase will link UAE and Oman. Total spending on the electricity projects is expected to aggregate USD217bn, of which approximately 80% is likely to be spent by KSA and the UAE (Exhibit 75).
JUNE 2009 SAUDI ARABIA FACTBOOK 56 ENERGY AND UTILITIES
Exhibit 75: Country wise distribution of electricity projects in GCC – total of USD217bn
Bahrain
Oman
Kuwait
Qatar
UAE
Saudi Arabia
0 20 40 60 80 100 120
Source: ProLeads Global
Exhibit 76 indicates that KSA’s energy and utilities sector performed better than that of the entire GCC on revenue during 2005–9M-08. However, the sector lags GCC peers in terms of return on equity (Exhibit 77).
Exhibit 76: Revenue of GCC energy & utilities companies, Exhibit 77: Comparison of RoE and P/E of GCC companies, 2005 – 2008 (USD mn) 2008
6,000 60
50 5,000
40 4,000 30 3,000
RoE (%) 20 2,000 10
1,000 0 0 5 10 15 20 25 30 0 -10 P/E 2005 2006 2007 2008 KSA Kuwait Qatar UAE KSA Kuwait Qatar UAE
Source: Reuters Source: Reuters The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
KSA will need to increase its Though rising demand offers huge growth potential, underinvestment during the last decade power generating capacity has resulted in power shortages in many regions in KSA. The Saudi Government is increasingly from 35.9 GW in 2007 to 60.0 seeking the participation of private players to overcome the possible supply crunch. According GW in 2023 to meet rising to the Saudi Electricity Company (SECO), the Kingdom’s electricity sector had an installed electricity demand, according generation capacity of 35.9 Gigawatt (GW) in 2007. Electricity and Cogeneration Regulatory to ECRA Authority (ECRA) estimates that KSA would need to increase its power generating capacity to 60,000 Megawatt (MW) by 2023, representing an increase of 1,600 MW per year.
Currently, private sector investment in energy projects under development totals USD79bn. According to the Energy Information Administration report (published in August 2008), KSA aims to attract private sector investment for up to 60 percent equity in integrated Independent Water and Power Projects (IWPPs), with the remainder split between Public Investment Fund
JUNE 2009 SAUDI ARABIA FACTBOOK 57 ENERGY AND UTILITIES
(PIF) and SECO. Moreover, in a move toward privatization of the power sector, ECRA plans to split SECO’s power generation assets into four separate units before eventual privatization of the company.
Exhibit 78 depicts the performance of the two companies listed on the Tadawul Stock Exchange. SECO dwarfs NGIC in terms of market capitalization with 4.17% share in the index, as on 31 December 2008.
Exhibit 78: Sector details
% weight in index as Avg. NPM (%), Avg. RoE (%), on Dec 2008* 1Q-05 – 4Q-08* 2005 – 2008* Saudi Electricity Co (SECO) 4.17 6.7 2.9 National Gas & Industrialization Co (NGIC) 0.14 10.5 13.1
Source: Bloomberg, Tadawul * start period may differ based on availability of data
SECO enjoys a near monopoly in the electricity sector. SECO controlled over 89% of generation SECO is a dominant player in the energy sector, controlling capacity and 100% of the transmission and distribution network in the Kingdom in 2007. over 89% of the Kingdom’s SECO’s revenue increased 11.1% YoY to SR5,126.2mn in 4Q-08. However, higher sales cost generation capacity resulted in SECO reporting a net loss of SR435.7mn in 4Q-08. NGIC’s revenue increased 2.8% YoY to SR378.3mn, whereas its profit margin contracted 236bp to 10.8% in 4Q-08. In 2008, SECO’s revenue increased 8.1% YoY to SR22,293.9mn and NGIC’s revenue increased 5.7% YoY to SR1,471.3mn. SECO’s net profit declined 30.8% YoY to SR1,074.8mn because of higher personnel and operating costs, whereas NGIC’s net profit increased 6.7% YoY to SR148.7mn in 2008.
Exhibit 79: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 80: Profitability (%) of companies, 2005 – 2008
24,000 1,500 15
12 22,000 1,400
9
20,000 1,300 6
18,000 1,200 3
- 16,000 1,100 2005 2006 2007 2008 2005 2006 2007 2008 SECO NGIC SECO NGIC *
Source: Reuters Source: Reuters Companies marked * are plotted on secondary axis
Pricing multiples of both the companies peaked in 2005. In 2008, the decline in the pricing multiples of these companies has been less severe vis-à-vis the TASI. However, SECO’s P/E multiples of 35.9x in 2008 is much higher, compared with NGIC’s multiple of 8.7x due to SECO’s positioning as a dominant player in the Saudi energy sector. Nevertheless, NGIC had higher RoE (14.3%) and P/B multiples (1.3x) in 2008.
JUNE 2009 SAUDI ARABIA FACTBOOK 58 ENERGY AND UTILITIES
Exhibit 81: Comparison of P/B and RoE, 2007 Exhibit 82: Comparison of P/B and RoE, 2008
15 15 NGIC NGIC 12 12
9 9 RoE (%) RoE (%) RoE 6 6
3 SECO 3 SECO
0 0 0123P/B 0123P/B
Source: Bloomberg, Tadawul Source: Bloomberg, Tadawul Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap as on 31 Dec 2008
Exhibit 83 indicates that SECO’s trading volumes are higher than that of NGIC.
Exhibit 83: Avg. daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
8,000 7,582
6,400
4,800
3,200
1,708 1,600
0 SECO NGIC
Source: Reuters
Since 2000, electricity tariffs have remained constant in KSA. However, increasing participation of the private sector is likely to result in the gradual introduction of market-based tariffs. Electricity & Cogeneration Authority’s (ECRA) approval of the proposed tariff changes is a key growth catalyst. This move is expected to provide relief to energy providers by accommodating the cost of services to the extent possible and offering sufficient revenue growth opportunities while reducing the burden on low-income families. However, given the deteriorating consumer confidence amid the ongoing economic crisis, implementation of this new tariff structure is likely to be muted.
Electricity consumption is Going forward, Government’s initiatives to bring about economic growth (in the form of expected to slowdown in 2009 additional Government spending and rate cuts) with higher focus on energy-intensive industries due to declining industrial and are likely to provide impetus to the energy sector. Though declining industrial and construction construction activity, but long activity could dent demand growth in 2009, significantly low per capita energy consumption in term is still intact the Kingdom offers sufficient room for an upside in the long run. Furthermore, the Saudi Government continues to encourage private sector investment in the energy sector, as privatization will bring in the much-needed investment. The Pan-Arab GCC grid will also
JUNE 2009 SAUDI ARABIA FACTBOOK 59 ENERGY AND UTILITIES
increase the utilization rates of Saudi energy firms. However, we remain concerned on the timely completion of the power projects mainly due to shortage of skilled staff and high demand of power projects elsewhere in the GCC. For instance, Marafiq’s Jubail IWPP project (largest in the Middle East) has been delayed, whereas the earlier completion target date was 2009. Nevertheless, increasing participation of the private sector, coupled with planned capacity expansions and favorable demand outlook, could be viewed as catalysts for industry growth going forward.
JUNE 2009 SAUDI ARABIA FACTBOOK 60 Agriculture and Food
Fulfilling demand through imports
KSA is one of the largest importers of agricultural and food products in the world. The Kingdom imports agricultural products from Ukraine, Syria, Brazil, India, the US, European Union (EU), and Australia. KSA imported over SR25.5bn of agriculture products in 2008, up sharply 40% YoY. The agriculture sector in KSA contributed 3% of the GDP and employed around 12% of the total workforce in 2007. The prime reason for dependence on imports is the paucity of fresh water and arable land.
Demand for agricultural, food, and food-related products continues to remain high, led by the growing population, making KSA the leading market in the Middle East for agricultural products. The Saudi Government is planning various initiatives ranging from loan and subsidy policies to boost agriculture activity in the region, while paying special attention to technological upgrading.
In the recent 2009 state budget, the agriculture and water sectors were allocated SR35.4bn, which was the third largest amount of the total budget. Major portions of this amount are expected to be spent on improving agricultural productivity, irrigation, silos, mills, desalination, roads, drainage, and provision of other incentives to farmers. Several water conservation projects have also been flagged off.
These Government initiatives and support have spurred private sector interest in the sector with investments expected to reach SR181bn in 2009, after sharply surging in 2008. A total of about 23% of this investment is mainly focused on agriculture related projects alone.
As a result of the limited arable Although, of the total land area of 2,149,690 sq km in KSA, only a very small portion is arable, land and depleting fossil water thousands of hectares of desert have now been transformed into arable land using modern sources, KSA is expected to technology and equipment. However, of the total water required for agriculture, majority is increase its dependence on sourced from non-renewable aquifers. The Saudi Arabian Ministry of Agriculture (MOA) food imports announced 12.5% per annum cut in wheat production from the spring of 2009 until the spring of 2016, because of depleting fossil water within KSA. As a result, from 2009–2016, the Kingdom is expected to fulfill its wheat requirements by importing a similar percentage of wheat from the international market every year.
Moreover, the US Department of Agriculture Foreign Agricultural Service expects the demand for rice to increase in 2009 due to a rise in population and higher number of pilgrims visiting Mecca. The Kingdom, the largest importer of rice from India, faced supply pressures in 2008, due to the ban on non-basmati rice exports from India. Furthermore, the Saudi Government implemented a new rice subsidy program on 5 Jan 08, under which, it subsidized rice imports at the rate of USD266.67 per metric ton and this is expected to help lower retail prices of high quality rice by up to 20% in KSA.
Population growth, higher The growing population base of Saudi Arabia and higher consumer spending are expected to consumer spending changes in drive demand for food. With increased focus on urbanization and industrialization and the life style and eating habits are growing influence of western lifestyles in KSA, the eating and living habits of the people have key growth drivers changed dramatically. As a result, the number of supermarkets and fast food chains are expected to rise in major urban areas of KSA. In the past ten years, majority of the US quick- service restaurant franchises such as McDonald’s, Pizza Hut, Subway and KFC, as well as Western-style supermarkets have entered the Kingdom. Local players in the fast food business
JUNE 2009 SAUDI ARABIA FACTBOOK 61 AGRICULTURE AND FOOD
are Herfy, Al-Back, Tazaj, Dajen and Kudu. Further, the rising number of foreign pilgrims is likely to increase per capita food consumption in the Kingdom.
The Kingdom imports large quantities of agricultural commodities and food ingredients for its growing food processing sector. Therefore, KSA levies only 5% import duty on the majority of foodstuffs imported. However, rice, food grains and fresh produce are exempted from import duty. Going forward, the KSA Government is phasing out custom duty and will introduce Value Added Tax (VAT), in line with the UAE Government’s plan. This development will most likely change the country’s indirect tax system.
KSA companies compare well with GCC peers on revenue parameters.
Exhibit 84: Revenue of GCC agriculture companies, Exhibit 85: Comparison of RoE and P/E of GCC companies, 2005–2008 (USD mn) 2008,
7000 60
6000 50
40 5000
30 4000 20
3000 ROE (%) 10 2000 0 1000 -5 0 5 10 15 20 25 -10
0 -20 P/E 2005 2006 2007 2008 Kuwait KSA Qatar Oman Kuwait Oman KSA Qatar UAE
Source: Gulfbase, Reuters Source: Gulfbase, Reuters, Bloomberg The companies list is not exhaustive Size of the bubble represents market cap. as on 31 Dec 2008
The 15 companies that comprise the agriculture sub-index of the Saudi Stock Exchange are listed in Exhibit 86 along with their respective average net profit margins and average RoE. Almarai had the highest market weight as of December 2008, whereas Savola exhibited the best RoE (excluding Bishah).
Exhibit 86: Sector details
% weight in Index Avg. NPM (%), Avg. RoE, as on Dec 2008 1Q05 – 4Q08* 2005 – 2008* Savola Group 1.31 13.5 23.6 National Agriculture Development Co 0.21 10.1 8.7 Qassim Agriculture Co 0.04 53.9 1.1 Hail Agriculture Development Co 0.07 16.2 10.9 Tabuk Agriculture Development Co 0.04 15.9 7.4 Saudi Fisheries Co 0.05 (31.5) (19.4) Ash Shargiyah Agriculture Development 0.01 2.0 2.2 Al-Jouf Agriculture Development Co 0.05 25.5 9.9 Bishah Agriculture Development Co** 0.04 NM 25.9 Jazan Development Co 0.05 318.4 11.8 Food Products Co 0.02 6.4 4.7 Saudi Dairy & Foodstuff Co 0.06 3.1 5.1 Almarai Company 1.65 17.6 -26.5 Anaam International Holding Group Co 0.06 7.6 2.1
Source: Bloomberg, Tadawul * start period may differ based on availability of data; ** Performance up to 1Q-07
JUNE 2009 SAUDI ARABIA FACTBOOK 62 AGRICULTURE AND FOOD
The combined revenue of 14 companies (excluding Bishah) increased 10.1% YoY in 2008, although earnings fell over 52.0% during the same period. The top three companies—Savola Group, Almarai Company, and National Agriculture Development Co—accounted for approximately 95.3% of the total revenue. Savola Group, the largest company in the sector, accounted for around 63.2% of the sector’s revenue. Almarai ranks second on revenue.
Although growth in earnings has slowed down QoQ, sales across segments remained steady due to strong domestic demand for food and related products. Most other companies in the sector, including National Agriculture Development Company and Almarai, also recorded revenue gains. Among the leading players in 4Q-08, Savola’s top line declined 8.9% QoQ and National Agriculture Development Co’s revenue fell 12.2%.
Exhibit 87: Revenue of companies, 2005-2008 (SR mn) Exhibit 88: Profitability (%) of Companies, 2005 – 2008
800 15000 25
700 12000 20 600 15 500 9000
400 10 300 6000 5 200 3000 100 0
0 0 -5 2005 2006 2007 2008 2005 2006 2007 2008 Hail Saudi Fisheries Halwani* Savola NADEC Hail Savola* NADEC Bishah ** SADAFCO* Almarai* SADAFCO * Almarai Halwani
Source: Reuters, Gulfbase, Bloomberg Source: Reuters, Gulfbase, Bloomberg Companies marked * are plotted on secondary axis **up to 2006
As indicated in Exhibits 89 and 90, the price multiples of Saudi agriculture and food companies were at their peak prior to the 2006 correction in the Saudi market which resulted in multiples declining significantly. The peer average of companies in this sector stood at 14.8x in FY-08. Savola, the largest amongst peers, traded at 14.3x.
Exhibit 89: Comparison of P/B and RoE, 2007 Exhibit 90: Comparison of P/B and RoE, 2008
35 35
30 30
25 25
20 20 15 ROE(%) ROE(%) 15 10 10 5 5 P/B P/B 0 0 024681012 0 5 10 15 20 Savola Group National Agriculture Savola Group National Agriculture Hail Agriculture Tabuk Hail Agriculture Tabuk Al Jouf Agriculture Jazan Development Al Jouf Agriculture Jazan Development Food Products Saudi Dairy & Foodstuff Almarai Anaam Food Products Saudi Dairy & Foodstuff Halwani Almarai Anaam
Source: Gulfbase, Reuters, NCBC Research Source: Gulfbase, Reuters, NCBC Research Non meaningful values have been excluded Non meaningful values have been excluded Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 63 AGRICULTURE AND FOOD
Exhibit 91: Average daily trading volume of stocks (‘000s) , Jan07 – Dec08
6000
5000 4,736 4,763
4000 3,647 3,586 2,819 3000 2,559 2,715 2,355 2,148 2,178 1,799 2000 1,807 1,575
1000 360 339
0 Hail Food Food Tabuk Jazan Jazan Savola Ash Saudi Bishah Al-Jouf Almarai Qassim Anaam NADEC Halwani Fisheries shargiyah shargiyah SADAFCO SADAFCO
Source: Reuters, Tadawul
KSA is largely dependent on imports for its agriculture and food product requirements. The Government is following a policy of conserving all its depleting fresh water resources while developing arable land in the Kingdom. Going forward, imports of key inputs such as wheat, rice, barley, are likely to grow in tandem with the development of the economy. With KSA’s accession to the WTO, there has been an inflow of foreign participants, which increases competition. In addition, the Government is phasing out customs duty and introducing VAT. Favorable demographics such as rising population will be a key growth driver for this sector. Although efforts to develop desert into arable land are underway, lack of agricultural land and water resources will continue to increase imports of major foodstuffs. Thus, KSA is expected to remain a net importer of agriculture and food products.
JUNE 2009 SAUDI ARABIA FACTBOOK 64 Telecom and IT
Favorable demographics driving growth
The Saudi telecommunication sector has experienced robust growth in the past few years, largely driven by KSA’s young demographic profile (68% of the people are below the age of 30) and rising per capita income. Currently, the telecommunication sector index of the Saudi Stock Exchange comprises four companies—Saudi Telecom Co (STC), Etihad Etisalat Co (Mobily), Mobile Telecommunication Co. (Zain) and Etihad Atheeb Telecom Company. STC enjoyed a monopoly in the fixed-line telecom service segment until recently, while Mobily and Zain compete with STC in the mobile telephone service segment.
KSA’s low penetration level In 2008, the KSA Government granted licenses to Bahrain Telecommunication Co. (Batelco), indicates significant room for Hong Kong’s PCCW Ltd (PCCW), and US’ Verizon Communications Inc (Verizon); with their growth entry, STC’s monopoly in the fixed-line telecom segment has ended. Of the newly licensed players, Etihad Atheeb Telecommunication Company completed an IPO of SAR300mn in February 2009, which was oversubscribed 3.5 times. The entry of new companies is expected to accelerate the expansion of existing infrastructure and implementation of new technology platforms. However, with increased competition owing to the entry of new players such as Mobily (in 2005) and Zain (in 2008) in wireless telecom segment, the average revenue per user (ARPU) of Saudi telecom sector has seen a sharp decline in the past three years.
Despite being one of the largest mobile markets in the GCC region, the country had a relatively low mobile penetration (116%) and fixed-line penetration (16.8%) in 2007. During 1H-08, the Saudi telecommunication market recorded a mobile penetration rate of 123.3%. KSA’s fixed to mobile substitution has also increased significantly over the last three years. This dented the growth in new fixed-line subscriptions and hence restricted the growth in revenue from this segment. In the operational fixed landline category, KSA had 4mn lines by the end of 2007, taking the fixed-line penetration level at 17%. Internet penetration grew to 26% in 2007, and is expected to be a catalyst for growth in the telecom sector in the long term.
Exhibit 92: Fixed-line and mobile subscribers (per 100 Exhibit 93: Broadband subscriber lines and internet users (per population) in KSA 100 population) in KSA
17.0 160 10 120
8 16.5 120 90
6
16.0 80 60 4
15.5 40 30 2
15.0 0 0 0 2003 2005 2007 2009E 2011E 2003 2005 2007 2009E 2011E Broadband subscribers Internet users Fixed-line subscribers Mobile subscribers
Source: EIU Source: EIU
The sector continues to be among the lucrative markets in the GCC due to its low penetration level compared with other GCC peers, and favorable demographics. Saudi Arabia ranked fourth in terms of mobile penetration in GCC, with UAE being the first with 173%, followed by Qatar and Bahrain with 150.4% and 148.2% penetration levels in 2007 respectively. Moreover, fixed-
JUNE 2009 SAUDI ARABIA FACTBOOK 65 TELECOM AND IT
line penetration stands at 17% vis-à-vis 19% in Bahrain and 30% in the UAE. KSA telecom companies are diversifying geographically as well, selectively targeting low mobile penetration markets. STC has expanded into the Indian and Indonesian markets on similar lines. Mobily also has plans to invest INR700mn (approximately USD15.5mn) in India, where it already has operations, to capture the growing Indian Telecommunication sector. These steps are likely to alleviate the profitability concerns due to falling ARPU rate in KSA.
KSA’s telecom sector is the largest in GCC in revenue and has better return on equity also. However, KSA companies have better return on equity than Kuwaiti companies do.
Exhibit 94: Revenue of GCC Telecom companies, Exhibit 95: Comparison of RoE and P/E of GCC companies, 2005 – 2008 (USD mn) 2008
16,000 40
14,000 35 12,000
10,000 30
8,000 25 6,000 RoE (%)
4,000 20 2,000 P/E 0 15 2005 2006 2007 2008 681012 KSA Qatar UAE Kuwait Oman Bahrain Oman Bahrain UAE KSA Kuwait Qatar
Source: Reuters Source: Reuters, NCBC Research The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
The four telecommunication companies of KSA—STC, Mobily, Zain, and Atheeb—are listed on the TASI. STC is the largest company in KSA’s telecommunication sector with a market cap of SR98.2bn as on 31 December 2008. Zain’s initial public offering came in 2008 and the company launched commercial services in August 2008. Atheeb was listed in March 2009. The company has not yet started operations and plans to launch commercial services in 2009.
Exhibit 96: Sector details % weight in index Avg. NPM (%) Avg. RoE, as on Dec 2008* 1Q05 – 4Q08* 2005 – 2008* Saudi Telecom Co (STC) 10.62 33.8 35.4 Etihad Etisalat Co (Mobily) 2.35 12.1 23.3 Mobile Telecommunication Co. (Zain) 1.61 NA NA
Source: Bloomberg, Tadawul, Reuters * start periods may differ based on the availability of data; does not include Etihad Atheeb
Mobily, which commenced mobile telephone services in early 2005, has performed creditably in the sector. Mobily’s aggressive focus on the wireless Internet market has generated excellent returns for the company in the recent past as reflected in the 29.0% YoY rise in revenue and 51.2% YoY increase in net profits during 4Q-08. On the other hand, STC recorded a 35.0% YoY rise in revenue for 4Q-08; however, the company’s net profits declined 61.2% YoY for the same period.
For 2008, Mobily’s revenue grew 27.9% YoY to SR10.8bn and net profit shot up 51.2% YoY to SR2.1bn. During 2008, STC reported 41.5% rise in revenue to SR47.4bn. Nevertheless, the company’s net profit declined 8.1% YoY because of the difference in exchange rates for the
JUNE 2009 SAUDI ARABIA FACTBOOK 66 TELECOM AND IT
foreign investments worth SR2bn in 2008. This also had an adverse affect on the bottom-line growth of KSA’s telecom sector leading to a 1.9% YoY fall for 2008.
Exhibit 97: Revenue of Companies, 2005 – 2008 (SR mn) Exhibit 98: Profitability (%) of Companies, 2005 – 2008
50,000 42
35 40,000
28 30,000 21
20,000 14
10,000 7
0 0 2005 2006 2007 2008 2005 2006 2007 2008 STC Mobily STC Mobily
Source: Reuters Source: Reuters
As of 31 December 2008, the P/E multiples of STC and Mobily were 8.9x and 10.4x, respectively. Similarly, the P/B multiples of STC and Mobily were 2.6x and 2.2x respectively. However, STC has a better return on equity (30.0%) compared with Mobily (26.7%) in 2008.
Exhibit 99: Comparison of P/B and RoE, 2007 Exhibit 100: Comparison of P/B and RoE, 2008
40 40
36 36 STC
32 32 STC RoE (%) RoE (%) 28 28 Mobily Mobily
24 24 P/B P/B 20 20 1234 4567
Source: Bloomberg, Tadawul Source: Bloomberg, Tadawul Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 67 TELECOM AND IT
Zain started trading in 2008 and had the highest daily trading volumes (Exhibit 101).
Exhibit 101: Avg. daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
14,000 12,060 12,000
10,000
8,000
6,000
4,000
1,613 2,000 1,040
0 STC Mobily Zain
Source: Reuters
Internet and broadband The telecommunication sector in KSA is emerging as one of the most competitive markets in the services, as well as value added region. With the liberalization of the sector and entry of more players, competition is likely to services are the relatively further intensify, depressing the already falling ARPUs. Competition also would increase unexplored and key growth marketing costs and promotion expenses. However, strong demand for mobile, reduction in areas for the sector handset prices and tariffs, and increasing popularity of value-added services offered on mobile platforms, present a significant growth opportunity. We expect growth in customer base and average minutes of use to offset the effect on revenue of a fall in ARPU. Moreover, the uptake of Internet and broadband services is expected to increase due to a growing young population, and willingness to adopt new technologies. Although demand for wired Internet is likely to promote fixed-line connectivity we believe companies would focus more on wireless connectivity, especially through mobiles, given their high penetration. Furthermore, investments in the sector are likely to increase with the opening up of the sector and the entry of new players. Therefore, our outlook on growth in KSA’s telecommunication sector is positive.
JUNE 2009 SAUDI ARABIA FACTBOOK 68 Insurance
Long term growth insured
The insurance sector in KSA, which has the largest population in the GCC, has undergone a sea change in the past few years. KSA’s insurance sector emerged stronger on the back of economic growth, increased market liberalization, favorable demographics, and a shift in regulatory patterns. According to Saudi Arabian Monetary Agency (SAMA)’s survey 2006–07 report , the Saudi insurance market registered robust growth of 24.0% YoY in 2007, with gross written premium increasing from SR6.9bn in 2006 to SR8.6bn in 2007. KSA was the second largest insurance market in total premium in the GCC in 2007.
In June 2008, 42 insurance companies operated in the Saudi market, 21 of which were fully licensed to operate in the Kingdom. In addition, eight have applied to the Ministry of Commerce and Industry for licenses. Increasing liberalization and implementation of positive regulatory changes have led to a marked improvement in the investment climate in KSA’s insurance sector of late.
Low insurance penetration and We believe the insurance sector in KSA is promising in the long term, given that insurance low density relative to regional penetration rates are very low and the sector is at a nascent stage. Although, insurance markets indicate future growth penetration in KSA increased from 0.53% in 2006 to 0.61% in 2007, it remained one of the most potential under-penetrated markets in the GCC in 2007. The average insurance penetration level in the GCC (excluding Bahrain) in 2007 was 1.02. Insurance density (gross written premium per capita) in KSA was also the lowest in the GCC (excluding Bahrain).
Exhibit 102: Insurance density and penetration – 2006 and 2007 Insurance penetration (in % of GDP) Insurance density (per capita in USD) Country 2006 2007 2006 2007 KSA 0.5 0.6 63 92 Kuwait 0.7 0.6 227 257 Oman 1.0 1.1 133 159 Qatar 1.1 0.9 683 640 UAE 1.7 1.9 585 812
Source: Swiss Re Sigma
However, new rules mandate insurance players to maintain gross premiums below 10x their capital and reinsure at least 30% of gross written premiums within the Kingdom. Companies also have to distribute 10% of net surplus from insurance operations to policyholders in line with the Mudarabah model of Islamic cooperative insurance. Hence, although the market is expected to expand in future, the legal framework might make if difficult for new players seeking entry into the market.
Buoyed by cultural factors, The GCC insurance sector has experienced exceptional growth over the past few years, driven Takaful insurance is gaining by improved business and legal environment and increasing maturity of the GCC economies. importance in GCC There has been a paradigm shift in the region’s appetite for insurance, which, in turn, has attracted many foreign insurers and paved the way for consolidation among local players in the Saudi insurance sector. The GCC insurance market essentially relies on Takaful, an insurance concept based on the Islamic banking law, thus making insurance a more widely acceptable and accessible product. According to Swiss Re Sigma, KSA’s insurance sector is the largest growth market for Takaful products. KSA alone accounted for approximately 30% of the total gross premium market in the GCC (excluding Bahrain) in 2007.
JUNE 2009 SAUDI ARABIA FACTBOOK 69 INSURANCE
Exhibit 103: Country wise distribution of gross premiums (USD mn) – 2007
4,000
3,000
2,000
1,000
0 Kuwait Oman Qatar Saudi Arabia UAE Life Non-Life
Source: Swiss Re Sigma
Given it is a nascent industry, the Company for Co-operative Insurance (NCCI) is the only dominant player operating in KSA. KSA leads other GCC insurance companies on revenue (Exhibit 104). However, in terms of RoE and P/B multiple, Qatari insurance companies rules the chart. KSA insurance companies have moderate RoE and P/B multiples vis-à-vis their GCC peers (Exhibit 105).
Exhibit 104: Revenue of GCC Insurance companies, 2005 – 2008 Exhibit 105: Comparison of RoE and P/E of GCC companies, (USD mn) 2008
800 25
20
600 15
10 400
RoE (%) RoE 5
0 200 P/B -5
0 -10 2005 2006 2007 2008 0.5 1 1.5 2 2.5 KSA Kuwait Qatar Bahrain UAE Oman KSA Kuwait Qatar Bahrain UAE Oman
Source: Reuters Source: Reuters The list of companies taken is not exhaustive. Only large players (based on market cap) of Note: We have taken P/B multiple as most of the GCC companies reflect absurd P/E value each country have been considered. due to investment losses in 2008. The list of companies taken is not exhaustive. Only large players (based on market cap) of each country have been considered; Size of the bubble represents market cap. as on 31 Dec 2008.
In 2007, gross written premium in health insurance (36% of the insurance market) and motor insurance (28%) together accounted for about 64% of the insurance market, compared with 60% in 2006. This growth was largely due to the Saudi Government making motor insurance compulsory for all and mandating employers to provide health insurance to expatriates. Energy insurance, and Protection and Savings insurance were the fastest growing lines of business in 2007 with YoY growth rates of 141% and 50%, respectively.
JUNE 2009 SAUDI ARABIA FACTBOOK 70 INSURANCE
Going forward, we expect the health insurance market to grow rapidly, buoyed by the Non-life insurance to expand Government’s decision of mandating employers to provide health insurance for expatriates. The annually at 18.6% over 2007-12 driven by health and motor motor insurance market is also expected to expand, with motor insurance being declared insurance compulsory. BMI expects the total non-life insurance sector to expand at 18.6% CAGR in 2007– 12, backed by strength in the health and motor insurance sectors, coupled with increased non- life penetration. Meanwhile, the life insurance sector is projected to expand at 25.6% CAGR in 2007–12 on population growth and expectations of a rise in density (premium per capita) from USD3.6 in 2007 to USD10 in 2012.
The Tadawul has 21 listed insurance companies, of which six were listed in 2008. These include: Arabia Insurance Cooperative Co. (paid-up capital of SR200mn); Trade Union Cooperative Insurance Co. (paid-up capital of SR250mn); Al-Sagr Cooperative Insurance Company (paid-up capital of SR200mn); Bupa Arabia for Cooperative Insurance Co. (paid-up capital of SR400mn); Saudi Re for Cooperative Reinsurance Co. (paid-up capital of SR1bn); and United Cooperative Assurance Co. (paid-up capital of SR200mn). Four other insurance companies have floated their IPO in April 2009. These include: Al Rajhi Co. for Cooperative Insurance (offering size of SR60mn); Weqaya for Takaful Insurance and Reinsurance Co. (offering size of SR80mn); ACE Arabia Cooperative Insurance Co. (offering size of SR40mn) and AXA Cooperative Insurance (offering size of SR80mn). NCCI continued to hold a dominant position in KSA’s insurance sector with 0.18% and 16.0% weight by market capitalization on the Tadawul and the Tadawul Insurance index respectively, as on 31 December 2008.
Exhibit 106: Sector details % wt in Avg. NPM (%), Avg. RoE (%) index 1Q-05 – 4Q-08* 2005 – 2008 The Company for Co-operative Insurance (Tawuniya) 0.18 23.30 32.71 Malath Co-operative Insurance and Reinsurance Co. (Malath) 0.11 (22.70) Mediterranean & Gulf Insurance and Reinsurance (Medgulf) 0.15 N/A Saudi Fransi Co-operative Insurance Co. (Allianz SF) 0.05 (11.35) Islamic Arab Insurance Co. (SALAMA) 0.04 (4.54) Saudi United Cooperative Insurance Co. (Walaa) 0.03 N/A Arabian Shield Co-operative Insurance Co. 0.03 N/A SABB Takaful 0.04 (6.32) Sanad Insurance and Reinsurance Co-operative Co. 0.03 N/A The Saudi Arabian Cooperative Insurance Co. (SAICO) 0.02 N/A Saudi Indian Company for Cooperative Insurance 0.05 (134.41) Gulf Union Co-operative Insurance Co. 0.03 N/A Alahli Takaful Company (ATC) 0.05 (171.73) Al-Ahlia Insurance Co. 0.03 (802.33) Allied Co-operative insurance group (ACIG) 0..02 N/A Arabia Insurance Co-operative Co. (AICC) 0.03 N/A Trade Union Co-operative Insurance 0.03 N/A Al-Sagr Cooperative Insurance Co. 0.03 N/A United Co-operative Assurance (UCA) 0.08 N/A Saudi Re for Co-operative Reinsurance Co. 0.10 23.30 Bupa Arabia for Co-operative Insurance Co. 0.05 (22.70)
Source: Bloomberg, Tadawul, Company data: * start periods may differ based on availability of data
Since the Saudi insurance market is still evolving, majority of the players registered losses in Many insurance players posted 2008 except NCCI, Arabian Shield Co-operative Insurance Co., Gulf Union Co-operative loss in 2008 due to investment losses and high operational Insurance Co., and Al-Sagr Cooperative Insurance Co., which posted profits. NCCI has been costs resulting from inception able to maintain profitability due to its dominant position in growing insurance segments such as motor insurance and health insurance. However, NCCI posted negative profitability in 4Q-08
JUNE 2009 SAUDI ARABIA FACTBOOK 71 INSURANCE
(YoY), despite growth in revenue. In 2008, NCCI’s profits declined 87% YoY to SR67mn. Although, gross written premium and net premium earned grew 23% and 16% YoY respectively in 2008, loss in investment portfolios and competition from the recently licensed companies impacted the bottom line. Stringent Government regulations on investments such as limiting investment in equity to not more than 15% of total investments to limit downside risks associated with the volatility of the equity markets are helpful. Nevertheless, a weak financial market is likely to affect the value of their investment portfolio in the near term.
Exhibit 107: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 108: Profitability (%) of companies, 2005 – 2008
2,800 50
40
2,400 30
20 2,000
10
1,600 0 2005 2006 2007 2008 2005 2006 2007 2008
Source: Tadawul, Reuters Source: Tadawul, Reuters NCCI is the only dominant player operating in KSA NCCI is the only dominant player operating in KSA
Following the Government’s decision to liberalize the insurance sector in 2006, the sector experienced significant growth in 2007. Furthermore, the Government’s phased introduction of compulsory health insurance for expatriates in 2006 reflected positively on the sector index. However, plummeting equity markets in KSA in 2008 impacted the valuations of the companies in this sector. In 2008, P/B multiple contracted because of a weak equity market while P/E multiples remained high mainly due to a steeper decline in earnings vis-à-vis the share price. For instance, as of 31 December 2008, NCCI’s P/B and P/E and multiple stood at 1.6x and 25.2x respectively, compared with 4.1x and 14.3x respectively in 2007. As illustrated below, most of the KSA insurance companies, barring NCCI and the Gulf Union Co-operative Insurance Co., had negative RoE in 2008.
Exhibit 109: P/E of NCCI, 2005–08
40
NCCI (as on 31 Dec 2007) 20 NCCI (as on 31 Dec 2008)
0 Gulf Union Medgulf SAICO Saudi Indian RoE (%) RoE SABB Takaful Walaa Malath ATC -20 Al-Ahlia Allianz SF ACIG SALAMA -40 0246P/B
Source: Reuters, Bloomberg, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 72 INSURANCE
Saudi Re, followed by MEDGULF, had the highest daily trading volumes in 2007-08.
Exhibit 110: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
2,000 1,806 1,822
1,500 1,377 1,104 949 925 937 941 898 1,000 825 781 759 760 778 639 608 574 619 508 500 295 202
0 ATC UCA AICC ACIG NCCI Walaa Malath SAICO Al-Sagr Al-Ahlia Medgulf SALAMA Saudi Re Saudi Allianz SF Allianz Gulf Union Gulf Sanad Ins. Sanad Bupa Arabia Trade Union SABB Takaful Arabian Shield Saudi Co. Indian
Source: Bloomberg
KSA’s insurance industry is at an incipient stage and offers scope for exponential growth, going forward. The sector is estimated to benefit largely from increasing liberalization, growing population, and increasing awareness of insurance products.
Although long term drivers are However, in the near term, a slowdown in business activities will have a negative impact on positive, we hold a negative demand for non-life insurance. As many companies are listed recently and are at a nascent outlook on the sector in the stage of development, they are expected to incur higher selling and general administration short term costs, which would put pressure on their net income in 2009. In addition, unit-linked life insurance products have lost their charm due to the plunging equity markets, which, in turn, is impacting the overall growth of the insurance sector. Insurance companies are likely to experience erosion in their capital values, as they will record mark-to-market losses on their investment portfolio. Hence, we remain cautious on the earnings prospects of insurance companies in 2009, and thus hold a negative outlook on this sector in the near-term.
JUNE 2009 SAUDI ARABIA FACTBOOK 73 Multi-investment
Light at the end of the tunnel
The multi-investment sector is made up of companies that invest in projects across a wide variety of sectors. A handful of large diversified conglomerates currently operate in the Kingdom. They function mainly in sectors such as real estate, hospitality, industrial manufacturing, and energy. Although the current global meltdown has severely impacted the sector, anticipated recovery in the medium term has a potential to provide a push to this sector
Government support of At present, seven major companies operate in the Saudi multi-investment sector, whose various sectors is likely to combined turnover expanded at a staggering 113.2% CAGR between 2005 and 2007, owing to create multi-investment the robust macroeconomic growth in KSA during that period. opportunities The Saudi Government has taken various initiatives such as reducing tax rates applicable to foreign-owned firms from 45% to 20% to encourage more foreign participation across sectors. Government-backed development of economic cities is expected to directly provide growth opportunities to companies operating in the real estate, hotels, and tourism sectors. Such initiatives, coupled with KSA’s accession to the WTO and expenditure of SR161.7bn that was planned in 2008 towards various sectors, are likely to drive growth; multi-invest companies stand to benefit from the growth of these sectors in the long term.
Revenue of Saudi companies surged in 2007, led by a growing economy, although these numbers have fallen sharply in 2008. In the second half of 2008, KSA multi-investment companies had begun feeling the pinch of lower RoEs compared with GCC peers; both RoEs and PEs have entered negative territory at the end of 2008.
Exhibit 111: Revenue of GCC multi investment companies, Exhibit 112: Comparison of RoE and P/E of GCC companies, 2005–2008 (USD mn) 2008
3000 50 2500 40 2000 30 UAE Oman 1500 20 1000 10 P/E 500 0 0 -10 -5-10 0 5 10 15 20 ROE (%) ROE -500 -20 -1000 Bahrain -30 KSA -1500 -40 -2000 -50 -2500 -60 2005 2006 2007 2008 Kuwait -70 KSA UAE Kuwait Bahrain Oman
Source: Gulfbase, Reuters, Tadawul Source: Gulfbase, Reuters, Tadawul The companies list is not exhaustive The companies list is not exhaustive Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 74 MULTI-INVESTMENT
Kingdom Holding Company (Kingdom) currently has the largest market weight, whereas Al- Ahsa Development Company’s profit margins were the highest.
Exhibit 113: Sector details % weight in Index Avg. NPM (%), Avg. RoE, on Dec 2008* 1Q05 – 4Q08* 2005 – 2008* Kingdom Holding Company (Kingdom) 3.20 NM NM Aseer Trading, Tourism & Manufacturing Co (Aseer) 0.14 13.1 8.2 Al-Ahsa Development Co (Al Ahsa for Dev.) 0.05 75.5 11.5 Saudi Advanced Industries Co (Saudi Advanced) 0.05 28.3 2.3 Saudi Arabia Refineries Co (SARCo) 0.09 66.8 6.5 Saudi Industrial Services Co (SISCo) 0.07 NM NM Al-Baha Investment & Development Co (Al Baha) 0.02 NM NM
Source: Bloomberg, Tadawul, Reuters and Gulfbase * start periods may differ based on availability of data
Leading players in terms of revenue in the Saudi multi-investment sector are Kingdom, Assir and Saudi Industrial Services Co. (SISCO). Kingdom is majority-owned (93.5%) by HH Prince Alwaleed Bin Talal Bin Abdulaziz Al Saud and is one of the most diversified organizations in KSA. The company has business interests in banking, real estate, technology, hotels and tourism, media and telecommunications, healthcare, and education. Assir is involved in construction of agricultural projects, allocation of contracting works, and holds a large trading portfolio. The combined turnover of both companies accounted for approximately 96% of the sector turnover in 2008.
Most of the companies in the sector have experienced robust growth between 2005 and 2007, with revenue expanding at 113.2% CAGR during the period, primarily attributable to overall economic growth and liberalization initiatives of the Saudi Government. However, owing to volatile investment portfolios, falling oil prices and the current unfavorable environment in the global equities space, this sector has experienced a sharp downturn in terms of value in the last quarter of 2008. In 2008, revenue recorded growth of only 11.1% YoY, compared with 332.0% YoY growth in 2007.
Global crisis impact on the After having grown at a CAGR of 48.8% in 2005-2007 and 148.1% YoY in 2007, the sector sector is expected to continue suffered net losses in excess of SR30bn in 2008, led by the losses made by the leading players. in the near-term future These negative results were primarily due to huge annual losses incurred by the Kingdom Holding Company, one of the biggest and worst losses in the history of the region. Kingdom suffered a loss of SR31bn in the last quarter alone and Assir suffered losses of SR212mn in 4Q- 08, posting a loss for the second consecutive quarter. Al-Ahsa also recorded a loss of SR19mn in 4Q-08 and although Saudi Advanced Industries recorded a profit of SR2.1mn, it was down 52.1% QoQ. The impact of the global crisis, clearly evident in the last quarter of 2008, is likely to continue in the near-term future.
JUNE 2009 SAUDI ARABIA FACT BOOK 75 MULTI-INVESTMENT
Exhibit 114: Revenue of companies, 2005–2008 (SR mn) Exhibit 115: Profitability (%) of companies, 2005 – 2008
200 6000 120 4000 160 2000 80 0 120 -2000 -4000 40 80 -6000
-8000 0 40 -10000 -12000 -40 0 -14000 2005 2006 2007 2008 2005 2006 2007 2008
Al-Ahsa Saudi Advanced Saudi Refineries Assir Al-Ahsa Saudi Advanced Saudi Industrial Al-Baha Kingdom* Saudi Refineries Saudi Industrial Assir*
Source: Gulfbase, Bloomberg, Reuters Source: Gulfbase, Bloomberg, Reuters * Saudi Refineries FY08 ended April 08 *non meaningful values have been excluded Companies marked * are plotted on secondary axis
Companies operating in the sector had significantly high price multiples in 2005, primarily due to anticipated growth prospects, supported by Government initiatives such as the planned development of economic cities across KSA. However, following a major correction in the Saudi stock market, valuations have significantly corrected and now are at attractive levels, compared with 2005 and early 2006 levels. At the end of 2007, the sector had high P/E and P/BV of 45.4x and 2.0x respectively. Both, P/E and P/BV multiples have declined in 2008 with most of the leading companies posting losses for the year. Most companies posted negative RoEs and P/BVs that have fallen from 2007 levels.
Exhibit 116: Comparison of P/B and RoE, 2007 Exhibit 117: Comparison of P/B and RoE, 2008
38 60
40 Saudi Saudi Advanced 28 Saudi 20 Refineries Refineries Al Ahsa 0 Aseer Al Baha P/B 18 Aseer (20)
(40) ROE(%) ROE(%) 8 Al Ahsa (60)
P/B (80)
(2) (100) Kingdom
Kingdom (120)
(12) (140) 012345 (2)(1)01234567
Source: Gulfbase, Bloomberg, Reuters, NCBC Research Source: Gulfbase, Bloomberg, Reuters, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACT BOOK 76 MULTI-INVESTMENT
Exhibit 118 displays the daily trading volumes for 2007-08. According to current statistics, Kingdom Holding has the highest average daily volume of stocks traded.
Exhibit 118: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
7,000 6,104 6,000
5,000
3,769 4,000 3,649
3,000 2,572 2,620 2,264 2,000
1,000 678
0 Kingdom Assir Al Ahsa SAIC SARCO SISCO Al Baha
Source: Reuters, Tadawul
More losses expected in near In the near term, as evident from the results of some of the major companies in the sector in term; hospitality and real estate 4Q-08, the multi-investment sector is likely to remain under pressure and may head toward coupled with Government more losses. However, with a growing economy presenting diverse opportunities, the medium- initiatives likely to support long to-long term outlook remains positive. Fall in the prices of input commodities such as steel and term prospects other construction materials is likely to support the margins of construction companies and help tap new construction projects. The sector, especially the real estate and hospitality industry, is expected to benefit from higher infrastructure spending (e.g. development of economic cities across KSA), which in turn will positively impact multi investment companies. Moreover, investor-friendly initiatives of the Government, including reduction in tax-rates for foreign firms and liberalization, are likely to boost the economy in the long term, thus in turn enabling the multi-investment sector gain traction.
JUNE 2009 SAUDI ARABIA FACT BOOK 77 Industrial Investment
Facing the impact of economic slowdown and credit crisis
Companies in the Saudi industrial investment sector operate in a diversified stream of businesses. These firms manufacture and distribute a range of products, including pharmaceuticals, medical appliances, steel wire and wire related products, glass products, textiles, fertilizers, chemicals, and petrochemicals. According to the Ministry of Commerce and Industry of KSA, in 2007, approximately 3,900 industrial units operated in the Kingdom, employing around 396,000 personnel (approximately 6% of the country’s workforce).
The non-oil Industrial sector experienced strong growth during 2007 and 1H-08 and contributed around 10% to the Kingdom’s GDP in 2007, primarily due to the increase in commodity prices. KSA’s entry into WTO in December 2005 also encouraged diversification and foreign direct investments in the country’s industrial sector. However, the credit crisis has adversely impacted the sector in 2H-08 and led to a sharp decline in demand for industrial and building materials. As a result, commodity prices, including industrial and building materials, slumped during the period. Furthermore, the liquidity crunch, engendered by a marked shift in foreign capital investments, has compounded the sector’s woes. As a result, the sector is estimated to have grown 5.4% YoY in 2008, compared with 8.6% in 2007.
With developed nations facing worsening recession and with emerging economies slowing down, we expect demand for metals and commodities to remain subdued in the near-to-medium term. However, in the long term, the export of metal products, electrical goods, machinery and industrial equipment, construction materials, wood products, and textiles and garments is expected to increase due to the Saudi Government’s thrust on development of the non-oil sectors.
Lack of availability of finance Companies in the KSA industrial investment sector are initiating capacity expansion to leverage and declining demand could the growth potential. MAADEN plans to build an aluminum project worth USD10.5bn and Saudi delay announced expansion Paper Manufacturing Company intends to double its capacity by setting up a second plant worth plans SR36mn with a production capacity of 25,000 tons per year. MAADEN has, however, postponed its plans to construct an integrated aluminum plant worth USD10.5bn by approximately three years after its partner Rio Tinto Alcan stepped out from the project due to a weak market. Furthermore we remain concerned about capacity expansion projects amid weak demand. Shortage of skilled technical workforce and rise in cost of raw materials in 1H-08 have already delayed several capacity expansion projects. Going forward, decline in demand for building materials and reduced availability of capital are likely to further delay projects and could lead to cost overruns.
JUNE 2009 SAUDI ARABIA FACTBOOK 78 INDUSTRIAL INVESTMENT
Firms in KSA lag their GCC peers on RoE but have higher pricing multiples.
Exhibit 119: Revenues of GCC industrial investment companies, Exhibit 120: Comparison of RoE and P/E of GCC companies, 2005–08 (USD mn) 2008
5000 60 4500 Kuwait 4000 50 3500
3000 40 2500 Qatar 2000 RoE (%) 30 1500 1000 20 500 KSA
0 UAE P/E 2005 2006 2007 2008 10 048121620 KSA Qatar UAE Kuwait
Source: Reuters Source: Reuters, NCBC Research The companies list is not exhaustive Size of the bubble represents market cap. as on 31 Dec 2008
In 2H-08, three new companies listed on the index—MAADEN, Basic Chemical Industries (BCI), and Astra Industrial Group. MAADEN is the sector’s largest company in market capitalization with 43.5% share in the sector, followed by AlAbdulatif with 15.9% share, as on 31 December 2008.
Exhibit 121: Sector details % weight in Index Avg. NPM (%), Avg. RoE (%), as on Dec 2008* 1Q05 – 4Q08* 2005 – 2008* Saudi Pharmaceutical Indust. Med. Appliances 0.16 15.3 5.4 The National Co. for Glass 0.08 97.5 21.8 Filing & Packing Materials Manufacturing Co 0.03 9.2 15.9 National Metal Manufacturing and Casting Co 0.06 6.7 10.3 MAADEN 1.07 50.8 1.8 Saudi Chemical Company 0.14 12.4 17.3 BCI 0.06 8.5 13.3 Astra 0.20 17.4 12.8 Saudi Paper Manufacturing Co 0.24 17.5 24.9 AlAbdulatif Industrial Investment Co 0.39 14.8 20.2 Saudi Industrial Export Co 0.03 6.6 13.9
Source: Bloomberg , Tadawul, Gulfbase, Reuters * start periods may differ based on the availability of data
During 2005–08, the total revenue of the eleven listed companies increased at 39.0% CAGR and their average profit margin stood at 23.3%. Revenue was up 39.7% YoY to SR7.5bn in 2008, of which Saudi Chemical accounted for 20.5%, followed by AlAbdulatif with 15.2% and Astra Industrial Group with 13.2%. In 4Q-08, total revenue declined 0.7% to SR1.8bn, with Saudi Chemical, Saudi Pharmaceutical and Al Abdulatif contributing 26.1%, 16.1%, and 14.1% to the decline respectively. Average net profit margin for the eleven listed companies was 10.66% in 4Q-08, although it was 17.54% for eight listed companies in 4Q-07. During 2008, industrial investment sector recorded a 51.1% rise in net profits to SR1.2bn.
JUNE 2009 SAUDI ARABIA FACTBOOK 79 INDUSTRIAL INVESTMENT
Exhibit 122: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 123: Profitability (%) of companies, 2005 – 2008
1,000 2000 50 140
1800 125 800 40 1600 110 600 1400 30 95 1200 400 20 80 1000 200 10 800 65
0 600 0 50 2005 2006 2007 2008 2005 2006 2007 2008 SPIMACO FIPCO NMMCC SCCO ZOUJAJ FIPCO NMMCC SPM SPM ALABDUL SIECO MAADEN SIECO MAADEN BCI ASTRA BCI ASTRA ZOUJAJ * SPIMACO * SCCO * ALABDUL *
Source: Bloomberg, Reuters Source: Bloomberg, Reuters Companies marked * are plotted on secondary axis Companies marked * are plotted on secondary axis
The pricing multiples of Saudi industrial investment companies surged during 2007 following the 2006 stock market correction. This was due to exceptional growth in the Saudi stock market supported by economic expansion, a developing capital market, privatization programs, and more number of companies tapping the capital market for funds. However, in 2008, P/E multiples of companies in the Saudi stock market plummeted, as the global economy slowed down. In 2008, PE multiples averaged 17.6x, well below the 37.1x recorded in 2007. In the same period, P/BV ratio averaged 2.0x as against 4.1x in 2007. Average RoE declined 26bp to 13.7% in 2008 from 13.9% in 2007.
Exhibit 124: Comparison of P/B and RoE, 2007 Exhibit 125: Comparison of P/B and RoE, 2008
30 30
25 ALABDUL 25 ZOUJAJ SPM SPM
SCCO 20 20 BCI SCCO FIPCO ALABDUL 15 15 ASTRA RoE (%) RoE RoE (%) SIECO SPIMACO 10 10 SPIMACO SIECO NMMCC 5 5 NMMCC MAADEN P/B 0 0 024680246 P/B
Source: Bloomberg, Tadawul, NCBC Research Source: Bloomberg, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008 *ZOUJAJ cannot be seen in the chart *FIPCO cannot be seen in the chart
JUNE 2009 SAUDI ARABIA FACTBOOK 80 INDUSTRIAL INVESTMENT
MAADEN, a newly listed company, topped the chart in terms of average daily volume traded.
Exhibit 126: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
25,000 22,079
20,000
15,000
10,000
5,000 1,983 2,178 2178 2,628 2,016 2,378 1,409 1,112 941 1,331 0 BCI SPM SCCO FIPCO SIECO ASTRA ZOUJAJ NMMCC MAADEN MAADEN ALABDUL SPIMACO
Source: Bloomberg, Reuters
Government’s thrust on To meet growing demand at home and abroad, companies in the sector are planning to add mainstream industrial new capacity or are in the midst of a capacity expansion. We expect the Government’s focus on investment projects to fuel increasing non-oil export revenue to benefit exports of chemicals, metal products, electrical growth goods, machinery and industrial equipment, construction materials, wood products, textiles and garments in the medium-to-long term. However, the sector is likely to face near-term challenges in the form of falling demand and tight liquidity. This would have a major impact on the expansion plans of companies in this sector, leading to major projects either being kept on hold or cancelled. The Government is likely to take steps to keep the mainstream industrial investment projects on track so that the overall growth of the sector is not hindered. Nevertheless, inability to counter these threats effectively could prevent the sector from realizing its full potential, going forward.
JUNE 2009 SAUDI ARABIA FACTBOOK 81 Building and Construction
Healthy pipeline remains key long-term driver
The construction sector in KSA holds key importance to the non-oil sector growth in KSA. KSA’s building and construction sector is involved in the manufacture and supply of floor tiles, gypsum and gypsum derivatives, communication cables, copper rods, conductors, accessories, pipes systems, welded and coated steel pipes. The sector also makes and supplies air- conditioning systems, process equipment, transmission and telecommunication towers, vitrified clay pipes for sewage systems, computer, telephone, and pilot cables, and modular buildings.
Rapid economic development, huge petrodollar influx, shrinking average household size and rising income levels in the Kingdom in the last 2–3 years, has kept demand for residential buildings and infrastructure projects in an upswing. According to SAMA, construction activity grew 9.9% YoY in 2007, contributing 4.6% to GDP in 2007 (compared with 4.5% in 2006). This sector employed 2.3mn workers as of 2007, accounting for 38.9% of the total number of workers in the private sector. Moreover, The Industrial Development Fund in 2008 granted SR24bn worth of loans to the construction sector, which made up 32% of the total loans approved to the various sectors. The Government expects the sector to grow by 4.1% in 2008
Long-term prospects for the The residential real estate segment, which accounts for approximately 75.0% of the total real sector remain positive estate developments in KSA, is currently experiencing a supply shortage. Moreover, King Abdullah in 2007 introduced 1,800 development and infrastructure projects in Riyadh at an investment of more than USD31bn. These projects span the residential, education, healthcare, water & power, housing, and telecommunications sectors. The growth in population has also translated into increased demand for infrastructure development, including the energy, water and telecommunications sectors.
Below are some statistics that support the construction sector’s long-term growth prospects:
• 1.3mn housing units are required over the next seven years
• Energy and electricity needs are growing, driven by rising population
• 600 new factories have been planned
• Telecom and water sectors are growing
• Tourism and transport needs are increasing
• The King Abdullah Economic City (KAEC) and the Jazan Economic City (JEC) are alone worth USD54.0bn and are part of similar projects being set up.
However, hit by the current global credit crisis, development work on many of these projects has temporarily slowed down.
The global crisis has led to a Within the GCC, economic growth historically has increased demand for residential, commercial steep fall in value of contracts and infrastructural projects. KSA is expected to account for 8.0% of the total USD118bn awarded in the Kingdom in 4Q- investment in the sector. However, construction activity across sectors in the GCC has slowed 08. in 4Q-08, led by the global crisis impacting top-line and bottom-line growth of companies. Real estate prices in the UAE have fallen and work on King Abdullah Economic City has lost momentum, while construction of petrochemical facilities is also likely to slow down. Exhibit 127 depicts the reducing value of contracts awarded to the construction sector in the GCC in Q4
JUNE 2009 SAUDI ARABIA FACTBOOK 82 BUILDING AND CONTRUCTION
2008. The UAE, the region’s largest market, has suffered a near 40.0% drop, highlighting the effects of the global crisis on development work across the region.
Exhibit 127: GCC construction sector contracts awarded value in 2008 (USD bn) Q1 Q2 Q3 Q4 2008 total Bahrain 0.39 0.49 0.44 0.72 2.04 Kuwait 0.28 0.97 3.5 0.16 4.91 Oman 0.17 0.5 4.9 0 5.57 Qatar 5.97 6.6 0.75 0.4 13.72 KSA 2.57 2.75 3.85 0.36 9.53 UAE 23.4 21.2 23.3 14.1 82.00 GCC 32.78 32.51 36.74 15.74 117.77
Source: MEED
At the listed company level, KSA has a large and diversified construction sector with strong revenue growth historically, although top lines have suffered in the current crisis. RoE has been on par with GCC peers with a P/E range of around 20x.
Exhibit 128: Revenues of GCC building and construction Exhibit 129: Comparison of RoE and P/E of GCC companies, companies, 2005–2008 (USD mn) 2008
6000 35
5000 30 UAE
4000 25 KSA
3000
ROE(%) 20
2000 Oman 15
1000 Kuwait 10
0 P/E 2005 2006 2007 2008 5 -10 0 10 20 30 40 50 60 70 KSA UAE Oman Kuwait
Source: Gulfbase, Reuters Source: Gulfbase Reuters, The companies list is not exhaustive The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 83 BUILDING AND CONTRUCTION
The building and construction sector has a large number of private players with only 12 listed companies. Profit margins were the highest for National Gypsum Company, whereas Mohammad Al Mojil group had the highest market weight in the sector.
Exhibit 130: Sector details % weight in Index Avg. NPM (%), Avg. RoE (%), as of Dec 2008* 1Q05 - 4Q08* 2005 - 2008* Saudi Ceramic Co 0.29 19.9 21.2 National Gypsum Company 0.10 46.1 29.4 Saudi Cable Company 0.22 5.9 18.4 Saudi Industrial Development Co 0.03 NM NM Saudi Arabian Amiantit Co 0.22 2.3 7.8 Arabian Pipes Company 0.15 16.0 18.6 Zamil Industrial Investment Co 0.28 5.4 24.2 AL-Babtain Power & Telecommunication Co 0.19 12.4 24.3 Saudi Vitrified Clay Pipes Co 0.05 19.3 44.2 Mohammad Al Mojil Group 0.48 23.9 16.4 Middle East Specialized Cables Co 0.16 8.8 33.5 Red Sea Housing 0.24 22.3 39.4
Source: Bloomberg, Gulfbase, Reuters and Tadawul, Annual Report * start periods may differ based on availability of data
Total revenue of the 12 listed companies increased at 37.8% CAGR and profits grew at 72.6% CAGR in 2005–08. The rise in revenue was backed by growing demand created by the several ongoing infrastructure and industrial projects. For 2008, the revenue of the total sector grew 27.5% YoY (compared with 55.2% YoY growth in 2007), on an average. Moreover, net profit showed an improvement of 17.7% YoY in 2008. Although the potential for construction activities is high in KSA, weakening sentiments for the sector in the global market might restrict the upside potential of the sector in the short-term. Demand for the construction of petrochemical facilities could see a downturn in the short term due to weak oil prices. This could adversely impact the revenue performance of building material providers.
In 4Q-08, the average revenue of The global credit crisis has resulted in a slowdown in development work on many projects, the companies declined 10.0% which is evident in the 4Q-08 results of some of the companies. In 4Q-08, the average revenue QoQ, while earnings plummeted of the companies has declined 10.0% QoQ. The picture is grimmer with net profit, which 75% QoQ. plummeted an average 75.0% QoQ. Exhibits 131 and 132 display the profitability and revenue of the 12 listed companies until 4Q-08.
Exhibit 131: Revenue of companies, 2005–2008 (SR mn) Exhibit 132: Profitability (%) of companies, 2005–2008
5000 35
30 4000 25
3000 20
15 2000 10
1000 5
0 0 2005 2006 2007 2008 2005 2006 2007 2008 Saudi Ceramics Amiantit Saudi Ceramics Amiantit Zamil Specialized Cables Zamil Specialized Cables Saudi Cable Co. Al babatain Saudi Cable Co. Al babatain Redsea Mohamed Al Mojil Redsea Mohamed Al Mojil
Source: Gulfbase , Bloomberg, Reuters Source: Gulfbase , Bloomberg, Reuters
JUNE 2009 SAUDI ARABIA FACTBOOK 84 BUILDING AND CONTRUCTION
The pricing multiples of the companies in this sector indicate a mixed trend. Some of the companies experienced relatively flat multiples, while for others it increased significantly in 2005–06. This was due to exceptional growth in the Saudi stock market, supported by a growing economy, several IPOs, and a fast developing capital market. However, the pricing multiples are currently at attractive levels, primarily due to the correction in the Saudi stock market. As of 2007, P/E was at 30.6x, while P/BV was at 4.7x. As depicted in Exhibit 55 and 56, pricing multiples have been on the decline in 2008, providing an attractive long-term investment opportunity. Mohamed Al Mojil recorded the highest RoE in 2008, while P/BV was the highest for Saudi Ceramics.
Exhibit 133: Comparison of P/B and RoE, 2007 Exhibit 134: Comparison of P/B and RoE, 2008
55 50 Mohamed Al Specialized Mojil Cables Redsea 45 Saudi Cable 40 Co. Al babatain Gypsum 35 30 Zamil Saudi Vitrified Saudi Cable Redsea Al babatain Co. Saudi 25 ROE(%)
ROE(%) 20 Ceramics Arabian pipes Specialized Amiantit Gypsum Cables 15 Saudi 10 Vitrified Zamil Saudi Arabian pipes SIDC Ceramics 5 P/B Amiantit P/B 0 01234 -5 SIDC 0246810-10
Source: Bloomberg, Reuters, NCBC Research Source: Bloomberg, Reuters, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
Exhibit 135 shows the average daily trading volume of the 12 companies. Currently, Saudi Industrial Development Co has the highest average daily trading volume.
Exhibit 135: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
3,000 2,562 2,461 2,500
2,000 1,816
1,479 1,500 1,062 1,093 1,000 782 696 777 780 415 500 241
0 ZIIC SIDC MMG SAAC APCO MESC SVCP NGCO SCACO SCACO REDSEA REDSEA SCERCO ALBABTAI
Source: Reuters, Tadawul
JUNE 2009 SAUDI ARABIA FACTBOOK 85 BUILDING AND CONTRUCTION
Saudi Aramco to award contracts only to Saudi contractors or JVs
Saudi Aramco plans a $60bn boost over five years (USD28bn for upstream investment and USD32bn for downstream spending). The company has allocated $15bn to develop seven process facility projects, nearly $6bn for six offshore facilities and a further $6bn for ten maintenance programs. Aramco will spend up to $3bn on plant improvements, pipelines, civil infrastructure and electrical works for 121 projects. It is interesting to note is that media reports indicate that contracts will only be awarded to Saudi Contractors or to international contractors that formed JVs with local contractors.
MMG and Arabian Pipes likely While most companies to benefit from this would be private players, two listed companies likely to benefit from contracts to to gain are MMG and Arabian Pipes. MMG executes construction projects within the oil, gas and local players petrochemical industry. The services also include maintenance and turnkey contracts, industrial cleaning and pre-commission services, etc. The company delivers tailor-made construction services both onshore and offshore. Arabian Pipes Co (APC) manufactures high frequency welded (HFW) steel pipes for the oil and gas, petrochemical, agricultural and construction industries.
Expected credit tightening by banks to the real estate developers in the short term amid increased volatility in the market could slow the pace of construction activities in KSA. Shortage of skilled labor remains an issue and needs immediate attention. However, the long-term outlook on the sector remains positive. The Saudi Government aims to encourage foreign investment in the building and construction sector in light of the steady outlook for economic growth. In the long run, the multibillion dollar projects for development of the six planned economic cities and public infrastructure projects are likely to provide further impetus to the building and construction sector. Demand is also expected to be higher due to the growing tourism, transport, and telecommunication sectors, backed by rising population. These factors point toward the long-term sustainability of the construction sector in KSA.
Cost pressures mitigated by KSA has been hit by the current global crisis with the IMF forecasting (April-09) a contraction in falling material prices GDP of (0.9%) in 2009 as against growth of 4.6% in 2008. KSA’s building and construction sector is also expected to be hit by the slowdown in development work in many projects across the country. However, steady demand from an increasing population (CAGR of 2.8% in the next five years according to IMF estimates) is likely to sustain the sector in the long run. Moreover, cost pressure on margins is likely to moderate, led by falling oil prices and lower prices of copper, aluminum, and other construction materials.
JUNE 2009 SAUDI ARABIA FACTBOOK 86 Real Estate and Development
Shaken but not stirred
The Saudi real estate sector, although shaken by the current global meltdown, continues to grow steadily, benefiting from growing demand for residential and commercial properties. Rising population, changing demographics, growing hotel and tourism industry and higher personal disposable income are fuelling demand in the Kingdom’s residential markets.
KSA’s real estate sector driven Size of the average household is changing: There is a gradual trend toward the Western by strong structural family life style of smaller (nuclear) family units. This is one of the by-products of urban fundamentals migration. Furthermore, the young population would marry and form new households. The current average household size in KSA is estimated to be 5.62. We estimate the total household size to decline to 5.2 by 2015. While we expect the expat non-Saudi household size to remain constant at 4.1, the household size of Saudi families would decline from approximately 6 at present to 5.8 by 2015. We have taken into consideration the varying household sizes for each region while estimating expected changes for each region.
Exhibit 136: Large variance in regional household size
9 8 7 6 5 4 3 2 Size of household 1 0 Hail Jouf Arar Baha Aseer Jazan Tabuk Najran Riyadh Makkah Qassim Eastern Madinah Province
Overall Saudi Non-Saudi
Source: KSA Department of Statistics, NCBC Research
We are of the view that a declining household size will fuel demand for housing, creating demand for a large number of household units. Simultaneously the lower average household size and an improved affordability will also accelerate growth within the apartment segment.
JUNE 2009 SAUDI ARABIA FACTBOOK 87 REAL ESTATE AND DEVELOPMENT
Exhibit 137: Household sizes forecast to fall to 5.2 by 2015
7
6
5
4
3
2 Size of household
1
0 Overall Saudi Non-Saudi
2004 2015E
Source: KSA Department of Statistics, NCBC Research
We estimated a total incremental demand of over 1.3mn housing units by 2015 (representing an annual requirement of over 190,000 units over the next seven years). Our housing demand estimate would require an investment of over SR680bn (nearly $180bn) by 2015.
New economic cities
The Kingdom’s ambitious With planned investments of more than USD60bn, KSA has begun constructing four integrated economic city projects are an economic cities located on the Red Sea coast in the Western region of the Kingdom — King important step in the ongoing Abdullah Economic City, Jazan (Jazan Economic City), Hail (Prince Abdul Aziz bin Mousaed economic transformation Economic City), and Madinah (Knowledge Economic City). Two more ventures -- Tabuk Economic City and Eastern Province Economic City -- are at the planning stage. According to projections by the Center for Studies and Research at the Eastern Province Chamber of Commerce and Industry, the Kingdom's economic cities will contribute USD150bn to country's annual GDP and create 1.3mn new jobs by 2020. King Abdullah Economic City (KAEC) alone is expected to contribute one-tenth of the GDP of the construction sector. It is expected to house 2,500 manufacturing companies and be home to a 13.8 sq km seaport with the capacity to handle 10 million containers. The port will be one of the five largest in the world.
The economic cities are a part of the ambitious "10×10" program, which aims to place Saudi Arabia among the world’s top ten competitive investment destinations by 2010. Some of the key facts of these economic cities are cited in the exhibit below.
JUNE 2009 SAUDI ARABIA FACTBOOK 88 REAL ESTATE AND DEVELOPMENT
Exhibit 138: Economic cities – Facts
King Abdullah Economic Prince Abdul Aziz Bin Parameters City Jazan Economic City Mousaed Economic City Knowledge Economic City Area (mn sqm) 168 100 156 4.8 Investment size (USD bn) 27 27 8 7 Jobs 1mn 100,000 55,000 20,000 Population 2mn 300,000 300,000 150,000 Zones Sea port, industrial zone, Industrial park (will occupy Logistics and transportation Taiba complex, technological central business district, 2/3 of the city), sea port, centre, dry port, international and administrative colleges, water-front resort area, agriculture repackaging and airport, petrochemical and theme parks, business centre, education zone and distribution, fisheries, agriculture industries centre, residential and commercial residential zones business and cultural centre, business and knowledge areas, passengers station, health and education areas centre, mining centre and King Abdul Aziz Mosque entertainment area Focus Ports, logistics, light industry Heavy industries, lifestyle, Logistics, agribusiness, Knowledge based industries, and services agro industries and people minerals and construction tourism and services development material
Source: SAGIA
Exhibit 139: Six economic cities distributed throughout the country
Source: SAGIA, NCBC Research
Falling prices and rising rents
On the pricing front, in recent years, Saudi real estate firms have been enjoying the benefits of escalating real estate prices led by growing demand-supply mismatch. However, the current global crisis has bought prices under pressure. Real estate companies in Jeddah recently slashed prices of new apartments and villas by 12.0% owing to the global downturn. Moreover, the pace of development of many projects has slowed down in recent months, hit by the crisis.
Although real estate prices It is important to note that while prices have fallen, this is not necessarily true of rentals. Given have been falling in the the lack of a clearly defined mortgage regulatory structure and low median incomes, the ability Kingdom, rental yields have still of Saudis to purchase a property is reduced. This, combined with the slowdown in property been rising in certain pockets supply across the Kingdom, is resulting in a situation where rentals are actually increasing in certain pockets. Consequent to this, rental yields have been rising in certain areas of the Kingdom.
The mortgage law
The pending mortgage law, which will enable Saudis to avail amortized mortgages as opposed to long-term loans at rates of 3.5% to 5.0%, when passed, is likely to elicit demand from a wider
JUNE 2009 SAUDI ARABIA FACTBOOK 89 REAL ESTATE AND DEVELOPMENT
section of the population. Once approved, we expect this law to boost the real estate market more in the medium-to-long term, as currently only about 35% of Saudi families own homes with home loans making up a paltry 2.0% of the total GDP.
The mortgage law would enable We believe that the mortgage law is likely to have four components: wider access to property a) Mortgage financing component ownership, from the current low b) Registered mortgage component rate The mortgage financing component is likely to focus on the financing and lending aspects of the mortgage. The registered mortgage component is likely to be more focused on regulatory aspects and collectability.
Supply slowdown
The current sharp decline in oil prices coupled with the credit crisis has resulted in a slowdown in the real estate sector in the entire region. Development work across many projects has slowed or been put on hold, including the King Abdullah Economic City. Banks have shown reluctance to extend credit to many real estate companies across the region. Moreover, investor sentiment toward real estate in the region remains negative with prices in Dubai and Abu Dhabi falling 40% and 15% respectively from the highs of last year. Unlike other GCC markets, especially Dubai, that has characterized speculative excess, the KSA real estate sector has been primarily driven by fundamentals. As a result, despite the prevailing negative sentiment, the current demand in the country remains steady and is causing a supply shortage in the low- to-middle income space.
UAE is the leader in the region Company performance in terms of revenues, with KSA companies also exhibiting Historically, companies in the real estate sector in KSA compare well on revenue terms with lower ROE than GCC peers. their GCC peers, although the UAE has been the leader in the region. RoE levels of KSA companies are lower than other GCC nations, although they trade at relatively higher P/E’s.
Exhibit 140: Revenues of GCC real estate development Exhibit 141: Comparison of RoE and P/E of GCC companies, companies, 2005 – 2008 (USD mn) 2008
9000 30
8000 UAE 7000
6000 20 Qatar 5000
4000 ROE (%) ROE 3000 10 Kuwait 2000 KSA
1000
0 P/E 0 2005 2006 2007 2008 -10 0 10 20 30 40 KSA UAE Kuwait Qatar
Source: Gulfbase, Reuters, Bloomberg; Source: Gulfbase, Reuters, Bloomberg; The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
The sector is seeing the entry of new developers, who are forming alliances with Saudi nationals. Emaar, the Economic City is a joint venture between Emaar Properties PJSC (a large
JUNE 2009 SAUDI ARABIA FACTBOOK 90 REAL ESTATE AND DEVELOPMENT
property developer in the UAE) and local investors in the Kingdom. Furthermore, in October 2008, Bayt Al-Mal Investment and Awan Real Estate Investment and Development Company signed a deal worth SR7.5bn to implement a massive real estate project in Riyadh. Listed below are the constituents of the real estate sector in KSA. Alarkan had the highest RoE, whereas average profit margins were the highest for Saudi Real Estate Co.
Exhibit 142: Sector details % weight in Index Avg. NPM (%), Avg. RoE (%), as on Dec 2008* 1Q05 – 4Q08* 2005 – 2008* Saudi Real Estate Co. 0.26 76.8 6.3 Taiba Holding Co. 0.29 64.6 8.8 Makkah Construction & Development Co. 0.42 72.3 7.1 Arriyadh Development Co. 0.10 56.9 5.0 Emaar The Economic City 0.82 NM NM Jabal Omar Development Company 1.47 NM NM Dar Alarkan Real Estate Development Co 1.74 41.4 19.6
Source: Bloomberg, Reuters, Gulfbase and Tadawul: Annual Report; * start periods may differ based on availability of data
Q4-08 saw companies posting Total revenue of KSA’s real estate sector increased 38.4% YoY to SR6990.2mn in 2007, revenue declines of over 20% expanding at 96.9% CAGR during 2005-2008. This growth was an outcome of strong sales YoY. volumes as well as higher average price realizations. However, in 2008, overall sector earnings declined 22.4% YoY and revenue fell 4.8% YoY. On an average, revenue and net profit of Saudi Real Estate Co and Taiba Holding have declined 24.0% and 39.0% YoY respectively in 2008.
Exhibit 143: Revenue of companies, 2005–2008 (SR mn) Exhibit 144: Profitability (%) of companies, 2005–2008
600 7000 100
6000 500 80 5000 400 60 4000 300 3000 40 200 2000 20 100 1000
0 0 0 2005 2006 2007 2008 2005 2006 2007 2008 Saudi Real Estate Taiba Saudi Real Estate Taiba Makkah Makkah Arriyadh Arriyadh Dar alarkan * Dar alarkan
Source: Gulfbase, Bloomberg, Reuters Source: Gulfbase, Reuters, Bloomberg Companies marked * are plotted on secondary axis *non meaningful values excluded
The price multiples of Saudi real estate development companies were at their peak in 2005 due to the euphoria surrounding the growth potential of these companies, with increasing demand and the announcement of the ‘Economic Cities’ project in late 2005. However, the multiples have declined significantly since the stock market correction in 2006, with continuing downward momentum in 2008 led by the current crisis. At the end of 2008, the average P/E multiple of KSA real estate companies was 14.5x and P/BV was 1.0x, from P/E and P/BV levels of 30.9x and 1.8x respectively in 2007. In 2008, Dar Al Arkan had the highest RoE and Jabal Omar, a new entrant, recorded the highest P/BV.
JUNE 2009 SAUDI ARABIA FACTBOOK 91 REAL ESTATE AND DEVELOPMENT
Exhibit 145: Comparison of P/B and RoE, 2007 Exhibit 146: Comparison of P/B and RoE, 2008
30 35
Dar alarkan 25 25
20 Taiba Taiba Dar alarkan 15 Arriyadh Makkah 15 Saudi Real ROE(%) ROE(%) 5 Estate 10 Makkah Saudi Real -5 5 Estate Jabal Arriyadh Emaar 0 -15 0123456 00.511.522.53 P/B P/B
Source: Gulfbase, Bloomberg, Reuters, NCBC Research Source: Gulfbase, Bloomberg, Reuters, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
Jabal Omar had the highest average daily trading volume in 2007-08.
Exhibit 147: Avg. daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
12,000 10,905
10,000 8,376 8,000
6,000
3,751 4,047 4,000 2,494 1,765 2,000 1,399
0 Saudi Real Taiba Makkah Arriyadh Al Arkan Emaar Jabal Omar Estate
Source: Reuters, Tadawul
Favorable demographics, rising The impact of the global crisis is evident in the latest financial results of companies and has population, development of slowed the pace of development of some economic cities, with private sector players being hit economic cities, and growing hard in recent quarters. We however expect favorable demographics, rising population, tourism to boost demand increasing demand for development of the economic cities, growing tourism and hotel industry and public infrastructure projects to continue to boost demand for real estate development in KSA. Moreover, with prices being driven by demand and not speculation, the market is likely to remain shielded from a sudden flight of capital. The Government’s utilization of petrodollars earned in the past few years to fund infrastructure development projects, coupled with expansion initiatives by Saudi companies, are likely to boost supply. Additionally, the expected approval of the mortgage law would further boost housing demand by easing access to mortgage financing. Therefore, we expect a steady recovery in Saudi real estate prices, led by the growing demand for real estate development. This might also result in more new players entering the Kingdom’s real estate market, thereby increasing supply.
JUNE 2009 SAUDI ARABIA FACTBOOK 92 Transportation
Suffering due to low demand
The transportation sector in the GCC is currently witnessing a slowdown due to the decline in demand levels. In 2H-08, KSA’s Transportation sectors growth was severely affected by the fall in freight rates, decline in travel rate, and low demand for crude oil, which is the major export commodity. Although, the sector is likely to face challenges in the short-term due to falling international trade, the Government’s initiatives to improve transport-related infrastructure is likely to support the sector’s growth in the long term. Furthermore, KSA’s strategic location at the crossroads of Europe, Africa, and Asia gives it an unmatched advantage over other countries in the GCC. Keeping this in mind, the Government of Saudi Arabia has estimated a total expenditure of SR19.2bn for transportation and telecom sector for 2009.
Declining international trade Air is the most preferred transport mode in KSA, with 38.5mn passengers travelling by airways continues to dent freight rates in 2007. across all modes of transportation Exhibit 148: Usage of transport mode – 2007
Marine transport 3% Roadways 14% Railway 2%
Air transport 81%
Source: SAMA
Air transport
Liberalization of aviation sector Benefiting from the Government’s decision to liberalize the aviation sector in 2005, the sector set to offer additional continues to gain momentum. The Government is issuing licenses to private carriers to increase investment opportunities their participation. According to the General Authority for Civil Aviation (GACA), total passenger traffic at the international and domestic airports increased 2.4% YoY to 38.5mn in 2007. KSA currently has 27 airports of which four are international.
National Air Services (NAS), the Kingdom’s first private sector airline, plans to invest around USD4.14bn to boost its fleet from 60 in June 2008 to 142 by 2012. The Government has also infused SR30bn to expand airports in Jeddah, Madinah and Tabuk. Moreover, GACA has launched USD1.5bn expansion program at the King Abdul Aziz International Airport (KAIA), Jeddah, to accommodate A380s, the world’s largest aircraft. However, the air transportation sector in KSA has experienced a slowdown in the recent past due to the decline in passenger travel and the reduction in air cargo, heightened by the reduced demand for commodities.
JUNE 2009 SAUDI ARABIA FACTBOOK 93 TRANSPORTATION
Road transport
Road transport in KSA is Government-owned and largely driven by the growing population and intercity passenger/cargo movement. Huge investments in various projects and rapid growth of large cities have underlined the need for a more improved road transport system. Development of road infrastructure is required to ease connectivity and help in transporting huge volumes of materials to the construction sites of these projects. To improve the road transport infrastructure, the Government invested over SR7.5bn on projects for asphalted roads in 2007. In the 2009 budget, the Government has allocated SR11.5bn for road construction projects, which would help in expanding the capacity of transportation sector.
Rail transport
Expanding population base and Rail transport in KSA is managed by Saudi Railway Organization (SRO) and comprises two rising religious tourism offers main lines — Dammam-Abqaiq-Hofuf-Riyadh (499.1km) used by passengers and Riyadh- significant opportunities for Hardd-Hofuf (555.9km) used by freight trains. Annually, the railway sector handles around road and rail transport in KSA 850,000 passengers and 850mn tons of cargo. The Kingdom is upgrading its rail network as demand is expected to increase, particularly from Hajj and Umrah pilgrims. Exhibit 71 depicts significant new projects approved by SRO.
Exhibit 149: Projects approved by SRO Length (km) Qualified consortiums Landbridge project • • • Construction of 950 km • Agility Logistics new track between Consortium Riyadh and Jeddah • AlMuhaidib/ ACWA • Construction of 115 km Consortium new line between • Mada Consortium Dammam and Jubail • Saudi Binladin • The project is expected Consortium to connect major cities, such as Jeddah, Riyadh, Dammam and Jubail
Makkah-Madinah Rail Link Project (MMRL) • Construction of 450 km • Al-Rajhi Consortium new rail line between • The Saudi Binladin Makkah and Madinah Group • Construction of two • The Saudi Oger passenger stations in • The Saudi Japanese Makkah Consortium • Construction of one • Al-Sholah station in Madinah Consortium • Estimated cost of • OHL International USD5.3 bn
Source: Saudi Railways Organization (SRO)
Completion of the Landbridge project is expected to strengthen the Kingdom’s position on both the regional and international transport maps. However, work on the USD5bn Landbridge project has still not started because the Governments of the GCC states could not agree on whether to have one central or body six national regulatory bodies for regulating the project. Another important milestone in rail transport is the approval of tenders for the Makkah-Madinah Rail Link Project (MMRL) to offer transportation solutions predominantly to Hajj and Umrah
JUNE 2009 SAUDI ARABIA FACTBOOK 94 TRANSPORTATION
pilgrims and commuters traveling between Makkah and Madinah. Completion of these two projects would strengthen KSA’s rail network in the coming years.
Marine transport
KSA’s strategic location at the In the marine transport segment, there are 21 large ports for marine transportation, which move crossroads of Europe, Asia and around 4mn twenty-foot equivalent units (TEUs) annually with around 12,000 ships visiting Africa offer significant upside Saudi ports each year. The private sector plays an important role in the management, operation potential for sea cargo and maintenance of ports in KSA. King Abdullah Economic City, near Jeddah, and the Jazan Economic City, which are currently under construction, are expected to have their own ports. Saudi Development and Re-Export Company is likely to open its new terminal at Jeddah Islamic Port, in addition to the South and Jeddah North container terminals, which handled 3.3mn TEUs in 2008. Red Sea Gateway Terminal is expected to increase the port's annual capacity to 5mn TEUs in 2009. With the completion of Landbridge project, connectivity to Jeddah and Dammam, would improve further, providing impetus to marine transport in these areas by changing regional shipment patterns. Since Jeddah is a major transportation hub on the Red Sea and Dammam allows further shipment to Iran, Iraq, Kuwait, Qatar, and Bahrain, the Landbridge project would provide a link between Jeddah and other GCC countries.
However, the shipping freight rates reduced drastically in 4Q-08, compared with 1H-08. The freight rates for Very Large Crude Carriers (VLCC) came down to USD63,500 per day in 4Q-08, compared with USD100,000 per day in 1H-08. Similarly, the bulk cargo freight that grew from average of USD106,918 per trip in 2007 to USD150,000 in 1H-08, subsequently fell to USD10,000-15,000 in 4Q-08.
KSA’s transportation sector is an emerging one compared with other GCC countries like the UAE and Kuwait, and hence, shows lower revenue. However, the sector fares well on RoE.
Exhibit 150: Revenues of GCC transportation, Exhibit 151: Comparison of RoE and P/E of GCC companies, 2005–08 (USD mn) 2008
20 7,000
6,000 Oman
5,000 15 4,000 Kuwait UAE 3,000 Qatar RoE (%) RoE
2,000 10 KSA
1,000
0 P/E 2005 2006 2007 2008 5 KSA UAE Kuwait Oman Qatar 0 9 18 27 36 45
Source: Gulfbase, Reuters Source: Gulfbase, Reuters, NCBC Research The companies list is not exhaustive. Size of the bubble represents market cap. as on 31 Dec 2008
JUNE 2009 SAUDI ARABIA FACTBOOK 95 TRANSPORTATION
National Shipping Company is the largest company in the transport sector with SR5.2bn market capitalization as on 31 December 2008.
Exhibit 152: Sector details % weight in index as Avg. NPM (%), Avg. RoE, on 31 Dec 08 1Q05 – 4Q08* 2005 – 2008* National Shipping Co. of Saudi Arabia 0.56 26.7 15.1 Saudi Public Transport Co. 0.10 21.3 11.6 Saudi Land Transport Co. 0.02 16.8 3.9 United International Transportation Co Ltd 0.07 13.7 32.9
Source: Bloomberg, Gulfbase, Reuters, Tadawul * start periods may differ based on availability of data
As of 4Q-08, the sector’s largest company, National Shipping Co. of Saudi Arabia (NSCSA) topped the revenue list with SR652.4mn, which accounted for 63.3% of the total sector’s turnover and a 55.9% YoY growth for the company. Profitability margins for the sector in 4Q-08 declined sharply, to an average of 15.9% (compared with 27.0% in 4Q-07) because of large deterioration in crude oil prices. During 2008, the transport sector of KSA had experienced 29.8% YoY revenue growth to SR3.9bn and a net profit rise of 34.5% to SR865.7mn. In 2008, NSCSA registered a net profit growth of 75.2% YoY compared with the previous year owing to the rise in crude oil transport and general goods during first nine months of the year. The second largest company in the sector, Saudi Public Transport recorded a revenue growth of 2.7% YoY in 2008, however, the company’s profits declined by 70.0% YoY due to rise in operating expenses.
Exhibit 153: Revenue of companies, 2005 – 2008 (SR mn) Exhibit 154: Profitability (%) of companies, 2005 – 2008
3,000 50 50
2,500 49 40
30 2,000 48 20 1,500 47 10 1,000 46 0
500 45 -10
0 44 -20 2005 2006 2007 2008 2005 2006 2007 2008 NSCSA SAPTCO BUDGET SLTCO * SLTCO BUDGET NSCSA SAPTCO
Source: Reuters, Bloomberg Source: Reuters, Bloomberg Companies marked * are plotted on secondary axis
As of 31 December 2008, the sector’s P/E and P/BV multiple stood at 16.1x and 1.2x respectively, compared with P/E and P/BV multiple of 30.9x and 3.7x respectively in 2007. This decline can be attributed to the fall in equity markets owing to the global financial crisis. The average RoE for the sector as of 2008 declined 120bp to 12.3%. As illustrated below, United International Transportation Co Ltd (BUDGET) had the highest RoE (25.5%) and P/B multiple (1.9x) in 2008.
JUNE 2009 SAUDI ARABIA FACTBOOK 96 TRANSPORTATION
Exhibit 155: Comparison of P/B and RoE, 2007 Exhibit 156: Comparison of P/B and RoE, 2008
36 36
30 30
BUDGET NSCSA 24 24 BUDGET NSCSA 18 18 ROE (%) ROE ROE (%) ROE 12 12
SLTCO SLTCO 6 6
PB SAPTCO PB SAPTCO 0 0 0246810012
Source: Bloomberg, Tadawul Source: Bloomberg, Tadawul Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap as on 31 Dec 2008
National Shipping Company had the highest average volume traded in 2007-08.
Exhibit 157: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
7,000
5,970 6,000
5,000
4,000 3,781
2,791 3,000
2,000 1,060 1,000
0 NSCSA SAPTCO SLTCO BUDGET
Source: Bloomberg, Reuters
Long-term outlook promising Going forward, the long-term fundamentals of the Saudi transportation sector remain strong. on the back of growing KSA’s oil exports are expected to grow to approximately 9.3 million barrels per day (mn b/d) by dependency on KSA for 2012 from approximately 8.7mn b/d in 2008, according to the data released by Business sourcing global oil requirement Monitor International Limited‘s 4Q-08 KSA Oil & Gas report. This would give an impetus to the growth of transportation sector of KSA in the long term. Rising infrastructural development activities and construction of economic cities are set to boom inter-city and intra-city transportation in the Kingdom. Across all modes of transportation, the freight tonnage traffic in KSA is expected to grow at an average of 3.7% annually during the next five years, according to the data released by the Saudi Arabia Freight Transport Report for 1Q-09. An expanding population base and rising religious tourism also generate significant business opportunities for the firms engaged in road and rail transport in KSA.
However, as seen in 4Q-08, declining international trade amid weakening consumer confidence continues to dent travel and freight rates across all modes of transportation, in the near-to- medium term. Consequently, shipping companies have been delaying their capacity expansion plans in an attempt to cope with the decline in demand for marine transportation, oversupply
JUNE 2009 SAUDI ARABIA FACTBOOK 97 TRANSPORTATION
fears, and plunging freight charges. We believe that KSA’s aviation sector may be somewhat shielded due to significant contribution of religious tourism in the overall tourism industry. Nevertheless, sliding freight rates and weakening demand cloud the overall Saudi transport sector’s earnings visibility for 2009 and 2010. Delayed construction of the planned economic cities and industrial projects further worsens our near-to-medium term outlook on the sector. However, with the onset of economic revival, the Government’s initiatives to strengthen its trade relations with other countries and encourage the participation of private sector are likely to provide a fillip to the sector.
JUNE 2009 SAUDI ARABIA FACTBOOK 98 Media and Publishing
Outlook bleak for conventional print media
The media and publishing sector comprises companies involved in publishing, printing and advertising operations. Advertising primarily leans toward print media (84% of total ad-spend) with TV, radio, cinema and outdoor advertising forming the other revenue streams. Online and Radio advertising, which currently contribute to around 1% and 2% respectively of total advertising spend, have also seen considerable growth, with many companies opting for less expensive web advertisements over traditional print advertisements. At present, the media and publishing industry in KSA can be termed as under-developed, characterized by low advertising spending on per capita basis. The industry, however, faces challenges through increased competition from the Internet and anticipated decline in promotional activities by businesses in the current global meltdown.
Ongoing economic downturn to KSA’s media sector at present is dominated by Saudi Research and Marketing Group (SRMG), weaken overall advertisement which also owns Saudi Printing and Packaging Company (SPPC). SRMG is majority-owned by revenues in 2009 Kingdom Holding Company and heirs of Prince Ahmad Bin Salman Bin Abdulaziz Al Saud. Media companies experienced healthy revenue growth primarily due to economic growth in the Kingdom, fuelled by the Government’s liberalization initiatives.
The UAE and Kuwait experienced robust growth in the publishing, printing, and advertising business mainly benefiting from the greater freedom to the press and economic development of the past few years. Ad spends in most of the GCC countries increased substantially during the first half of 2008, over the corresponding 2007 period. Advertising expenditure in the GCC grew 23.7% YoY to USD3.77bn in 1H-08 from USD3.05bn. Ad spend in KSA was up 11.0% YoY to USD550mn in 1H-08. Going forward, the companies are likely to cut their advertising and marketing expenditures due to the ongoing economic slowdown. The advertising spend in the Arab markets is expected to come down to an average of annual USD4bn (during 2009-13), compared with USD10bn in 2008.
Exhibit 158: Advertising expenditure in GCC (USD bn), 1H-08
1.8 80% 1.57 69% 1.5 60% 1.2 0.92 0.9 42% 40% (USD bn) 0.55 0.6 24% 0.33 20% 11% 0.3 11% 0.15 0.12 0 05 0.0 1% 2% 0% Pan Arab UAE KSA Kuwait Qatar Oman Bahrain Expenditure (LHS) % growth y-o-y (RHS)
Source: NCBC Research, Company data
KSA’s media sector performed better than GCC peers did on revenue during 2005–2008. The sector also fared well on RoE with attractive P/E multiple (Exhibit 159 and 160).
JUNE 2009 SAUDI ARABIA FACTBOOK 99 MEDIA AND PUBLISHING
Exhibit 159: Revenues of GCC media companies, Exhibit 160: Comparison of RoE and P/E of GCC companies, 2005 – 2008 (USD mn) 2008
500 25 KSA
400 20
300 Qatar 15
200 (%) RoE 10 Kuwait Bahrain 100 5
0 P/E 2005 2006 2007 2008 0 KSA Kuwait Qatar Bahrain 0 5 10 15 20 25
Source: Reuters Source: Reuters Size of the bubble represents market cap. as on 31 Dec 2008
SRMG has the highest weight in the index and SPPC is the top performer in terms of average net profit margin and RoE.
Exhibit 161: Sector details % weight in index Avg. NPM (%), Avg. RoE, as on Dec 2008* 1Q05 – 4Q08* 2005 – 2008* Saudi Research And Marketing Group (SRMG) 0.26 22.6 22.6 Saudi Printing & Packaging Co. (SPPC) 0.09 36.7 21.5 Tihama Advertising & Public Relations Co. (Tihama) 0.03 16.7** 10.7**
Source: Bloomberg, Tadawul, Reuters and Gulfbase * start period may differ based on availability of data ** Figures for Tihama have been calendarized based on FY ending of SRMG and SPPC
Slump in demand and increase Based on revenue, SRMG is the leading company operating in the sector, followed by SPPC in costs affected profitability in and Tihama. SPPC has the highest profitability among the three. 4Q-08 In 2008, the sector’s overall revenue grew 17.6% YoY to SR1,893mn. SRMG’s revenue increased 20.4% YoY and SPPC’s revenue jumped 10.3% YoY in 2008. Tihama’s revenue was up 13.9% YoY in 2008. However, the net profit margins for the three companies contracted in 4Q-08. This trend is expected to continue in the near term with companies, especially in the Real Estate and Tourism sectors, reining in their advertising and marketing expenditures.
JUNE 2009 SAUDI ARABIA FACTBOOK 100 MEDIA AND PUBLISHING
Exhibit 162: Revenues of companies, 2005 – 2008 (SR mn) Exhibit 163: Profitability (%) of companies, 2005 – 2008
500 1400 40
400 1050 30
300
700 20
200
350 10 100
0 0 0 2005 2006 2007 2008 2005 2006 2007 2008 SPPC Tihama SRMG * SRMG SPPC Tihama
Source: Reuters Source: Reuters Companies marked * are on secondary axis Figures for Tihama have been calendarized based on FY ending of SRMG and SPPC Figures for Tihama have been calendarized based on FY ending of SRMG and SPPC
In 2008, the media and publishing sector’s average PE multiples contracted to 7.9x from 17.8x in 2007. This decline resulted largely from the stock market crash triggered by the ongoing global financial crisis. In the same period, P/BV ratio averaged 1.3x as against 3.2x in 2007. As on 31 Dec 08, SPPC has better return on equity, at attractive multiples, compared with peers. In 2008, SRMG’s RoE decreased to 16.2% from 28.2% in 2007 and Tihama’s RoE increased nearly 136bp YoY to 14.2% in 2008.
Exhibit 164: Comparison of P/B and RoE, 2007 Exhibit 165: Comparison of P/B and RoE, 2008
35 30
30 25 SRMG SRMG
25 20 SPPC
RoE (%) RoE SPPC 20 (%) RoE 15 Tihama
15 10 Tihama P/B 10 5 2.5 3 P/B 3.5 4 0.5 1.0 1.5 2.0
Source: Bloomberg, Reuters, Tadawul, NCBC Research Source: Bloomberg, Reuters, Tadawul, NCBC Research Size of the bubble represents market cap. as on 31 Dec 2007 Size of the bubble represents market cap. as on 31 Dec 2008
Tihama leads on average traded volumes, followed by SPPC and SRMG.
JUNE 2009 SAUDI ARABIA FACTBOOK 101 MEDIA AND PUBLISHING
Exhibit 166: Average daily trading volume of stocks (‘000s) , Jan 2007 – Dec 2008
2,500
1,985 2,000
1,500
1,078 1,000
500 324
0 SRMG SPPC TIHAMA
Source: Reuters
Robust demand growth for Going forward, growth in KSA’s media and publishing sector is likely to be sluggish, marred by digital media weakens the slowdown in business promotional activities, the growing popularity of the Internet, and stringent outlook for an already Government regulations. Driven by a young demographic profile (more than 45% of the struggling print media industry population is under 20 years’ age), the popularity of the Internet is growing. Internet penetration, which currently stands at 22%, is likely to increase further. This in turn will adversely impact the newspaper readership in the Kingdom. Furthermore, companies are likely to choose less expensive web advertisements over traditional paper advertisements. Although the long-term prospects of non-print media advertising business look promising, it is not likely to offset the impact of decline in revenue from conventional print media completely. In the near term too, the companies, particularly those in the real estate and tourism sectors, are likely to cut back their advertising and marketing expenditures due to the ongoing economic slowdown. We, therefore, hold a negative outlook for the newspaper and magazine industry.
JUNE 2009 SAUDI ARABIA FACTBOOK 102 Hotel and Tourism
Religious and business tourism key drivers
The KSA’s hotel and tourism sector has been energized by strong growth in intra-regional travel supported by increase in expenditure on tourist infrastructure facilities. Of all the GCC countries, KSA holds the edge in religious tourism, with 5mn Muslim pilgrims from across the world visiting Islam’s two holiest sites—Mecca and Medina—each year.
SAMA estimated the tourism sector at around SR37.0bn in 2007, or 2.6% of KSA’s total GDP and 5.8% to non-oil GDP. As of 9M-08, the sector was the most profitable one in the Kingdom with a 102.6% YoY growth in profitability. The Saudi Government estimated wholesale, retail, restaurants and hotel industry to have grown 4.2% in 2008, compared with 6.0% in 2007. Furthermore, religious tourism accounted for 15.1% of domestic tourism and 73.2% of inbound tourism in 2007 in KSA. According to the Saudi Commission for Tourism (SCT), pilgrims account for 51% of all the visitors in KSA, spending approximately SR10bn (USD2.67bn) each year. Hence, developing Haj infrastructure continues to remain a priority for the Government.
Developing tourism has been a The development of KSA’s tourism sector also forms part of a larger plan to diversify the part of government’s long-term economy and create jobs for Saudi nationals. SAMA estimates the number of people employed objective of economic in the country’s hotel and tourism sector in 2007 to be around 6.7mn or 5.1% of KSA’s total diversification labor force. Another positive for KSA’s tourism sector has been the SCT’s decision in 2006 to grant travel agencies the right to sponsor tourists. This move has helped in significantly reducing the processing time for visas, thereby encouraging foreigners to enter the Kingdom. Furthermore, in 2007, SCT implemented multiple-entry one-year business visas, thereby paving the way for growth in international tourism. According to EIU estimates, 9.4mn international tourists are likely to have visited KSA in 2008, compared with 9.0mn in 2007.
Historically, Saudi nationals have preferred to travel within the country. Apart from domestic tourists, other Muslim nations such as Kuwait, the UAE, Egypt, Syria, and Pakistan, which account for about 50% of KSA’s international tourism revenue, remain the key source markets for the country’s tourism sector.
Exhibit 167: International tourist arrivals (% change over same period of the previous year)
20 17.3
16 14.5
12 10.4
8 6.6 7 5.6 4.9 5 4.3 3.7 4 3.2 1.7
0 World Europe Asia Americas Africa Middle East
2006-07 2007-08 (Jan - Aug)
Source: World Tourism Organization
JUNE 2009 SAUDI ARABIA FACTBOOK 103 HOTEL AND TOURISM
Separately, leisure tourism has failed to pick up in KSA for cultural and religious reasons, contributing a meager 2.1% to inbound tourism in 2007.
To drive growth in the sector, the KSA Government plans to increase the number of terminals at existing airports and construct new airports, apart from liberalizing the Kingdom’s air transportation laws. Two new budget airlines, Sama and Nas Air, received licenses to operate in 2007. Furthermore, according to Saudi Commission for Tourism and Antiquities (SCTA), 13 projects related to historical city centers and popular markets are planned in KSA, aimed at developing these sites into attractive tourist destinations. In June 2008, KSA’s Council of Ministers approved the USD38.0bn tourism development project on the Red Sea coastline. This project is in addition to the USD10.0bn tourism development project at Al-Auqair on the Gulf coast of KSA.
Considerable investment in Because of these positive developments, the real estate and hospitality businesses in KSA hotels by domestic and have also seen increased investment activity to meet the demand for hotel space from religious international hospitality brands as well as business travelers. In February 2008, Intercontinental Hotels Group signed a to meet demand franchise development agreement with Siraj Capital Ltd to develop 12 Holiday Inn Express properties by 2013; and the Accor Group plans to expand its upper mid-range Novotel and lower-end Ibis brands.
KSA’s hotel industry registered an average room occupancy rate of 62% during 1994-2007 (HVS Research). In the GCC, the country lags the United Arab Emirates (73% average room occupancy rate in 1994-2007), Qatar (68%) and Bahrain (64%). The room occupancy rate in KSA increased 5% to 72% in 2007 from 67% in 2006, while UAE (84% in 2007) and Qatar (71% in 2007) registered flat growth. In Kuwait, room occupancy rate declined 7% to 58% in 2007 from 65% in 2006. Bahrain experienced a 7% rise to 77% in 2007 from 71% in 2006. The average room rate in KSA grew at 5% CAGR to USD183.5 in 1994-2007, compared with 9% in Bahrain (to USD249), 1% in Kuwait (to USD239), 13% in Qatar (to USD306), and 6% in the UAE (to USD248) during the same period. The average room rate in KSA was the lowest in the GCC.
Exhibit 168 indicates the expected increase in the number of rooms in the Middle East over the next four years. UAE leads, but KSA, Qatar, and Egypt are expected to perform well.
Exhibit 168: New supply by country (rooms over next 4 years)
Bahrain 5,784
Egypt 12,942
Jordan 6,811
Kuwait 3,329
Lebanon 2,058
Oman 9,172
Qatar 11,487
Saudi Arabia 9,915
Syria 1,585
UAE 90,527
0 20,000 40,000 60,000 80,000 100,000
Source: World Tourism Organization
JUNE 2009 SAUDI ARABIA FACTBOOK 104 HOTEL AND TOURISM
Exhibit 169 depicts that KSA’s hotel and tourism sector is an emerging one, compared with other GCC countries. The sector also lags GCC peers on RoE (Exhibit 170).
Exhibit 169: Revenues of GCC hotel & tourism companies, Exhibit 170: Comparison of RoE and P/E of GCC companies, 2005–08 (USD mn) 2008
500 40
400 Bahrain 30 Kuwait 300
20 200 ROE (%) ROE
KSA 100 10
UAE 0 PE 2005 2006 2007 2008 0 Kuwait Oman Bahrain UAE KSA 0 102030405060
Source: Reuters Source: Reuters, NCBC Research The companies list is not exhaustive Size of the bubble represents market cap. as on 31 Dec 2008
As on 31 December 2008, Saudi Hotels & Resort Areas Co. (Saudi Hotels), with a market cap of SR1.6bn, is the largest company in this sector.
Exhibit 171: Sector details % weight in index as Avg. NPM (%), Avg. RoE, on Dec 2008* 1Q05 – 4Q08* 2005 – 2008* Saudi Hotels & Resort Areas Co 0.17 33.4 9.2 Tourism Enterprises Co. (SHAMS) 0.02 (18.0) 0.3
Source: Bloomberg, Tadawul, Gulfbase, Reuters * start period may differ based on availability of data
Saudi Hotels performed better than Tourism Enterprise Company (TECO) on revenue and profitability, attributable to higher market share. In 2008, revenue of Saudi Hotels grew 10.6% YoY to SR291.9mn and net income surged 58.8% YoY to SR123.3mn. TECO’s revenue grew 0.9% YoY to SR13.3mn and net income grew 25.7% YoY to SR2.7mn in 2008. In 4Q-08, Saudi Hotels’ net income declined 1.7% YoY to SR33.8mn and TECO made a net loss of SR1.2mn due to reduced spending by local and foreign tourists.
Exhibit 172: Revenue of companies, 2005-2008 (SR mn) Exhibit 173: Profitability (%) of companies, 2005 – 2008
20 400 80
15 300 40
10 200 0
5 100 -40
0 0 -80 2005 2006 2007 2008 2005 2006 2007 2008
TECO SHARCO * SHARCO TECO
Source: Reuters, Bloomberg, Companies marked * are plotted on secondary axis Source: Reuters, Bloomberg
JUNE 2009 SAUDI ARABIA FACTBOOK 105 HOTEL AND TOURISM
In 2008, the sector’s P/B multiple averaged 1.7x in 2008. As of 2008, the sector’s average RoE stood at 5.9% in 2008. As illustrated below, in 2008, Saudi Hotels had better RoE (11.4%) at attractive P/B multiple (1.2x) compared with TECO.
Exhibit 174: Comparison of P/B and RoE, 2007 Exhibit 175: Comparison of P/B and RoE, 2008
16 16
12 SHARCO 12
SHARCO 8
8 ROE (%)
ROE (%) ROE 4 TECO PB 4 0 TECO
PB
0 (4) 0123 0246810
Source: Gulfbase, Bloomberg, Tadawul Source: Gulfbase, Bloomberg, Tadawul
TECO, however, topped the average trading volume chart in 2007-08.
Exhibit 176: Average daily trading volume of stocks (‘000s), Jan 2007 – Dec 2008
3,000
2,428 2,500
1,960 2,000
1,500
1,000
500
0 SHARCO TECO
Source: Reuters
KSA government maintains in Going forward, we expect KSA to maintain focus on religious tourism (both domestic and focus on developing tourism international), the backbone of the tourism sector. The KSA Government has allocated infrastructure to support long SR385bn for fortifying the overall infrastructure of tourism sector in its 2009 budget, a 10.9% term demand rise compared with the 2008 budget. The rapid development of infrastructure facilities, liberalization of airlines, capacity expansion at airports, and SCT’s easing of restrictions on non- religious visas and introduction of multiple-entry one-year business visas will likely drive growth in KSA’s hotel and tourism sector. The World Travel and Tourism Council (WTTC) expect KSA to attract 45.3mn tourists by 2020. Furthermore, WTTC also expects revenue from KSA’s tourism sector to increase to USD56.1bn in 2016, driven largely by religious tourism. These factors will also underpin growth in the hotel industry, with hotel revenue expected to grow 4% annually to reach SAR14.3bn by 2020.
However, we expect the growth in the tourism sector of KSA to be slow in the near-term as discretionary spending, and hence travel rate, take a hit in case of domestic as well as foreign
JUNE 2009 SAUDI ARABIA FACTBOOK 106 HOTEL AND TOURISM
tourists. Moreover, lack of rapid infrastructure development has been limiting the growth of religious tourism in KSA. This has been forcing the Government to restrict the number of visas issued to avoid overcrowding during the annual Hajj pilgrimage. Given these factors, we have a neutral outlook for the near term on KSA’s hotel and tourism sector.
JUNE 2009 SAUDI ARABIA FACTBOOK 107
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JUNE 2009 SAUDI ARABIA FACTBOOK 108
Company Profiles
Listed companies on the Tadawul
THIS PAGE IS INTENTIONALLY LEFT BLANK
JUNE 2009 SAUDI ARABIA FACTBOOK 110
Company Page No. Banking and Financials Al Rajhi Bank 112 Petrochemicals
Samba Financial 113 Cement
Banque Saudi Fransi 114 Retail
Arab National Bank 115 Energy and Utilities
Alinma Bank 116 Agriculture and Food
Riyad Bank 117 Telecom and IT
SABB 118 Insurance
Saudi Investment Bank 119 Multi Investment
Bank Al Jazira 120 Industrial Investment
Saudi Hollandi Bank 121 Building and Construction
Bank Al Bilad 122 Real Estate
Transportation
Media and Publishing
Hotels and Tourism
BANKS AND FINANCIAL SERVICES
Also known as Al Rajhi Bank Al Rajhi
Al Rajhi Bank (Al Rajhi), the third largest bank in Saudi Arabia in term of assets, Price SR67.5 was established in 1976. The bank is a full-fledged Islamic bank and offers Shariah- Pricing / Valuation as on May 27, 2009 compliant banking and investment products. It operates 19 branches in Malaysia Mkt cap SR101.3bn ($27,036.0mn) and has wholly owned subsidiaries in UK, British Virgin Islands and Jersey.
Sh. outstanding 1,500.0mn Key statistics Company financials
52 week range H/L (SR) 93.0/40.6 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 5,677 6,843 7,722 8,494 10.0 14.4 3m 130.06 34.73 Operating Income SRmn 7,751 9,510 9,321 10,575 13.5 10.9 12m 130.23 34.77 Net Income SRmn 5,633 7,302 6,450 6,525 1.2 5.0 Raw Beta 6m 3yr Assets SRmn 95,038 105,209 124,887 164,930 32.1 20.2 1.21 1.23 Equity SRmn 12,878 20,180 23,606 27,032 14.5 28.0 Investments SRmn 80,329 89,563 104,875 144,004 37.3 21.5 Reuters 1120.SE Total Deposits SRmn 75,835 79,356 95,349 130,074 36.4 19.7 Bloomberg RJHI AB Net Interest Margin % 6.8 7.1 7.0 6.1 - Price perform (%) 1M 3M 12M Cost/Income % 20.4 20.6 26.1 26.3 - - Absolute (%) 0 43 (23) ROE % 52.6 44.2 29.5 25.8 - - Market (%) 6 32 (39) ROA % 6.5 7.35.6 4.5 - - Sector (%) (3) 32 (31) Div Payout* % 34.5 13.7 50.4 77.5 - - Website: www.alrajhibank.com.sa EPS SR 3.8 4.9 4.3 4.3 1.2 5.0 BVPS SR 8.6 12.8 14.9 18.0 20.8 28.0 Valuation multiples Source: Company, NCBC Research* Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 17.8 27.3 12.9 P/B (x) 6.5 7.4 3.1 Product segment 2008 Geographic 2008 P/Sales (x) 19.0 22.8 9.9 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 0.8 1.8 6.0 Retail Banking 38.8 49.9 Saudi Arabia 74.1
Corporate Banking 33.3 22.8 GCC & Mid East 21.3 Weightage (%) Treasury 28.0 24.8 Eur,NA & Others 1.3 TASI (free float weight) 11.35 Investment Banking 0.0 2.6 South East Asia 3.3 Source: Company, NCBC Research MSCI Saudi (domestic – large cap) 17.80
• Business brief: Al Rajhi offers Shariah-compliant retail banking, corporate banking Free float (%) and treasury services to its customers. The bank’s investment banking, asset Free float 50.12 management and brokerage businesses are managed by its subsidiary, the Al Rajhi Relative share price perf. Financial Services Company. It has a presence in Europe and plans to expand 11,000 10 0 aggressively in South East Asian and Chinese Islamic financing markets. 9,000 80 60 7,000 40 • Financials: Al Rajhi’s investment portfolio grew 37.3% y-o-y to SR144.0 bn in 2008. 5,000 20 The bank’s net interest margin, stood at 6.1%, driven by 10.0% y-o-y growth in net 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 special commission income and low cost funding structure. Al Rajhi’s total operating TASI Al Rajhi (RHS) income grew 13.5% y-o-y in 2008 due to strong growth in net special commission
income. However, higher credit loss provisions during the period led to a sluggish Top 5 shareholders %) 1.2% y-o-y expansion in net income in 2008. Sulaiman Abdul Aziz Saleh Al Rajhi 24.6 Saleh Abdul Aziz Saleh Al Rajhi 13.8 • Recent developments: In April 2009, the bank announced a net profit of General Organization for Social 9.9 SR1,732mn for 1Q-09, an increase of 8.1% y-o-y. In the same month, the bank was Insurance (GOSI) awarded second banking license in Malaysia. In addition, Al Rajhi announced that it Abdullah Abdul Aziz Saleh Al Rajhi 5.9 opened six new branches in last 3 months, and that it is the first foreign Islamic bank
Source: NCBC Research to join the MEPS shared ATM Network. In Feb 2009, Al Rajhi Banking & Investment Corp., the overseas unit of Al Rajhi raised its paid-up capital to MYR1bn from MYR600mn.
JUNE 2009 AL RAJHI BANK 112
BANKS AND FINANCIAL SERVICES
Also known as Samba Financial SAMBA Price SR49.9 Samba Financial Group (Samba), the second largest bank in Saudi Arabia in terms Pricing / Valuation as on May 27, 2009 of total assets, was incorporated in 1980 through the takeover of Citigroup’s
Mkt cap SR44.9bn ($11, 992.0mn) branches in the Kingdom. The bank also operates in the UK, Pakistan and the UAE Sh. outstanding 900.0mn through its subsidiaries.
Key statistics Company financials
52 week range H/L (SR) 86.5/38.2 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 3,508 4,301 4,944 5,061 2.4 13.0 3m 22.23 5.94 Operating Income SRmn 5,828 7,273 7,196 7,012 (2.6) 6.4 12m 35.87 9.58 Net Income SRmn 4,018 5,210 4,808 4,454 (7.4) 3.5 Raw Beta 6m 3yr Assets SRmn 108,306 124,015 154,414 178,891 15.9 18.2 0.99 0.68 Equity SRmn 12,906 15,300 17,845 19,846 11.2 15.4 Advances SRmn 62,386 67,028 80,553 98,147 21.8 16.3 Reuters 1090.SE Total Deposits SRmn 89,639 100,641 127,236 146,318 15.0 17.7 Bloomberg SAMBA AB Net Interest Margin % 3.5 3.8 3.7 3.2 - - Price perform (%) 1M 3M 12M Cost/Income % 25.9 24.7 28.9 31.0 - - Absolute (%) (10) 25 (40) ROE % 34.9 36.9 29.0 23.6 - - Market (%) 6 32 (39) ROA % 4.0 4.5 3.5 2.7 - - Sector (%) (3) 32 (31) Div Payout* % 44.4 41.7 36.3 36.1 - - Website: www samba com EPS SR 4.5 5.8 5.3 4.9 (7.4) 3.5
BVPS SR 12.4 15.8 19.1 22.1 15.5 21.3 Valuation multiples Source: Company, NCBC Research * Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 16.1 22.5 10.4 Product segment 2008 Geographic 2008 P/B (x) 5.5 6.1 2.3 P/Sales (x) 19.5 21.8 9.1 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 2.6 1.6 3.5 Retail Banking 18.2 41.0 Saudi Arabia 84.2 Corporate Banking 44.1 41.2 GCC & M.E 3.7 Weightage (%) Treasury 37.6 1.9 Europe 5.1 TASI (free float weight) 5.57 Investment Banking 0.0 15.8 North America 5.8 MSCI Saudi (domestic – large cap) 9.32 South East As 0.4 Other 0.7 Source: Company, NCBC Research Free float (%) Free float 55.43 • Business brief: Samba’s core banking activities include retail banking, corporate banking and treasury services. Samba Capital & Investment Management Co, the Relative share price perf. investment banking division, handles the asset management and brokerage services 11, 0 0 0 10 0 9,000 80 business. The bank’s subsidiaries are Samba Fund Management, Crescent 60 7,000 40 Commercial Bank Limited (68.4% stake) and Samba Real Estate Company. 5,000 20 3,000 - • Financials: Samba’s strong brand name, innovative product portfolio, and higher Jun-08 Aug-08 Nov-08 Feb-09 M ay-09 liquidity in Saudi Arabia enhanced its customer deposits. Samba’s strong relations TASI SAM BA (RHS) with corporate clients resulted in the expansion of its credit portfolio by 21.8% y-o-y in Top 5 shareholders (%) 2008. However, Net Special Commission Income grew only 2.4% y-o-y in 2008 Public Investment Fund 22.9 primarily due to meager 0.5% y-o-y growth in total Special Commission Income. General Organization for Social 11.4 Operating income declined due to the trading losses of SR623.1mn in 2008. Insurance (GOSI) Public Pension Authority (PPA) 10.2 • Recent developments: Samba’s net income increased 6% y-o-y to SR1.27bn for Ma'an Abdul Wahid Abdul Majeed Al 7.8 1Q-09. In March 2009, Samba launched ‘new generation’ online banking platform. In Sanaa February 2009, state-run Public Pension Agency bought 43.5mn shares for over Source: NCBC Research SR1.6 bn, raising its stake in Samba to 15.1%. In December 2008, Fitch affirmed the bank’s Long-term IDR at ‘A+’ and downgraded Individual rating to 'B/C' from 'B'.
JUNE 2009 SAMBA FINANCIAL GROUP 113
BANKS AND FINANCIAL SERVICES
Also known as Banque Saudi Fransi BSF
Price SR43.0 Banque Saudi Fransi (BSF), an affiliate of Calyon of France, commenced operations Pricing / Valuation as on May 27, 2009 in December 1977 by taking over the branches of Banque Indosuez. The bank offers
Mkt cap SR31.1bn ($8,303.9mn) conventional and Islamic banking products through a network of 75 branches and Sh. outstanding 723.2mn 274 ATMs in Saudi Arabia.
Key statistics Company financials
52 week range H/L (SR) 69.5/31.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 1,706 2,017 2,296 2,821 22.8 18.3 3m 8.63 2.31 Operating Income SRmn 3,094 3,939 3,701 4,406 19.0 12.5 12m 9.50 2.54 Net Income SRmn 2,216 3,007 2,711 2,806 3.5 8.2 Raw Beta 6m 3yr Assets SRmn 67,501 79,581 99,808 125,865 26.1 23.1 0.89 0.85 Equity SRmn 7,185 9,405 11,241 14,069 25.2 25.1 Advances SRmn 42,979 51,130 59,850 80,867 35.1 23.5 Reuters 1050.SE Total Deposits SRmn 56,040 65,454 82,130 101,193 23.2 21.8 Bloomberg BSFR AB Net Interest Margin % 2.8 2.8 2.7 2.6 - - Price perform (%) 1M 3M 12M Cost/Income % 24.0 21.4 25.6 27.0 - - Absolute (%) (7) 19 (31) ROE % 33.4 36.3 26.3 22.2 - - Market (%) 6 32 (39) ROA % 3.5 4.1 3.0 2.5 - - Sector (%) (3) 32 (31) Div Payout* % 28.9 25.0 38.8 27.7 - - Website: www alfransi com EPS SR 3.9 5.3 4.8 5.0 3.5 8.2
BVPS SR 12.3 16.4 19.4 25.0 28.8 26.6 Valuation multiples Source: Company, NCBC Research* Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 15.5 24.0 9.0 Product segment 2008 Geographic 2008 P/B (x) 5.0 5.8 1.8 P/Sales (x) 23.1 28.4 9.0 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 1.6 1.6 3.1 Retail Banking 12.3 22.0 Saudi Arabia 91.1 Corporate Banking 56.2 48.2 GCC & MENA 2.3 Weightage (%) Treasury 31.2 23.8 Eur & America 6.5 TASI (free float weight) 3.80 Other 0.2 6.0 Asia & others 0.1 Source: Company, NCBC Research MSCI Saudi (domestic – mid cap)
• Business brief: The bank’s core banking activities include retail banking, corporate Free float (%) banking, and treasury services. BSF’s investment banking activities are conducted by Free float 54.66 CAAM Saudi Fransi (60.0% stake), Fransi Tadawul (99.0% stake), and Calyon Saudi Relative share price perf. Fransi (45.0% stake). The bank also has an insurance JV with Allianz Group under 11, 0 0 0 80 the name Allianz Saudi Fransi Co. (32.5% stake). Sofinco Saudi Fransi manages 9,000 60 BSF’s consumer finance activities. The bank also has a 27.0% stake in Syria-based 7,000 40 5,000 20 Banque BEMO Saudi Fransi. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: BSF’s focus on corporate banking has enabled it to post 35.1% y-o-y TASI Saudi Fransi (RHS) growth in loan books in 2008. Net Special Commission Income grew 22.8% y-o-y led
by 7.2% y-o-y growth in total Special Commission Income and 6.3% y-o-y decline in Top 5 shareholders (%) Special Commission Expenses. However, net income grew marginally by 3.5% due to Calyon Bank 31.1 the fall in fee based income and losses on investments amid weak market conditions. General Organization for Social 12.8 Insurance (GOSI) • Recent developments: In May 2009, BSF’s shareholders approved an increase in Rashid Al Abdul Rahman Al Rashid & 9.8 Sons share capital of the company to SYP3.75bn by issuing bonus and rights shares. In Mohammed Ibrahim Mohammed Al 5.1 April 2009, BSF announced net profit of SR741mn for 1Q-09, up 1.2% y-o-y. The Essa bank issued two bonus shares for seven held, increasing its paid-up capital to Source: NCBC Research SR7.23bn in the same month. In December 2008, Fitch downgraded the bank’s
Individual rating to 'B/C' from 'B' and affirmed Long-term IDR rating at 'A'.
JUNE 2009 BANQUE SAUDI FRANSI 114
BANKS AND FINANCIAL SERVICES
Also known as Arab National Bank ANB Price SR45.4 Arab National Bank (ANB), commenced operation in KSA in 1980 after the takeover Pricing / Valuation as on May 27, 2009 of Arab Bank PLC. It has a network of 131 branches and 842 ATMs, and operates
Mkt cap SR29.5bn ($7,879.8mn) one branch in London. The bank holds 100.0% stake in Arab National Investment Sh. outstanding 650.0mn Co. and 20.0% stake in Saudi Travellers Cheque Co.
Key statistics Company financials
52 week range H/L (SR) 70.0/25.7 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 2,189 2,525 2,904 3,354 15.5 15.3 3m 10.78 2.88 Operating Income SRmn 3,142 3,855 3,956 4,128 4.3 9.5 12m 10.54 2.81 Net Income SRmn 1,828 2,505 2,461 2,486 1.0 10.8 Raw Beta 6m 3yr Assets SRmn 67,492 78,035 94,468 121,307 28.4 21.6 1.38 0.97 Equity SRmn 6,062 7,980 10,525 12,671 20.4 27.9 Advances SRmn 38,779 49,747 61,122 74,662 22.2 24.4 Reuters 1080.SE Total Deposits SRmn 57,209 64,872 78,139 103,253 32.1 21.8 Bloomberg ARNB AB Net Interest Margin % 3.4 3.6 3.5 3.2 - - Price perform (%) 1M 3M 12M Cost/Income % 33.9 32.9 36.1 38.3 - - Absolute (%) (1) 74 (27) ROE % 33.7 35.7 26.6 21.4 - - Market (%) 6 32 (39) ROA % 2.8 3.4 2.9 2.3 - - Sector (%) (3) 32 (31) Div Payout* % 30.0 15.5 - 29.4 - - Website: www anb.com.sa EPS SR 2.8 3.9 3.8 3.8 1.0 10.8
BVPS SR 9.3 12.3 16.2 19.5 20.4 27.9 Valuation multiples Source: Company, NCBC Research * Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 14.2 22.4 8.2 P/B (x) 4.4 5.2 1.6 Product segment 2008 Geographic 2008 P/Sales (x) 14.1 19.0 6.0 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 1.1 0.0 3.6 Retail Banking 20.9 45.4 Saudi Arabia 95.6
Corporate Banking 43.6 36.4 GCC & MENA 0.7 Weightage (%) Treasury 34.4 6.5 Eur & America 3.6
TASI (free float weight) 3.24 Investment banking and Other 1.0 11.7 Asia & others 0.2 Source: Company, NCBC Research MSCI Saudi (domestic – mid cap)
• Business brief: Apart from core banking activities, ANB also offers investment Free float (%) banking, housing finance and heavy equipment leasing services through its Free float 49.10 subsidiaries. ANIC handles investment-banking operations while SHL deals with Relative share price perf. housing finance. ANB has also formed joint ventures with Ejara and a Dubai-based 11,000 80 company for leasing equipment and plans to enter the insurance market with AIG. 9,000 60 7,000 40 • Financials: ANB’s loan portfolio expanded 22.2% y-o-y to SR74.7bn in 2008. The 5,000 20 3,000 - bank’s customer deposits also recorded a significant 32.1% y-o-y expansion in the M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 same period. Net Special Commission Income grew 15.5% y-o-y from SR2.9bn in TASI Arab National (RHS) 2007 to SR3.4bn in 2008, mainly due to 9.0% y-o-y fall in the Special Commission
Expenses. However, growth in operating income was lower due to investment losses Top 5 shareholders (%) worth SR424.2mn in 2008. This coupled with higher depreciation charges caused Arab Bank 40.0 General Organization for Social 10.8 meager 1.0% rise in the bank’s net income in 2008. Insurance (GOSI) • Recent developments: In April 2009, ANB reported a 3.4% y-o-y increase in net Rashid Al Abdul Rahman Al Rashid & 9.9 Sons profit to SR695mn for 1Q-09. In December 2008, Fitch affirmed the bank’s Long-term Al Jabar Commercial Co. 5.6 IDR rating at 'A' and downgraded the Individual rating to 'B/C' from 'B'. In September Source: NCBC Research 2008, SEI announced partnership with ANB Invest, a subsidiary of Arab National
Bank to provide investment solutions to the investors in Saudi Arabia.
JUNE 2009 ARAB NATIONAL BANK 115
BANKS AND FINANCIAL SERVICES
Also known as Alinma Bank Development Bank Price SR13.4 Alinma Bank (Alinma), was established in March 2006 in accordance with a Royal Pricing / Valuation as on May 27, 2009 Decree with a share capital of SR15 bn. The bank plans to offer retail and corporate
Mkt cap SR20.0bn ($5,347.1mn) banking services in accordance with Shariah-compliant principles and is expected Sh. outstanding 1,500.0mn to commence operations in 2Q-09.
Key statistics Company financials
52 week range H/L (SR) 21.0/10.0 YoY CAGR(%) 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Interest Income SRmn NM - - 3m 441.85 117.99 Operating Income SRmn 823 - - 9m 595.71 159.07 Net Income SRmn 390 - - Raw Beta 6m 1yr Assets SRmn 15,556 - - 0.66 0.73 Equity SRmn 15,390 - - Advances SRmn 0.0 - - Reuters 1150.SE Deposits SRmn 0.0 - - Bloomberg ALINMA AB Net Interest Margin % NM - - Price perform (%) 1M 3M 9M Cost/Income % NM - - Absolute (%) 14 23 (20) ROE % 2.53 - - Market (%) 6 32 (39) ROA % 2.51 - - Sector (%) (3) 32 (31) Div Payout % 0.0 - - Website: www alinma.com EPS SR 0.26 - -
BVPS SR 10.3 - - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA 42.7 P/B (x) NA NA 1.1 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Assets % Net Inc Breakup %Assets % Net Inc Div yield (%) NA NA 0.0
Source: Company, NCBC Research
Weightage (%) • Business brief: Alinma would be a full-fledged Islamic bank providing all the regular TASI (free float weight) 3.13 MSCI Saudi (domestic – mid cap) products and services associated with a commercial bank. The bank plans to offer
solutions related to financing projects through Ijara and Istisna contracts, short-term Free float (%) finance, Murabah and Musharaka programs, and treasury services. Free float 69.93 • Financials: Alinma is expected to commence core operations from Q2 2009. The Relative share price perf. company realized income from investment worth SR338.7mn, which drove its net 11, 0 0 0 20 income to SR390.0mn in 2008. 9,000 15 7,000 10 • Recent developments: In April 2009, the company announced 1Q-09 net profit of 5,000 5 3,000 - SR109mn and that Alinma Investment Co. is to start the operations with a paid up Jul-08 Oct-08 Jan-09 M ay-09 capital of SR250mn. In January 2009, the company announced its plans to TASI Alinma (RHS) commence core operations in mid-2009 through 15 branches. The bank also announced the plans to establish an investment company with a capital of SR1bn. In Top 5 shareholders (%) June 2008, the bank’s stock debuted on the Saudi Stock Exchange (Tadawul). Public Investment Fund 10.0 General Organization for Social 10.0 Alinma had offered 70% stake or 1.5 bn shares through IPO in the Kingdom, having a Insurance (GOSI) face value of SR10, in April 2008. Moreover, in April 2008, Alinma signed an Public Pension Authority (PPA) 10.0 agreement with Saudi Computer Company Ltd. to design and deploy banking
information technology (IT) systems utilizing IBM’s expertise.
Source: NCBC Research
JUNE 2009 ALINMA BANK 116
BANKS AND FINANCIAL SERVICES
Also known as Riyad Bank RIBL
Price SR24.0 Riyad Bank (RIBL) is Saudi Arabia’s fourth largest listed bank, in terms of asset- Pricing / Valuation as on May 27, 2009 size, with a market share of about 12.3%. Established in 1957, RIBL has a network of
Mkt cap SR36.0bn ($9,612.8mn) 201 branches and 1900 multi-functions ATM’s. It also has international presence Sh. outstanding 1,500.0mn with a branch in London, an agency in Houston, and an office in Singapore.
Key statistics Company financials
52 week range H/L (SR) 41.3/18.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 2,672 2,926 3,266 3,947 20.8 13.9 3m 22.75 6.07 Operating Income SRmn 4,195 4,886 5,168 5,248 1.6 7.8 12m 23.91 6.39 Net Income SRmn 2,837 2,909 3,011 2,639 (12.4) (2.4) Raw Beta 6m 3yr Assets SRmn 80,079 94,016 121,351 159,653 31.6 25.9 0.63 0.79 Equity SRmn 10,891 11,992 13,187 25,691 94.8 33.1 Advances SRmn 45,606 52,183 67,340 96,430 43.2 28.4 Reuters 1010.SE Total Deposits SRmn 65,892 77,359 102,130 126,269 23.6 24.2 Bloomberg RIBL AB Net Interest Margin % 3.6 3.5 3.2 2.9 - - Price perform (%) 1M 3M 12M Cost/Income % 34.0 33.0 35.0 41.0 - - Absolute (%) (5) 21 (40) ROE % 28.5 25.4 23.9 13.6 - - Market (%) 6 32 (39) ROA % 3.7 3.3 2.8 1.9 - - Sector (%) (3) 32 (31) Div Payout* % 58.8 71.2 68.9 82.7 - - Website: www riyadbank.com EPS SR 1.9 1.9 2.0 1.8 (12.4) (2.4)
BVPS SR 6.7 7.3 8.1 17.1 112.1 36.9 Valuation multiples Source: Company, NCBC Research* Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 13.9 19.7 12.1 Product segment 2008 Geographic 2008 P/B (x) 3.4 4.5 1.2 P/Sales (x) 13.8 18.2 8.1 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 5.1 3.5 6.9 Retail Banking 10.4 31.7 Saudi Arabia 87.3
Investment and Brokerage 0.0 8.6 GCC & MENA 3.9 Weightage (%) Corporate Banking 51.4 69.9 Eur & America 8.4 TASI (free float weight) 3.06 Treasury and Investment 37.7 (1.1) Asia & others 0.4 MSCI Saudi (domestic – large cap) Other 0.6 (9.1) Source: Company, NCBC Research
Free float (%) • Business brief: RIBL performs core-banking activities such as retail banking, Free float 38.04 corporate banking and treasury services. The bank offers a range of conventional and
Relative share price perf. Islamic banking products to its customers. RIBL also operates a wholly owned
11, 0 0 0 50 investment banking subsidiary—Riyad Capital through which it provides asset 9,000 40 30 management, wealth management, corporate finance, and brokerage services. 7,000 20 5,000 10 • Financials: RIBL reported 43.2% y-o-y expansion in its credit portfolio in 2008 driven 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 by the robust demand for corporate credit in the country. As a result, net special
TASI R BL (RHS) commission income grew 20.8% y-o-y. However, due to losses in trading activities,
RIBL recorded a sluggish 1.6% y-o-y growth in total operating income. Higher Top 5 shareholders (%) operating expenses, credit loss provisions and provisions for impaired assets dented Public Investment Fund 21.7 the bank’s bottom line in 2008. General Organization for Social 21.6 Insurance (GOSI) • Recent developments: RIBL’s 1Q-09 net profit declined 36.2% to SR441 mn due to Mohd Ibrahim Mohammed Al Essa 10.1 the decrease in its investments' values as a result to the global economic crisis. RIBL Al Nahla Commercial & Real Estate Co. 9.9 signed an agreement with UK based Royal & Sun Alliance in January 2009 to set up SAMA 6.5 Source: NCBC Research a joint venture– The Global Company for Cooperative Insurance with a paid up capital of SR200 mn. In December 2008, Fitch affirmed Long-term IDR and Senior unsecured debt at ‘A+’ and downgraded Individual rating to 'B/C' from 'B’.
JUNE 2009 RIYAD BANK 117
BANKS AND FINANCIAL SERVICES
Also known as SABB The Saudi British Bank Price SR50.8 SABB (earlier The Saudi British Bank) is an affiliate of HSBC Group. The bank Pricing / Valuation as on May 27, 2009 commenced operations in 1978 and offers conventional and Islamic products under
Mkt cap SR38.1bn ($10,163.6mn) the brand name SABB AMANAH. SABB operates 68 branches and 452 ATMs, two Sh. outstanding 750.0mn separate subsidiaries for investment banking and also offers insurance services.
Key statistics Company financials
52 week range H/L (SR) 78.5/36.4 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 1,974 2,584 3,059 3,207 4.9 17.6 3m 9.04 2.41 Operating Income SRmn 3,820 4,617 4,374 4,825 10.3 8.1 12m 6.55 1.75 Net Income SRmn 2,504 2,988 2,549 2,812 10.3 3.9 Raw Beta 6m 3yr Assets SRmn 65,928 77,189 98,213 131,661 34.1 25.9 0.65 0.86 Equity SRmn 7,493 9,405 10,425 11,634 11.6 15.8 Advances SRmn 40,847 42,450 62,001 80,237 29.4 25.2 Reuters 1060.SE Total Deposits SRmn 52,584 61,430 79,893 108,747 36.1 27.4 Bloomberg SABB AB Net Interest Margin % 3.3 3.7 3.6 2.9 - - Price perform (%) 1M 3M 12M Cost/Income % 31.6 30.4 32.7 34.0 - - Absolute (%) (10) 10 (45) ROE % 37.4 35.4 25.7 25.5 - - Market (%) 6 32 (39) ROA % 4.0 4.2 2.9 2.4 - - Sector (%) (3) 32 (31) Div Payout* % 32.5 50.2 57.5 20.5 - - Website: www sabb.com EPS SR 4.2 5.1 4.3 4.7 7.9 3.9
BVPS SR 11.5 14.1 15.9 19.4 21.8 19.0 Valuation multiples Source: Company, NCBC Research * Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 14.8 21.0 11.5 P/B (x) 4.7 5.1 2.8 Product segment 2008 Geographic 2008 P/Sales (x) 17.1 17.5 10.1 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 3.3 2.7 1.8 Retail Banking 18.3 17.3 Saudi Arabia 91.8
Corporate Banking 44.4 51.2 Middle East 2.4 Weightage (%) Treasury 37.2 17.6 Europe 2.4 TASI (free float weight) 2.80 Investment Banking 0.0 10.1 North America 3.4 MSCI Saudi (domestic – mid cap) Others 0.1 3.7 Other 0.1
Source: NCBC Research, Reuters* Gross dividend is used in div yield calculations for Saudi banking sector
Free float (%) • Business brief: SABB offers retail banking, corporate banking and treasury services. Free float 32.85 The bank also provides investment banking solutions through HSBC Saudi Arabia Relative share price perf. Ltd. (40.0% stake) which specializes in asset management and corporate finance 11, 0 0 0 15 0 services. SABB offers brokerage and securities services through SABB Securities 9,000 10 0 7,000 (100.0% stake) and Shariah compliant insurance products through SABB Takaful 50 5,000 (32.5% stake). 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: SABB enhanced its core banking activities over the years capitalizing on TASI SABB (RHS) its established brand name, affiliation with HSBC, strong corporate relations and a
wide range of Islamic product offerings. The bank reported a 29.4% y-o-y growth in Top 5 shareholders (%) loans. However, growth in Net Special Commission Income was constrained due to HSBC Holdings Co. 39.9 Al Olayan Saudi Investment Co. 16.9 23.0% y-o-y increase in Special Commission Expenses.
General Organization for Social 9.5 • Recent developments: In May 2009, Standard & Poor's affirmed its strong rating of Insurance (GOSI) SABB. In April 2009, SABB announced a 0.4% y-o-y growth in its 1Q-09 net profit to SR760mn. The bank raised its paid-up capital by 25% to SR7.5bn through the Source: NCBC Research issuance of 1:4 bonus shares in March. In December 2008, Fitch affirmed the bank’s Long-term IDR rating and Senior unsecured debt rating at ‘A.
JUNE 2009 SABB 118
BANKS AND FINANCIAL SERVICES
Also known as Saudi Investment Bk SAIB Price SR21.9 The Saudi Investment Bank (SAIB) was established in 1976 in Riyadh to provide Pricing / Valuation as on May 27, 2009 medium term finance to local companies for industrial projects. In 1983, the bank
Mkt cap SR9.9bn ($2,631.5mn) amended its charter to carry out commercial banking activities under the name Sh. outstanding 450.0mn SAIB. SAIB has a network of 33 branches and 247 ATMs.
Key statistics Company financials
52 week range H/L (SR) 35.5/14.1 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-07) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 786 1,031 1,056 1,026 (2.8) 9.3 3m 4.39 1.17 Operating Income SRmn 1,516 2,556 1,403 1,938 38.1 8.5 12m 6.22 1.66 Net Income SRmn 1,064 2,006 822 530 (35.5) (20.7) Raw Beta 6m 3yr Assets SRmn 39,581 40,845 46,542 53,596 15.2 10.6 0.85 0.90 Equity SRmn 5,307 6,001 6,770 6,609 (2.4) 7.6 Advances SRmn 19,794 20,691 23,129 29,556 27.8 14.3 Reuters 1030.SE Total Deposits SRmn 31,849 32,378 37,280 45,911 23.2 13.0 Bloomberg SIBC AB Net Interest Margin % 2.3 2.6 2.5 2.1 - - Price perform (%) 1M 3M 12M Cost/Income % 23.2 17.7 29.6 21.2 - - Absolute (%) 0 44 (36) ROE % 23.9 35.5 12.9 8.0 - - Market (%) 6 32 (39) ROA % 3.1 5.0 1.9 1.0 - - Sector (%) (3) 32 (31) Div Payout* % 12.2 - - - - - Website: www saib.com sa EPS SR 2.4 4.5 1.8 1.2 (33.3) (20.6)
BVPS SR 11.5 13.3 15.0 14.7 (2.0) 8.5 Valuation multiples Source: Company, NCBC Research * Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 10.6 27.9 14.1 P/B (x) 3.5 3.4 1.1 Product segment 2008 Geographic 2008 P/Sales (x) 20.7 21.8 7.3 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 0.0 0.0 0.0 Retail Banking 23.6 64.1 Saudi Arabia 91.5
Corporate Banking 36.9 103.5 GCC/MENA 0.6 Weightage (%) Treasury & Capital Market 39.5 (95.8) Eur & America 7.9 TASI (free float weight) 1.35 Investment Services & Brokerage 0.1 28.2 Asia & others 0.0 MSCI Saudi (domestic – large cap) 1.34 Source: Company, NCBC Research
• Business brief: SAIB’s provides personal banking, corporate banking, investment Free float (%) Free float 61.17 banking, Islamic banking, and treasury services to its customers. The bank’s services include local & international share trading, retail lending, Murabaha finance, American Relative share price perf. Express cards and Orix leasing services. SAIB established the SAIB Asset 11, 0 0 0 40 Management Company in November 2007 to carry out conventional and Islamic 9,000 30 7,000 20 asset management service. 5,000 10 3,000 - • Financials: SAIB recorded 27.8% y-o-y growth in its lending portfolio in 2008 due to M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 the massive investment boom prevailing in the Kingdom, especially during the first TASI S BC (RHS) half of 2008. The bank also recorded a robust growth of 23.2% y-o-y in deposits in the same period. Operating income grew 38.1% y-o-y in 2008; however, net income Top 5 shareholders (%) General Organization for Social 21.5 declined 35.5% due to higher provision charges. Insurance (GOSI) • Recent developments: In April 2009, SAIB announced that its 1Q-09 net profit Public Pension Authority (PPA) 17.3 Saudi Oger Ltd. 8.5 declined 6.6% y-o-y to SR241mn due to lower fees on banking activities. In JPMorgan Chase Co. 7.4 December 2008, Fitch affirmed the bank’s Long-term IDR rating at ‘A-‘and National Commercial Bank (NCB) 7.3 downgraded Individual rating to ‘C’ from ‘B/C’. In August 2008, BNP Paribas Asset Source: NCBC Research Management got approval to acquire 25.0% stake in the bank’s unit- SAIB Asset
Management.
JUNE 2009 SAUDI INVESTMENT BANK 119
BANKS AND FINANCIAL SERVICES
Also known as Bank Al Jazira BAJ Price SR21.6 Bank Aljazira (BJAZ) specializes in Islamic banking and investment products in Pricing / Valuation as on May 27, 2009 Saudi Arabia. BJAZ was established in 1975, following the takeover of the Saudi
Mkt cap SR6.5bn ($1,730.3mn) Arabian branches of National Bank of Pakistan. Headquartered at Jeddah, the bank Sh. outstanding 300.0mn operates a network of 24 branches and 314 ATMs across KSA.
Key statistics Company financials
52 week range H/L (SR) 41.0/13.3 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-07) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 276 477 595 631 6.1 31.7 3m 15.96 4.26 Operating Income SRmn 1,319 2,615 1,447 1,137 (21.4) (4.8) 12m 18.29 4.88 Net Income SRmn 874 1,974 805 222 (72.4) (36.7) Raw Beta 6m 3yr Assets SRmn 14,169 15,713 21,564 27,520 27.6 24.8 1.15 1.12 Equity SRmn 2,670 4,194 4,698 4,637 (1.3) 20.2 Advances SRmn 6,911 6,271 9,879 15,133 53.2 29.9 Reuters 1020.SE Total Deposits SRmn 10,973 11,091 16,364 22,267 27.7 26.6 Bloomberg BJAZ AB Net Interest Margin % 2.3 3.4 3.4 2.7 - - Price perform (%) 1M 3M 12M Cost/Income % 24.7 24.0 46.2 69.6 - - Absolute (%) 1 49 (46) ROE % 41.6 57.5 14.7 4.8 - - Market (%) 6 32 (39) ROA % 7.0 13.2 4.3 0.8 - - Sector (%) (3) 32 (31) Div Payout* % 7.7 13.9 16.8 67.5 - - Website: www baj.com.sa EPS SR 2.9 6.6 2.7 0.7 (72.6) (37.7)
BVPS SR 8.7 13.1 22.1 15.5 (30.0) 21.2 Valuation multiples Source: Company, NCBC Research * Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 7.5 18.3 20.3 Product segment 2008 Geographic 2008 P/B (x) 3.5 2.2 1.0 P/Sales (x) 30.9 24.8 7.2 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 1.9 0.9 3.3 Retail sector 9.3 10.7 Corporate Sector 47.7 118.0 Weightage (%) Brokerage 2.0 41.5 TASI (free float weight) 1.07 Treasury Sector 41.1 (70.2) Source: Company, NCBC Research MSCI Saudi (domestic – large cap) 1.64
• Business brief: BJAZ offers Shariah-compliant retail banking, corporate banking, Free float (%) and treasury services. The bank conducts its investment banking business through its Free float 73.63 subsidiary AJC. The insurance business is managed by ATATC, which was also the Relative share price perf. first financial institution to launch an authorized Islamic life insurance program in 11, 0 0 0 50 Saudi Arabia. 9,000 40 30 7,000 • Financials: BJAZ’s credit portfolio expanded 53.2% y-o-y to SR15.1bn in 2008. 20 5,000 10 However, the banks net special commission income grew only 6.1% y-o-y during 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 2008, mainly due to 53.9% y-o-y growth in the special commission expenses. TASI BJAZ (RHS) Moreover, sluggish stock market conditions led to a 23.0% y-o-y decline in fee-
income and investment and trading loss of SR68.4mn. This led to a 21.4% y-o-y fall Top 5 shareholders (%) in total operating income in 2008. BJAZ also witnessed higher operating expenses Rashed Al Abdul Rahman Al Rashid 22.2 and Sons Company during 2008 (up 18.0% y-o-y), which led to a 72.4% y-o-y fall in net income. Al Okhoah Union for development 6.5 • Recent developments: In April 2009, BJAZ obtained "ISO 9001" International National Pakistani Bank 5.8 Certificate of Quality as the first fully Shari'ah compliant bank in the Kingdom of Saudi Saleh Abdullah Mohammed Kamal 5.0 Source: NCBC Research Arabia. The bank recorded a 33.3% year on year decline in 1Q 09 net profit to SR102 mn. In December 2008, Fitch affirmed bank’s Long-term IDR rating at ‘A-‘ and Individual rating at ‘C’. In April 2008, BJAZ raised its share capital to SR3.0bn from SR2.25bn, through the issue of bonus shares.
JUNE 2009 BANK ALJAZIRA 120
BANKS AND FINANCIAL SERVICES
Also known as Saudi Hollandi Bank SHB Price SR39.6 Saudi Hollandi Bank (SHB), headquartered in Riyadh, was established in 1977 by Pricing / Valuation as on May 27, 2009 the conversion of Algemene Bank Nederland (ABN) into a JV bank. At present, the
Mkt cap SR13.1bn ($3,497.4mn) RBS led consortium holds a 39.9% stake in the bank. SHB offers both conventional Sh. outstanding 330.8mn and Islamic products through a network of 43 branches and 169 ATMs across KSA.
Key statistics Company financials
52 week range H/L (SR) 52.0/25.2 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 1,014 1,180 1,200 1,445 20.4 12.6 3m 3.58 0.95 Operating Income SRmn 1,718 1,947 1,776 2,111 18.9 7.1 12m 2.77 0.74 Net Income SRmn 1,052 953 439 1,224 179.0 5.2 Raw Beta 6m 3yr Assets SRmn 39,958 46,740 50,411 61,436 21.9 15.4 0.50 0.86 Equity SRmn 3,467 4,258 4,547 5,715 25.7 18.1 Advances SRmn 23,777 26,480 27,555 38,017 38.0 16.9 Reuters 1040.SE Total Deposits SRmn 34,362 40,712 43,763 52,299 19.5 15.0 Bloomberg AAAL AB Net Interest Margin % 2.8 2.8 2.5 2.7 - - Price perform (%) 1M 3M 12M Cost/Income % 33.0 33.1 47.4 38.4 - - Absolute (%) (14) 23 (34) ROE % 33.1 24.7 10.0 23.9 - - Market (%) 6 32 (39) ROA % 2.9 2.2 0.9 2.2 - - Sector (%) (3) 32 (31) Div Payout* % 38.5 20.5 48.5 19.1 - - Website: www shb.com.sa EPS SR 4.0 3.6 1.7 4.6 179.0 5.2
BVPS SR 13.1 16.1 17.2 21.6 25.7 18.1 Valuation multiples Source: Company, NCBC Research* Gross dividend is used in div yield calculations for Saudi banking sector
2006 2007 2008 Segment-wise business analysis P/E (x) 17.5 37.7 8.6 P/B (x) 3.9 3.6 1.9 Product segment 2008 Geographic 2008 P/Sales (x) 14.2 13.8 7.3 %Assets % Net Inc Breakup %Assets % Net Inc Div yield* (%) 1.2 1.3 2.2 Retail Banking 7.8 10.5 Saudi Arabia 97.5
Corporate Banking 57.8 70.1 Other GCC 1.7 Weightage (%) Treasury 34.4 17.1 Europe 0.5 TASI (free float weight) 0.86 Investment Banking 0.0 2.3 Other 0.2 MSCI Saudi (domestic – mid cap) Source: Company, NCBC Research
• Business brief: SHB’s core baking activities include retail banking, corporate Free float (%) Free float 29.35 banking, and treasury services. The bank offers Van Gogh preferred banking services, such as domestic & international share trading services and mutual fund Relative share price perf. portfolios, to HNIs under its wealth management segment. In September 2007, SHB 11, 0 0 0 80 established a wholly owned subsidiary Saudi Hollandi Capital Company to offer 9,000 60 7,000 40 investment-banking solutions. 5,000 20 • Financials: SHB recorded 38.0% y-o-y expansion in its credit portfolio in 2008. Net 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 special commission income grew 20.4% y-o-y in 2008 mainly due to 10.1% y-o-y TASI Saudi Hollandi (RHS) decline in the Special Commission Expenses. The banks fee-based income, mainly associated with trade finance and other services, also recorded a healthy 46.2% y-o-y Top 5 shareholders (%) ABN Amro Co. 39.9 growth during the same period. SHB’s aggressive clean-up activities in 2008 led to Al Olayan Saudi Investment Co. 20.8 reduced provision for credit loss provisioning in 2008, leading to a strong 179.0% y- General Organization for Social 9.6 o-y growth in net income. Insurance (GOSI) • Recent developments: SHB’s net profit increased 0.7% year on year to SR284.4 mn In March 2009, SHB increased its paid-up capital by 25% to SR3.31bn through Source: NCBC Research issuance of bonus shares. In December 2008, Fitch affirmed the bank’s Long-term
IDR rating at ‘A-‘and downgraded the Individual rating to 'C' from 'B/C’.
JUNE 2009 SAUDI HOLLANDI BANK 121
BANKS AND FINANCIAL SERVICES
Also known as Bank AlBilad AlBilad Price SR23.6 Bank AlBilad (AlBilad), headquartered in Riyadh, was established in 2004 by a Pricing / Valuation as on May 27, 2009 merger of eight money-exchange organizations. AlBilad’s wholly owned
Mkt cap SR7.1bn ($1,890.5mn) subsidiaries are AlBilad Brokerage & Securities Management Co., AlBilad Sh. outstanding 300.0mn Investment Co. and AlBilad Real Estate Co.
Key statistics Company financials
52 week range H/L (SR) 43.5/17.6 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Sp. Com Income SRmn 109 359 534 578 8.2 74.3 3m 15.76 4.21 Operating Income SRmn 171 655 779 875 12.3 72.5 12m 19.47 5.20 Net Income SRmn (98) 178 73 125 72.6 NM Raw Beta 6m 3yr Assets SRmn 7,005 11,281 16,636 16,052 (3.5) 31.8 0.14 0.20 Equity SRmn 2,899 3,024 3,104 3,213 3.53.5 Investments SRmn 5,212 9,825 13,599 10,157 (25.3) 24.9 Reuters 1140.SE Total Deposits SRmn 3,916 7,858 12,689 12,435 (2.0) 47.0 Bloomberg ALBI AB Net Interest Margin % 3.3 4.2 4.1 3.8 - - Price perform (%) 1M 3M 12M Cost/Income % 106.6 71.7 82.3 76.0 - - Absolute (%) 4 13 (38) ROE % (6.8) 6.0 2.4 4.0 - - Market (%) 6 32 (39) ROA % (1.4) 1.9 0.5 0.8 - - Sector (%) (3) 32 (31) Div Payout % ------Website: www bankalbilad com sa EPS SR (0.3) 0.6 0.2 0.4 72.6 NM
BVPS SR 9.4 9.2 9.9 10.7 8.2 4.3 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 67.0 166.6 67.1 P/B (x) 3.9 3.9 2.6 Product segment 2008 Geographic 2008 P/Sales (x) 33.2 22.6 14.5 %Assets % Net Inc Breakup %Assets % Net Inc Div yield (%) 0.0 0.0 0.0 Individuals 13.9 13.2 Saudi Arabia 93.7
Companies and Main Clients 44.5 111.1 GCC and MENA 5.4 Weightage (%) Treasury 12.9 (27.2) Europe 0.2 TASI (free float weight) 0.79 Transfer, Inv Services & Others 28.8 2.9 Asia and other 0.7 MSCI Saudi (domestic – large cap) 6.42 Source: Company, NCBC Research
• Business brief: AlBilad’s consumer services segment includes, AlBilad Net, AlBilad Free float (%) Free float 50.00 Tadawul, AlBilad 24, local share investment, and credit cards. The corporate services segment offers a range of finance solutions such as Murabaha, Musharaka, Istisna’a Relative share price perf. and securitization finance. The investment-banking segment offers services such as 11, 0 0 0 50 Akar, Amwal, Asayel, Al-Murabih, and Al-Seef. 9,000 40 30 7,000 20 • Financials: AlBilad’s investment portfolio declined 25.3% y-o-y to SR10.2bn in 2008. 5,000 10 3,000 - However, the net special commission income managed to expand 8.2% y-o-y in M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 2008. The bank also witnessed growth in fee-based income during the same period, TASI AL Bilad (RHS) which led to 12.3% y-o-y growth in the total operating income. Higher operating income coupled with reduced other G&A expenses led to a stronger rise in net Top 5 shareholders (%) Mohammed Ibrahim Mohammed Al 11.9 income. Subaei • Recent developments: In April 2009, Albilad announced a decline of 56% y-o-y in its Abdullah Ibrahim Mohammed Al 11.1 Subaei net income for 1Q-09 to SR22.4mn. In June 2008, the bank’s investment arm- First Investment Company 7.2 AlBilad Investment Co. signed an agreement with Saudi Integrated Telecom Abdul Rahman Saleh Abdul Aziz Al 6.9 Company (SITC) to become the latter’s IPO manager, financial consultant and Rajhi Abdul Rahman Abdul Aziz Saleh Al 6.5 coverage entrepreneur. In May 2008, Pakistan-based United Bank Limited (UBL) and Rajhi AlBilad signed an agreement for Electronic Home Remittance Facility at the UBL Source: NCBC Research Head Office in Karachi, Pakistan. JUNE 2009 BANK ALBILAD 122
Company Page No. Banking and Financials SABIC 124 Petrochemicals
SAFCO 125 Cement
Saudi Kayan 126 Retail
National Industrial 127 Energy and Utilities
Saudi Industrial Investment 128 Agriculture and Food
Sipchem 129 Telecom and IT
Rabigh Refining 130 Insurance
Sahara Petrochemicals 131 Multi Investment
Yanbu National 132 Industrial Investment
Advanced Polypropylene 133 Building and Construction
Nama Chemicals 134 Real Estate
Alujain Corporation 135 Transportation
Methanol Chemicals 136 Media and Publishing
Hotels and Tourism
PETROCHEMICAL INDUSTRIES
Also known as Saudi Basic Industries SABIC Price SR64.8 SABIC, established in 1976, is one of the leading petrochemical companies in the Pricing / Valuation as on May 27, 2009 world in terms of sales. The company produces basic chemicals-olefins, oxygenates
Mkt cap SR194.3bn ($51,869.2mn) and aromatics-intermediates and polymers. SABIC also produces fertilizers (through Sh. outstanding 3,000.0mn SAFCO, Ibn Al-Baytar, Al-Bayroni) and metals (through Hadeed, ALBA, GARMCO).
Key statistics Company financials
52 week range H/L (SR) 153.3/33.6 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 78,254 86,328 126,204 150,810 19.5 24.4 3m 754.24 201.40 EBITDA SRmn 35,701 37,005 48,653 46,643 (4.1) 9.3 12m 681.72 182.04 Net Income SRmn 19,160 20,294 27,022 22,030 (18.5) 4.8 Raw Beta 6m 3yr Assets SRmn 136,951 166,589 253,731 271,760 7.1 25.7 1.87 1.13 Equity SRmn 62,341 72,883 91,154 102,933 12.9 18.2 Total Debt SRmn 29,721 39,740 80,109 92,656 15.7 46.1 Reuters 2010.SE Cash & Equiv SRmn 28,173 41,228 46,056 51,845 12.6 22.5 Bloomberg SABIC AB EBITDA Mgn % 45.6 42.9 38.6 30.9 - - Price perform (%) 1M 3M 12M Net Mgn % 24.5 23.5 21.4 14.6 - - Absolute (%) 37 77 (54) ROE % 33.8 30.0 32.9 22.7 - - Market (%) 6 32 (39) ROA % 14.6 13.4 12.9 8.4 - - Sector (%) 27 59 (52) Div Payout % 48.0 49.3 33.3 40.9 - - Website: www sabic.com EPS SR 47.9 8.1 9.0 7.3 (18.5) N/M
BVPS SR 155.9 29.2 30.4 34.3 12.9 N/M Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 13.0 18.4 7.0 Product segment 2008 Geographic 2008 P/B (x) 3.6 5.4 1.5 P/Sales (x) 3.0 3.9 1.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.8 1.8 5.8 Petrochemicals 106.1 95.1 Fertilizers 6.1 27.6 Weightage (%) Metals 9.8 22.8 TASI (free float weight) 9.99 Corporate 4.5 101.0 MSCI Saudi (domestic – large cap) 30.73 Eliminations (26.5) (146.4) Source: Company, NCBC Research
Free float (%) • Business brief: SABIC has presence across the globe through its subsidiaries and Free float 22.98 associates. It operates through its six interlinked divisions – Basic Chemicals,
Relative share price perf. Intermediates, Polymers, Specialty Products, Fertilizers, and Metals. In 2008, the
11, 0 0 0 200 company’s total production stood at 55mn metric tons. 9,000 15 0 • Financials: SABIC posted 19.5% y-o-y revenue growth in 2008 to reach SR150.8bn. 7,000 10 0 5,000 50 However, the company’s net income declined by 18.5% y-o-y to SR22.0bn owing to 3,000 - reduced petrochemical demand and sharp fall in realizations. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI SABIC (RHS) • Recent developments: In 1Q-09, SABIC reported a loss of SR973.9mn (1Q08: net
profit of SR6.9bn) due to fall in petrochemical demand and prices coupled with a Top 5 shareholders (%) goodwill write-down of SR1.2bn. In May 2009, SABIC signed a MOU with Sipchem, Public Investment Fund 70.0 under which SABIC will provide ethylene to Sipchem in return of carbon monoxide
from the latter. In context, SABIC will build SR12bn worth of petrochemical projects in
Jubail. Under its restructuring initiatives, SABIC has laid off 1,600 jobs globally and halted operations at high-cost facilities. Its subsidiary, YANSAB is set to be Source: NCBC Research operational in 2Q-09. SABIC-Sinopec 50:50 owned project producing 1mn tons of ethylene derivatives annually in Tianjin (China) is set to start operations in Nov 2009.
JUNE 2009 SAUDI BASIC INDUSTRIES 124
PETROCHEMICAL INDUSTRIES Also known as Saudi Arabia Fertilizers SAFCO Price SR110.3 Saudi Arabia Fertilizers Company (SAFCO), established in 1965 is engaged in Pricing / Valuation as on May 27, 2009 producing ammonia and urea. The company markets its products in Asia, America,
Mkt cap SR27.6bn ($7,359.8mn) Australia, Africa and other middle-east countries apart from domestic market. Saudi Sh. outstanding 250.0mn Basic Industries Corp. (SABIC) holds 42.9% stake in SAFCO.
Key statistics Company financials
52 week range H/L (SR) 272.5/63.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,824 1,831 3,516 5,243 49.1 42.2 3m 58.04 15.50 EBITDA SRmn 1,178 1,183 2,471 4,594 85.9 57.4 12m 126.32 33.73 Net Income SRmn 1,100 1,151 2,209 4,530 105.1 60.3 Raw Beta 6m 3yr Assets SRmn 6,207 6,674 8,153 9,850 20.8 16.6 1.04 1.09 Equity SRmn 4,788 4,739 6,014 8,034 33.6 18.8 Total Debt SRmn 695 1,240 975 826 (15.2) 5.9 Reuters 2020.SE Cash & Equiv SRmn 304 594 1,572 3,918 149.2 134.4 Bloomberg SAFCO AB EBITDA Mgn % 64.6 64.6 70.3 87.6 - - Price perform (%) 1M 3M 12M Net Mgn % 60.3 62.9 62.8 86.4 - - Absolute (%) 3 22 (54) ROE % 24.4 24.2 41.1 64.5 - - Market (%) 6 32 (39) ROA % 19.2 17.9 29.8 50.3 - - Sector (%) 27 59 (52) Div Payout % 76.4 95.5 45.3 71.7 - - Website: www safco.com.sa EPS SR 27.5 5.8 11.0 18.1 N/M N/M
BVPS SR 119.7 23.7 30.1 32.1 N/M N/M Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 19.8 18.0 5.0 P/B (x) 4.8 6.6 2.8 Product segment 2008 Geographic 2008 P/Sales (x) 12.5 11.3 4.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 4.8 2.5 14.5 Ammonia & Urea 100 N/A Asia 34
Melamine & Sulfuric Acid N/A N/A America 26 Weightage (%) Australia 21 TASI (free float weight) 2.46 Saudi Arabia 13 MSCI Saudi (domestic – large cap) 7.36 Africa/Middle East 6
Source: Company, NCBC Research
Free float (%) • Business brief: SAFCO has a urea production capacity over 2.27mn tons per annum Free float 39.96 (tpa), majority of which is exported. Urea is a key material used in nitrogen fertilizers Relative share price perf. across the globe. The company also manufactures 2.1mn tpa of ammonia as an 11,000 300 intermediate raw material for producing urea. SAFCO has a sulphuric acid production 9,000 200 capacity of 130,000 tpa. The company is also constructing SAFCO V, a new fertilizer 7,000 10 0 5,000 plant in Jubail, which is expected to increase its urea capacity by 1.5mn tpa and 3,000 - ammonia capacity by 1.2mn tpa in 2011. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI SAFCO (RHS) • Financials: In 2008, SAFCO reported a robust year-on-year growth of 49.1% in its
top line to SR5,242.6mn benefiting from higher fertilizer prices during the year. Top 5 shareholders (%) Furthermore, its net income grew 105.1% y-o-y to SR4,530.3mn. Saudi Basic Industries Corporation 42.9 General Org. for Social Insurance 13.9 • Recent developments: SAFCO declared its 1Q-09 results on April 11, 2009. Net income declined 27.4% y-o-y to SR525.0mn in 1Q-09 due to lower fertilizer prizes. In August 2008, SAFCO stopped production at its Dammam plant to comply with the Royal decree enforcing environmental regulations. In July 2008, SAFCO signed a Source: NCBC Research deal with Hadeed (SABIC’s wholly owned subsidiary) to establish a steel plant with a
capacity of 1.7mn tpa.
JUNE 2009 SAUDI ARABIA FERTIZERS CO 125
PETROCHEMICAL INDUSTRIES
Also known as Saudi Kayan Petro. Saudi Kayan
Price SR13.2 Saudi Kayan Petrochemical Company (Kayan) was established by SABIC (35% Pricing / Valuation as on May 27, 2009 stake) and Al Kayan Petrochemical (20%) in 2007 for setting up a petrochemical
Mkt cap SR19.7bn ($5,267.0mn) complex, worth about SR38bn, in Jubail Industrial City. The plant has annual Sh. outstanding 1,500.0mn installed capacity of approximately 6mn tonnes of petrochemical products.
Key statistics Company financials
52 week range H/L (SR) 27.3/8.7 YoY CAGR(%) 2007# 2008* (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 0 0 - - 3m 103.74 27.70 EBITDA SRmn (100) 0 - - 12m 111.80 29.85 Net Income SRmn 323 494 - - Raw Beta 6m 2yr Assets SRmn 15,714 22,402 - - 1.09 1.11 Equity SRmn 15,323 15,494 - - Total Debt SRmn 0 5,815 - - Reuters 2350.SE Cash & Equiv SRmn 10,765 3,522 - - Bloomberg KAYAN AB EBITDA Mgn % - - - - Price perform (%) 1M 3M 12M Net Mgn % - - - - Absolute (%) 19 30 (48) ROE % - - - - Market (%) 6 32 (39) ROA % - - - - Sector (%) 27 59 (52) Div Payout % - - - - Website: www saudikayan.com EPS SR 0.22 0.33 - -
BVPS SR 10.2 10.3 - - Valuation multiples Source: Company, NCBC Research * 2008 figures represents the financial performance for 19 months period ending Dec 31, 2008 #2007 figures represents the financial performance for 6 months period ending Dec 31, 2007. 2006 2007 2008 P/E (x) NA NM NM Segment-wise business analysis P/B (x) NA 2.5 0.9 P/Sales (x) NA NM N/M Product segment 2008 Geographic 2008 Div yield (%) NA NM NM %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%) TASI (free float weight) 1.89 MSCI Saudi (domestic – mid cap) 4.16
Source: Company, NCBC Research
Free float (%) • Business brief: The complex is believed to be the world's largest integrated Free float 42.81 petrochemical complex, involving manufacturing of specialized chemicals such as Relative share price perf. polycarbonate, bisphenol A, acetone and ethanolamines apart from ethylene, 11, 0 0 0 30 polyethylene, propylene and ethylene glycols. Production is expected to begin by late 9,000 20 2010. The engineering, procurement & construction work is 71% complete by 1Q-09. 7,000 10 5,000 • Financials: Since Kayan is yet to start operations, the company has limited financial 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 history. The company reported a non-operational profit (from investments) of
TASI Kayan (RHS) SR494.1mn for 19 months period ending Dec 31, 2008.
• Recent developments: Kayan declared its 1Q-09 results on April 15, 2009. It Top 5 shareholders (%) recorded a net loss of SR6.3mn in 1Q-09 compared to a non-operational profit of Saudi Basic Industries Corporation 35.0 Kayan Petrochemical Company 20.0 SR95.6mn in 1Q-08. The Board of Directors appointed Mr. Taha Bin Abdullah Al Kuwaiz in place of Mr. Ahmed Bin Omar Abdullatif to the board on March 3, 2009. In December 2008, Kayan signed an USD533mn financing contract with Saudi Industrial Development Fund for the construction of its petrochemical complex in Jubail. Saudi Source: NCBC Research Basic Industries (SABIC) has also said that it would provide help in case of any gap in
funding for this project.
JUNE 2009 SAUDI KAYAN PETROCHEMICAL 126
PETROCHEMICAL INDUSTRIES
Also known as National Industrial NIC, Tasnee Price SR21.7 National Industrialization Company (Tasnee) was established in Riyadh in 1985 to Pricing / Valuation as on May 27, 2009 support the Kingdom’s industrial. In 2007, Tasnee acquired LyondellBasell’s
Mkt cap SR10.0bn ($2,669.4mn) worldwide titanium business and in 2008, it purchased Australia's Bemax Sh. outstanding 460.7mn Resources Ltd. and International Titanium Powder (ITP).
Key statistics Company financials
52 week range H/L (SR) 42.8/10.9 YoY CAGR(%) 2006* 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 3,241 7,227 10,037 38.9 - 3m 20.75 5.54 EBITDA SRmn 1,183 1,538 1,756 14.2 - 12m 27.39 7.31 Net Income SRmn 693 661 601 (9.1) - Raw Beta 6m 3yr Assets SRmn 10,357 24,237 30,423 25.5 - 1.29 1.41 Equity SRmn 5,567 5,939 7,318 23.2 - Total Debt SRmn 2,568 12,175 16,103 32.3 - Reuters 2060.SE Cash & Equiv SRmn 1,401 2,230 3,614 62.1 - Bloomberg NIC AB EBITDA Mgn % 36.5 21.3 17.5 - - Price perform (%) 1M 3M 12M Net Mgn % 21.4 9.1 6.0 - - Absolute (%) 42 68 (45) ROE % - 11.5 9.1 - - Market (%) 6 32 (39) ROA % - 3.8 2.2 - - Sector (%) 27 59 (52) Div Payout % 33.7 52.9 68.0 - - Website: www nic.com.sa EPS SR 3.0 1.89 1.47 N/M -
BVPS SR 23.9 17.0 15.9 N/M - Valuation multiples Source: Company, NCBC Research * 2006 figures represents the financial performance for 9 months period ending Dec 31, 2006.
2006 2007 2008 P/E (x) NM 26.4 10.0 Segment-wise business analysis P/B (x) 2.1 2.9 0.8 Product segment 2008 Geographic 2007 P/Sales (x) NM 2.4 0.6 Div yield (%) NM 2.0 6.8 %Rev % Net Inc Breakdown %Rev % Net Inc Industrial 75.6 N/A Europe 27 N/A Weightage (%) Petrochemical 33.0 N/A GCC 25 N/A Head Office and others 2.6 N/A Asia 21 N/A TASI (free float weight) 1.76 Adjustment (11.2) N/A America 19 N/A MSCI Saudi (domestic – large cap) 4.18 Others 8 N/A Source: Company NCBC Research Free float (%) Free float 78.58 • Business brief: Tasnee enjoys global presence with Europe contributing 27%, GCC - 25%, Asia - 21%, America - 19%, and Others - 8% to its 2007 revenues. Through its Relative share price perf. affiliates, TASNEE offer a wide range of products including polypropylene, titanium 11, 0 0 0 50 9,000 40 dioxide, automotive batteries, polycarbonate sheets, and carton packaging. The 30 7,000 20 company’s industrial services unit provides services such as waste management and 5,000 10 quality inspection. In 2006, TASNEE, in a JV with Sahara Olefins and Basell, formed 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 Saudi Ethylene and Polyethylene Co. (SEPC) with a capacity of 1mn tons per annum TASI NIC (RHS) (TPA) ethylene cracker, and 400,000 TPA of low and high density polyethylene each.
• Financials: Revenues grew 38.9% y-o-y to SR10,037.1mn in 2008. However, the net Top 5 shareholders (%) income declined 9.1% y-o-y to SR600.9mn in 2008 due to an increase in the cost of Al Sha'er Trade, Industries and 12.3 Construction goods sold, operating expenses as well as financial expenses. Gulf Investment Corporation 7.9 • Recent developments: Tasnee reported a loss of SR25.8mn in 1Q-09 compared to Kingdom Holding Company 6.2 Al Olayan Saudi Investment Co 6.1 a profit of SR148.0mn a year ago. SEPC completed experimental operations at its Swicorp Co. 5.8 ethylene complex in March 2009 and would be followed by commercial production Source: NCBC Research shortly. In October 2008, Cristal, Tasnee’s subsidiary, received the U.S. authority’s
approval for acquisition of ITP for SR412.5mn.
JUNE 2009 NATIONAL INDUSTRIALIZATION 127
PETROCHEMICAL INDUSTRIES
Also known as Saudi Industrial Invt. SIIG Price SR17.1 Saudi Industrial Investment Group (SIIG) was established in 1996 in Riyadh. The Pricing / Valuation as on May 27, 2009 company primarily focuses on investment opportunities in the Kingdom’s
Mkt cap SR7.7bn ($2,054.7mn) petrochemical sector. SIIG has entered into a joint venture with Chevron Phillips. It Sh. outstanding 450.0mn operates through two subsidiaries - Saudi Chevron Phillips and Jubail Chevron Phillips.
Key statistics Company financials
52 week range H/L (SR) 43.3/9.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,159 1,574 1,459 2,139 46.6 22.7 3m 17.69 4.72 EBITDA SRmn 466 618 474 168 (64.6) (28.8) 12m 39.68 10.60 Net Income SRmn 415 587 437 49 (88.9) (51.0) Raw Beta 6m 3yr Assets SRmn 3,201 4,421 4,964 8,646 74.2 39.3 1.15 1.17 Equity SRmn 2,327 2,913 3,126 5,197 66.3 30.7 Total Debt SRmn 629 1,091 1,372 2,731 99.1 63.1 Reuters 2250.SE Cash & Equiv SRmn 469 603 749 2,703 260.9 79.3 Bloomberg SIIG AB EBITDA Mgn % 40.2 39.3 32.5 7.9 - - Price perform (%) 1M 3M 12M Net Mgn % 35.8 37.3 30.0 2.3 - - Absolute (%) 20 65 (54) ROE % 19.6 22.4 14.5 1.2 - - Market (%) 6 32 (39) ROA % 15.8 15.4 9.3 0.7 - - Sector (%) 27 59 (52) Div Payout % - 38.3 25.7 0.0 - - Website: www.siig.com.sa EPS SR 11.5 2.6 1.9 0.11 N/M N/M
BVPS SR 64.5 12.9 13.9 11.5 N/M N/M Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 13.6 34.6 92.7 P/B (x) 2.7 4.8 0.9 Product segment 2008 Geographic 2008 P/Sales (x) 5.1 10.4 2.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.8 0.7 0.0 Industrial Development 100.0 Saudi Arabia 100.0
Weightage (%) TASI (free float weight) 1.52 Source: Company, NCBC Research
MSCI Saudi (domestic) 11.81 • Business brief: Saudi Chevron Phillips has an installed capacity of 1.2mn metric
Free float (%) tonnes/year (MTA) and produces benzene, cyclohexane and motor gas. Jubail Free float 88.53 Chevron Phillips commenced operations in 2H-08. The facility produces styrene, propylene and motor gas. In 2007, SIIG entered into a third joint venture (JV) with Relative share price perf. National Chevron Phillips (Chevron) to manufacture adipic acid and nylon. Under this 11, 0 0 0 50 9,000 40 JV, both companies are setting up SR18.0bn petrochemical complex, which is 30 7,000 scheduled to commence operations by 2011. 20 5,000 10 3,000 - • Financials: In 2008, sales grew 46.6% y-o-y to SR2,139.0mn. However, net profit M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 declined 88.9% y-o-y to SR48.8mn due to fall in petrochemical prices coupled with an TASI SIIG (RHS) increase in the cost of goods sold, operating expenses and financial expenses.
Consequently, net margin contracted to 2.3% in 2008 from 30.0% in 2007. Top 5 shareholders (%) Public Pension Authority 10.6 • Recent developments: According to SIIG’s estimates, the company has incurred a Ali Abdullah Ibrahim Al Jufaly 6.3 loss of SR38.7mn in the first four months of 2009 compared to a net profit of SR193.0mn in the same period a year ago. In 1Q-09, SIIG reported a loss of
SR50.5mn against a profit of SR137.4mn in 1Q-08. In December 2008, SIIG signed
an agreement for SR3bn loan from the public Investment Fund for its third project. In Source: NCBC Research January 2009, the company discontinued operations for 25 days at its Saudi Chevron Phillips (joint venture) facility due to maintenance purposes.
JUNE 2009 SAUDI INDUSTRIAL INVESTMENT GROUP 128
PETROCHEMICAL INDUSTRIES
Also known as Sipchem SIPCHEM
Price SR20.8 Saudi International Petrochemical Company (Sipchem), established in 1999, was the Pricing / Valuation as on May 27, 2009 first to set-up methanol and butanediol plants in KSA. The company invests in
Mkt cap SR6.9bn ($1,851.4mn) petrochemical and chemical businesses and currently operates through its 2 Sh. outstanding 333.3mn affiliates – International Methanol Co. (IMC) and International Diol Co. (IDC).
Key statistics Company financials
52 week range H/L (SR) 46.5/12.7 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 726 1,334 1,528 1,709 11.8 33.0 3m 28.83 7.70 EBITDA SRmn 539 956 1,091 1,151 5.5 28.7 12m 35.99 9.61 Net Income SRmn 325 494 594 537 (9.6) 18.2 Raw Beta 6m 2yr Assets SRmn 4,428 5,262 7,750 10,833 39.8 34.7 1.07 1.13 Equity SRmn 1,912 2,406 2,997 4,965 65.7 37.5 Total Debt SRmn 1,918 1,813 2,623 3,726 42.0 24.8 Reuters 2310.SE Cash & Equiv SRmn 1,164 1,507 1,562 2,581 65.2 30.4 Bloomberg SIPCHEM AB EBITDA Mgn % 74.3 71.7 71.4 67.4 - - Price perform (%) 1M 3M 12M Net Mgn % 44.8 37.0 38.9 31.4 - - Absolute (%) 17 32 (51) ROE % 24.5 22.9 22.0 13.5 - - Market (%) 6 32 (39) ROA % 9.2 10.2 9.1 5.8 - - Sector (%) 27 59 (52) Div Payout % - - 33.7 60.2 - - Website: www sipchem com EPS SR 10.83 3.29 2.97 1.66 N/M N/M
BVPS SR 63.7 16.0 15.0 14.9 N/M N/M Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 13.4 20.9 9.6 P/B (x) 2.7 4.1 1.0 Product segment 2008 Geographic 2007 P/Sales (x) 4.9 8.1 3.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 1.6 6.3 Petrochemicals 100.0 Asia 57
Europe 27 Weightage (%) Middle East 15 TASI (free float weight) 1.27 US 1 MSCI Saudi (domestic – mid cap) 4.67 Source: Company, NCBC Research
• Business brief: Sipchem, through its subsidiaries, has a wide geographical presence Free float (%) Free float 82.00 with Asia accounting 57%, Europe-27%, Middle East-15% and US-1% of total sales. IMC produces close to 1mn tpa of methanol. IDC produces 75,000 tpa of butanediol. Relative share price perf. Sipchem is constructing an acetyl complex comprising of a carbon monoxide plant, 11, 0 0 0 50 an acetic acid unit and a vinyl acetate monomer facility. 9,000 40 30 7,000 20 • Financials: Sipchem’s revenues increased 11.8% y-o-y to SR1,708.6mn while net 5,000 10 income plunged 9.6% y-o-y to SR536.8mn in 2008 due to fall in demand and price 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 realizations during 4Q08. Net margin contracted 746 bps y-o-y to 31.4% in 2008.
TASI Sipchem (RHS) • Recent developments: Sipchem’s net profit fell 87% y-o-y to SR29.2mn in 1Q-09 due to demand retreat and fall in prices. In May 2009, the company signed a contract with Top 5 shareholders (%) Zamil Group Holding Company 10.2 Saudi Basic Industries Cooperation (SABIC), under which the latter will provide National Manufacturing Holding Co. 8.3 ethylene to Sipchem while it will provide carbon monoxide to SABIC. Sipchem plans to Public Pension Agency 7.7 set up two plants (polyvinyl acetate and ethylene vinyl acetate) in Jubail at an initial cost Al Olayan Financial Company 6.3 of SR3bn. In line with this, Sipchem entered into an agreement with ExxonMobil to use
latter’s technology for the production of ethylene vinyl acetate. In February 2009, Source: NCBC Research Sipchem secured loan of SR1.35bn from Saudi Public Investment fund for construction
of the Acetyl complex in Jubail industrial city, which is expected to start in mid-2009.
JUNE 2009 SAUDI INTERNATIONAL PETROCHEMICAL COMPANY 129
PETROCHEMICAL INDUSTRIES
Also known as Rabigh Refining Petro Rabigh
Price SR29.0 Rabigh Refining and Petrochemical Co. (Petro Rabigh), established in 2005 at Pricing / Valuation as on May 27, 2009 Rabigh is a joint venture between Saudi Aramco and Sumitomo Chemical (a Japan-
Mkt cap SR25.4bn ($6,783.4mn) based firm). The USD10bn project, has an annual production capacity of 18.4mn Sh. outstanding 876.0mn tonnes of refined petroleum products and 2.4mn tonnes of petrochemical products.
Key statistics Company financials
52 week range H/L (SR) 64.5/13.8 YoY CAGR(%) 2006* 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn - - 6,543 - - 3m 126.13 33.68 EBITDA SRmn (260) (423) (1,029) N/M - 12m 206.69 55.19 Net Income SRmn (175) (423) (1,256) N/M - Raw Beta 6m 1yr Assets SRmn 11,171 26,961 47,911 77.7 - 1.71 1.24 Equity SRmn 2,450 5,953 9,264 55.6 - Total Debt SRmn 6,769 19,444 31,569 62.4 - Reuters 2380.SE Cash & Equiv SRmn 2,080 186 1,534 725.0 - Bloomberg PETROR A EBITDA Mgn % N/M N/M (15.7) - - Price perform (%) 1M 3M 12M Net Mgn % N/M N/M (19.2) - - Absolute (%) 16 64 (48) ROE % (7.1) (10.1) (16.5) - - Market (%) 6 32 (39) ROA % (1.6) (2.2) (3.4) - - Sector (%) 27 59 (52) Div Payout % - - - - - Website: www petrorabigh com EPS SR (0.2) (0.7) (1.5) N/M -
BVPS SR 2.8 6.8 10.6 55.6 - Valuation multiples Source: Company, NCBC Research * 2006 figures are for 16 months period ending December 31, 2006
2006 2007 2008 P/E (x) N/A N/A N/M Segment-wise business analysis P/B (x) N/A N/A 1.5 Product segment 2008 Geographic 2008 P/Sales (x) N/A N/A 2.1 Div yield (%) N/A N/A 0.0 %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%) Source: Company, NCBC Research TASI (free float weight) 1.05 MSCI Saudi (domestic – mid cap) N/A • Business brief: Aramco is expected to supply 400,000 barrels of crude oil, 95mn
cubic feet (mcf) of ethane and about 15,000 barrels of butane on a long-term fixed- Free float (%) price basis to Petro Rabigh. Sumitomo provides technological and marketing Free float 18.55 expertise. The plant is equipped with sophisticated olefin and ethane cracker. The Relative share price perf. company is targeting Europe and Asia (mainly China) for exports of its end products. 11, 0 0 0 80 9,000 60 • Financials: The Company recorded SR6,543.3mn as revenues in 2008. However, it 7,000 40 registered SR1,256.2mn loss in its bottom line compared to a loss of SR422.6mn in 5,000 20 2007. This is due to the decline in demand and prices for the company’s products in 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 4Q-08 and expenses related to its under-construction petrochemical facility.
TASI Petro Rabigh (RHS) • Recent developments: Petro Rabigh reported a net loss of SR28.7mn in 1Q-09
compared to a net loss of SR82.1mn a year ago. In May 2009, the company made its Top 5 shareholders (%) first export shipment of 19,200 metric tons of monoethylene glycol to China. Earlier in Aramco 37.5 Sumitomo Chemical Company 37.5 April 2009, the company had announced that its Rabigh complex is in the final stages for start up and the ethane cracker and refining facilities have started operations. Moreover, Saudi Aramco and Sumitomo Chemical have signed a MoU for doing a feasibility study for the expansion of this facility, under which an additional 30 mcf/day Source: NCBC Research of ethane and 3mn tons/annum of naphtha will be used. The contract for the
engineering work is likely to be awarded in June 2009.
JUNE 2009 RABIGH REFINING 130
PETROCHEMICAL INDUSTRIES
Also known as Sahara Petrochemical SPCO Price SR24.5 Sahara Petrochemical Company (SPC) was established in 2004 by Al Zamil Group. Pricing / Valuation as on May 27, 2009 SPC develops, owns and operates production facilities through joint ventures with
Mkt cap SR4.6bn ($1,226.6mn) other companies in the petrochemical sector. SPC has been working on two projects Sh. outstanding 187.5mn – Al Waha Petrochemical Company and Saudi Ethylene and Polyethylene Company.
Key statistics Company financials
52 week range H/L (SR) 49.5/10.4 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn ------3m 15.54 4.15 EBITDA SRmn (6) (14) (12) (39) NM NM 12m 19.98 5.33 Net Income SRmn 319 165 (5) (41) NM NM Raw Beta 6m 3yr Assets SRmn 2,305 2,479 3,048 4,721 54.9 27.0 1.24 1.25 Equity SRmn 2,260 1,983 1,950 1,769 (9.3) (7.8) Total Debt SRmn 0 0 542 2,222 310.3 - Reuters 2260.SE Cash & Equiv SRmn 2,003 812 81 453 458.2 (39.1) Bloomberg SPC AB EBITDA Mgn % N/M N/M N/M N/M - - Price perform (%) 1M 3M 12M Net Mgn % N/M N/M N/M N/M - - Absolute (%) 57 94 (44) ROE % 16.6 7.8 (0.3) (2.2) - - Market (%) 6 32 (39) ROA % 16.5 6.9 (0.2) (1.1) - - Sector (%) 27 59 (52) Div Payout % ------Website: www saharapcc.com EPS SR 10.6 1.1 (0.0) (0.2) NM NM
BVPS SR 75.3 13.2 12.5 9.4 NM NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 27.1 N/M N/M P/B (x) 2.2 4.2 1.3 Product segment 2008 Geographic 2008 P/Sales (x) N/M N/M N/M %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.0 0.0 Basic Chemical Manufacturing 100.0 Saudi Arabia 100.0
Weightage (%) TASI (free float weight) 0.92 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) 5.41 • Business brief: Al Waha has a production capacity of 460,000 tonnes per annum
Free float (%) (tpa) of propylene, which would serve as an input for production of 450,000 tpa of Free float 90.00 polypropylene. Saudi Ethylene and Polyethylene Co. (SEPC) has a production capacity of 1mn tpa ethylene cracker, and 800,000 tpa of polyethylene. Trial Relative share price perf. operations at SEPC facility completed in March 2009 and would be followed by 11, 0 0 0 60 9,000 commercial production shortly. 40 7,000 20 • Financials: SPC’s investment income declined 79.8% y-o-y to SR3.4mn in 2008 5,000 3,000 - while the operating expenses increased 2.3 times y-o-y to SR41.1mn. Consequently, M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 the company incurred a net loss of SR41.1mn in 2008 as against SR5.1mn loss in TASI SPC (RHS) 2007.
Top 5 shareholders (%) • Recent developments: In 1Q-09, SPC recorded a loss of SR14.2mn compared to a Al Zamil Group Holding Company 7.5 loss of SR6.7mn a year ago. In May 2009, the company appointed Mr. Esam Himdy as managing director and Mr. Saleh Bahamdan as chief executive officer. On May 11, 2009, Al Waha started trial operations at its petrochemical facility. SEPC completed
experimental operations at its ethylene complex in March 2009. In November 2008,
Tasnee and Sahara Olefins Co. (SPC’s subsidiary) signed a contract with Rohm and Source: NCBC Research Haas (USA) for the establishment of an acrylic acid plant with annual production capacity of 250,000 tonnes. The plant is expected to come on-stream in 2011.
JUNE 2009 SAHARA PETROCHEMICAL COMPANY 131
PETROCHEMICAL INDUSTRIES
Also known as Yanbu National YANSAB Price SR27.0 Yanbu National Petrochemicals Company (Yansab), with the majority stake owned Pricing / Valuation as on May 27, 2009 by Saudi Basic Industries Corporation (55%) was established in 2006 to set-up a
Mkt cap SR15.2bn ($4,055.4mn) four mn tonnes/year petrochemical complex in the Yanbu industrial city. Sh. outstanding 562.5mn
Key statistics Company financials
52 week range H/L (SR) 64.5/12.5 YoY CAGR(%) 2006# 2007* 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn - - - - - 3m 41.66 11.12 EBITDA SRmn (49) (83) (26) N/M - 12m 54.27 14.49 Net Income SRmn 140 110 (26) N/M - Raw Beta 6m 3yr Assets SRmn 7,082 15,309 18,677 22.0 - 1.39 1.20 Equity SRmn 5,753 5,723 5,697 (0.4) - Total Debt SRmn - 8,166 11,797 44.5 - Reuters 2290.SE Cash & Equiv SRmn 822 1,694 1,033 (39.0) - Bloomberg YANSAB AB EBITDA Mgn % - - - - - Price perform (%) 1M 3M 12M Net Mgn % - - - - - Absolute (%) 28 66 (55) ROE % 2.4 N/M (0.4) - - Market (%) 6 32 (39) ROA % 2.0 N/M (0.2) - - Sector (%) 27 59 (52) Div Payout % - - - - - Website: www.yansab com.sa EPS SR 0.2 0.2 (0.0) N/M -
BVPS SR 10.2 10.2 10.1 (0.4) - Valuation multiples Source: Company, NCBC Research * 2007 figures represents the financial performance for 23 months period ending Dec 31, 2007 # 2006 figures represents the financial performance for 11 months period ending Dec 31, 2006 2006 2007 2008 P/E (x) 99.2 N/M N/M Segment-wise business analysis P/B (x) 2.4 5.2 1.5 P/Sales (x) N/M N/M N/M Product segment 2008 Geographic 2008 Div yield (%) 0.0 0.0 0.0 %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%) TASI (free float weight) 0.90 Source: Company, NCBC Research
MSCI Saudi (domestic – large cap) 2.89 • Business brief: Once fully operational the approximately SR18bn complex is
Free float (%) expected to produce ethylene (1,300 thousand tonnes/year—KTA), Propylene (400 Free float 26.51 KTA), Polypropylene (400 KTA), Polyethylene—low-density and high-density—(400 KTA each), Mono, Di and Tri Ethylene Glycol (770 KTA, total), Benzene (170 KTA), Relative share price perf. Butene -1 (65 KTA), Butene -2 (50 KTA), Methyl Tertiary Butyl Ether (20 KTA) and 11, 0 0 0 80 9,000 60 Benzene Toluene Xylene (70 KTA). Operations are expected to commence in 2Q-09, 7,000 40 with pre-commissioning of several units under-progress. 5,000 20 3,000 - • Financials: As Yansab is in pre-operating stage for the fiscal period under M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 consideration, all revenues and expenses are non-operational in nature. The TASI YANSAB (RHS) company reported net loss of SR25.6mn in 2008 while it reported a net profit of
SR109.9mn for the 23 months period ending December 31, 2007. Although the Top 5 shareholders (%) operating expenses declined, the absence of any non-operating income led to the fall SABIC 51.0 General Organization for Social 9.2 in bottom line in 2008. Insurance (GOSI) • Recent developments: Yansab’s net loss widened to SR8.2mn in 1Q-09 compared
to SR6.6mn a year ago due to higher corporate expenses. The company expects operations at its petrochemical complex to start in 2Q-09, according to an Source: NCBC Research announcement on March 11, 2009. In January 2009, the company informed that the construction work has reached final phase, with 93% completion by 2008 end.
JUNE 2009 YANBU NATIONAL 132
PETROCHEMICAL INDUSTRIES
Also known as Advanced Polyprop. APPC
Price SR24.4 Advanced Polypropylene Company (APPC), based in Dammam, was established in Pricing / Valuation as on May 27, 2009 2005 to develop a SR3bn integrated propane dehydrogenation and polypropylene
Mkt cap SR3.4bn ($919.2mn) complex in Jubail Industrial City. This facility having annual production capacity to Sh. outstanding 141.4mn produce 450,000tonnes of polypropylene commenced commercial production in 2008.
Key statistics Company financials
52 week range H/L (SR) 62.5/12.2 YoY CAGR(%) 2006* 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn - - 1,459 - - 3m 43.03 11.49 EBITDA SRmn 2 (1) 366 N/M - 12m 56.63 15.12 Net Income SRmn 2 2 210 9,615.5 - Raw Beta 6m 2yr Assets SRmn 1,815 2,545 3,507 37.8 - 1.41 1.13 Equity SRmn 1,415 1,416 1,617 14.2 - Total Debt SRmn 272 1,070 1,713 60.0 - Reuters 2330.SE Cash & Equiv SRmn 361 89 216 143.8 - Bloomberg APPC AB EBITDA Mgn % N/M N/M 25.1 - - Price perform (%) 1M 3M 12M Net Mgn % N/M N/M 14.4 - - Absolute (%) 6 65 (50) ROE % 0.1 0.2 13.9 - - Market (%) 6 32 (39) ROA % 0.1 0.1 6.9 - - Sector (%) 27 59 (52) Div Payout % - - - - - Website: www appc.com.sa EPS SR 0.0 0.0 1.5 N/M -
BVPS SR 10.0 10.0 11.4 14.2 - Valuation multiples Source: Company, NCBC Research; 2006 figures are for 15 months period ending December 31, 2006
2006 2007 2008 Segment-wise business analysis P/E (x) N/M N/M 10.4 P/B (x) N/M 4.8 1.3 Product segment 2008 Geographic 2008 P/Sales (x) N/M N/M 1.5 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/M 0.0 0.0
Weightage (%) TASI (free float weight) 0.49 MSCI Saudi (domestic – mid cap) 4.52 Source: Company, NCBC Research
• Business brief: APPC has an annual production capacity of 450,000 tonnes of Free float (%) Free float 63.11 polypropylene. Polypropylene is used in several applications such as the manufacture of fabrics, moldings, pipes and furniture. The company has appointed Vinmar Relative share price perf. International (Houston), Mitsubishi Corp. and Domo (Gent-Zwijnaarde, Belgium) to 11, 0 0 0 80 offtake the output from this complex. Major part of the production would be shipped 9,000 60 7,000 40 via the ports of Dammam, Jeddah, and Al Jubail. 5,000 20 • Financials: APPC commenced commercial operations in August 2008. The company 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 recorded revenues of SR1,459.2mn in 2008. It registered a net profit of SR210.1mn TASI APPC (RHS) in 2008 compared to a non-operational profit of SR2.2mn in 2007.
• Recent developments: APPC declared its 1Q-09 results on April 8, 2009. APPC Top 5 shareholders (%) recorded a net income of SR42.9mn in 1Q-09 compared to a loss of SR48,718 in 1Q- Dar Chemicals 15.9 Islamic Development Bank Fund 9.0 08. APPC’s general meeting on March 02, 2009 approved the change in company's National Polypropylene Company 7.9 name to Advanced Petrochemicals Co. In August 2008, APPC started commercial [NPPC] production at its new propylene and polypropylene plants with a production capacity
of 450,000 tonnes per year of polypropylene.
Source: NCBC Research
JUNE 2009 ADVANCED POLYPROPYLENE 133
PETROCHEMICAL INDUSTRIES
Also known as Nama Chemicals Co NAMA Price SR11.7 Nama Chemicals Company (NAMA) was established in 1992. The company Pricing / Valuation as on May 27, 2009 develops, owns, and operates industrial projects within the chemical and
Mkt cap SR1.5bn ($399.8mn) petrochemical sectors. NAMA functions via its affiliates - Arabian Alkali Company Sh. outstanding 128.5mn (55,000mta capacity) and Jubail Chemical Industries Company (60,000mta capacity).
Key statistics Company financials
52 week range H/L (SR) 28.8/7.4 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 293 395 513 622 21.2 28.6 3m 63.41 16.93 EBITDA SRmn 17 40 50 27 (46.8) 17.1 12m 57.94 15.47 Net Income SRmn 30 22 34 (68) (298.0) (231.4) Raw Beta 6m 3yr Assets SRmn 1,087 1,115 1,751 2,545 45.4 32.8 1.23 1.27 Equity SRmn 686 784 922 1,557 69.0 31.4 Total Debt SRmn 193 254 696 800 15.0 60.6 Reuters 2210.SE Cash & Equiv SRmn 172 94 82 487 497.9 41.5 Bloomberg NAMA AB EBITDA Mgn % 5.7 10.0 9.8 4.3 - - Price perform (%) 1M 3M 12M Net Mgn % 10.2 5.6 6.6 (10.9) - - Absolute (%) 26 40 (53) ROE % 4.4 3.0 4.0 (5.4) - - Market (%) 6 32 (39) ROA % 2.9 2.0 2.4 (3.1) - - Sector (%) 27 59 (52) Div Payout % ------Website: www nama com sa EPS SR 2.3 0.3 0.4 (0.7) N/M N/M
BVPS SR 52.8 11.6 12.0 12.1 N/M N/M Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 82.7 72.3 N/M P/B (x) 2.3 2.7 0.7 Product segment 2008 Geographic 2008 P/Sales (x) 4.6 4.8 1.8 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.0 0.0 Epoxy, Caustic Soda 100.0
Weightage (%) TASI (free float weight) 0.33 MSCI Saudi (domestic) N/A Source: Company, NCBC Research
• Business brief: Arabian Alkali is one of the largest caustic soda producers in the Free float (%) Free float 100.00 Middle East. JANA produces epoxy resins and markets them under the brand names of RAZEEN and ARALDITE. NAMA is currently setting up the Hassad Petrochemicals Relative share price perf. Company that will manufacture different types of chemicals to supply both the 11, 0 0 0 30 subsidiaries. 9,000 20 7,000 • Financials: In 2008, the company‘s sales increased 21.2% y-o-y to SR621.8mn. 10 5,000 However, the company reported a net loss of SR67.5mn in 2008. This was due to an 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 increase in the cost of goods sold and higher selling, general and administrative TASI NAMA (RHS) expenses.
• Recent developments: NAMA declared its 1Q-09 result on April 21, 2009, reporting Top 5 shareholders (%) Ahmed Hamad Al Gosa bi Co. 7.4 a loss of SR32.4mn in 1Q-09 against a net profit of SR12.3mn a year earlier. On March 4, 2009, the company announced that the experimental operations at its SR1bn Hassad plant would complete soon. In January 2009, NAMA’s subsidiary, JANA received a SR210mn loan from the Saudi Industrial Development Fund. The
loan amount will be used for the expansion of the epoxy factory in order to double its Source: NCBC Research production capacity to 120,000 tons per annum by end of 2011. In November 2008,
the company hiked its capital to SR1,285.2mn from SR765mn through a rights issue.
JUNE 2009 NAMA CHEMICALS COMPANY 134
PETROCHEMICAL INDUSTRIES
Also known as Alujain Corporation Alujain
Price SR19.6 Alujain Corporation (ALCO), an industrial investment firm, was established in 1991 Pricing / Valuation as on May 27, 2009 and promoted by Xenel Industries (one of the oldest conglomerates in the
Mkt cap SR1.4bn ($362.2mn) Kingdom). The company’s investments include 57.4% stake in National Sh. outstanding 69.2mn Petrochemical Co. (NatPet) and a 93.1% stake in Arab Pesticide Co. (MOBEED).
Key statistics Company financials
52 week range H/L (SR) 51.5/9.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn ------3m 20.97 5.60 EBITDA SRmn (4) (7) (57) (59) N/M N/M 12m 21.66 5.78 Net Income SRmn 3 0 (40) (65) N/M (367.5) Raw Beta 6m 3yr Assets SRmn 702 713 2,747 3,229 17.5 66.1 1.33 1.35 Equity SRmn 691 703 651 515 (20.8) (9.2) Total Debt SRmn - - 1,612 2,123 31.7 - Reuters 2170.SE Cash & Equiv SRmn 110 64 226 150 (33.6) 74.1 Bloomberg ALCO AB EBITDA Mgn % N/M N/M N/M N/M - - Price perform (%) 1M 3M 12M Net Mgn % N/M N/M N/M N/M - - Absolute (%) 26 93 (60) ROE % 0.5 0.1 (5.9) (11.2) - - Market (%) 6 32 (39) ROA % 0.5 0.0 (2.3) (2.2) - - Sector (%) 27 59 (52) Div Payout % ------Website: www alujaincorporation.com EPS SR 0.2 0.0 (0.6) (0.9) N/M N/M
BVPS SR 49.9 20.4 9.4 7.5 N/M N/M Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/M N/M N/M P/B (x) 2.1 5.1 1.5 Product segment 2008 Geographic 2008 P/Sales (x) N/M N/M N/M %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.0 0.0 Industrial Development 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.26 Source: NCBC Research
MSCI Saudi (domestic – small cap) 4.42 • Business brief: ALCO predominantly invests in the Saudi petrochemical, energy,
Free float (%) mining and metals sector. The company transferred its Alfasel propylene production Free float 85.09 facility to the Teldene Polypropylene project, promoted by associate NatPet, in May 2006. NatPet owns a SR2.3bn propylene-polypropylene plant, with 400,000 tonnes Relative share price perf. per annum (TPA) capacity. The company also signed contracts with SABIC and 11, 0 0 0 60 9,000 Noble Group for the offtake of production. 40 7,000 20 • Financials: Since ALCO was not operational in 2008, the company does not report 5,000 3,000 - any sales revenues. In 2008, ALCO’s income from other sources declined 51.2% y-o- M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 y to SR11.0mn. This coupled with an increase in the operating expenses led to a net TASI ALCO (RHS) loss of SR65.1mn in 2008 compared to a loss of SR39.6mn in 2007.
Top 5 shareholders (%) • Recent developments: ALCO declared its 1Q-09 results on April 20, 2009, reporting Safra Company 14.9 a loss of SR10.8mn in 1Q-09 compared to SR13.1mn loss a year ago. In April 2009, Khalid Abdul Rahman Saleh Al Rajhi 9.9 the polypropylene plant owned by NatPet started operations. The plant is currently running at a utilization rate of 73% and is likely to reach full capacity by end of May
2009. In February 2009, ALCO increased its stake in MOBEED to 93.1% from 25%
earlier. The company also signed an agreement with Safra Co. to maintain and Source: NCBC Research operate MOBEED's facilities. The Board of Directors appointed Mr. Maatouk Hasan Ahmad and Mr. Khalid Abdulrazzak Al Nafisi to the board in 2009.
JUNE 2009 ALUJAIN CORPORATION 135
PETROCHEMICAL INDUSTRIES
Also known as Methanol Chemicals Chemanol Price SR13.8 Methanol Chemicals Company (Chemanol), established in 1989, is a manufacturer Pricing / Valuation as on May 27, 2009 of formaldehyde, methanol and derivatives, hexamine, resins and super
Mkt cap SR1.7bn ($442.8mn) plasticizers. The company exports about 83% of its products to more than 50 Sh. outstanding 120.6mn countries including UK, France, Germany, South Africa, USA, Canada, and Japan.
Key statistics Company financials
52 week range H/L (SR) 16.9/9.5 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 312 376 461 571 23.7 22.3 3m 44.94 12.00 EBITDA SRmn 65 72 61 73 19.7 3.7 6m 43.40 11.59 Net Income SRmn 40 45 25 38 54.9 (1.3) Assets SRmn 427 957 1,301 2,640 102.9 83.5 Raw Beta 6m 3yr Equity SRmn 182 653 678 1,390 105.0 97.0 0.96 N/A Total Debt SRmn 180 235 546 1,149 110.3 85.3 Reuters 2001.SE Cash & Equiv SRmn 24 185 73 379 417.1 152.8 Bloomberg CHEMANOL AB EBITDA Mgn % 21.0 19.1 13.2 12.8 - - Net Mgn % 12.7 11.8 5.4 6.7 - - Price perform (%) 1M 3M 6M ROE % 23.8 10.6 3.7 3.7 - - Absolute (%) 11 23 18 ROA % 10.3 6.4 2.2 1.9 - - Market (%) 6 32 19 Div Payout % ------Sector (%) 27 59 40 EPS SR N/A 1.0 0.4 0.5 N/M N/A Website: www chemanol.com BVPS SR N/A 14.5 11.3 11.5 N/M N/A Source: Company, NCBC Research Valuation multiples
2006 2007 2008 Segment-wise business analysis P/E (x) N/A N/A 35.2 Product segment 2008 Geographic 2008 P/B (x) N/A N/A 1.0 P/Sales (x) N/A N/A 2.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A 0.0
Source: Company, NCBC Research Weightage (%) TASI (free float weight) 0.19 • Business brief: Chemanol produces and supplies methanol formaldehyde and its MSCI Saudi (domestic) N/A derivatives for use across different industries such as agricultural, pharmaceutical, paper manufacturing and construction. The company came out with an Initial Public Free float (%) Free float 50.00 Offering (IPO) on the Saudi Stock Exchange in August 2008 in order to finance an expansion plan involving investment of approximately SR2bn. The total production Relative share price perf. capacity of the company is 484,600 tons of methanol formaldehyde, derivatives and 8,000 18 other methanol-based products per year. By 2009, Chemanol expects to have total 7,000 14 6,000 10 installed capacity of 1mn tons. 5,000 6 4,000 • Financials: Chemanol’s revenues grew by 23.7% to SR570.7mn in 2008, while net 3,000 2 Sep-08 Nov-08 Jan-09 M ar-09 M ay-09 income rose 54.9% to SR38.2mn. Hence, the company’s net margin has shown TASI Chemanol (RHS) improvement of 130 basis points y-o-y and stood at 6.7% in 2008. Moreover, the
company’s cash balance increased from SR73.4mn in 2007 to SR379.4mn in 2008; Top 5 shareholders (%) as the company raised capital through issuance of equity shares in August 2008. Abdullah & Abdul Aziz Kanoo Co. 11.2 Zamil Group Holding Co. 11.2 • Recent developments: Chemanol declared its 1Q-09 results on April 12, 2009. Net Mazen Khalifa Al Ahiq Al Nuaimi & 7.5 income declined 37.5% y-o-y to SR5.0mn in 1Q-09. In November 2008, Chemanol Sons announced the appointment of Mr. Khaled Al Rabiah as the company's chief Mohammed Jalal & Sons Co. 5.0 executive officer (CEO). In August 2008, Chemanol announced its IPO of 50% Al Mazrooe Holding Co 5.0
Source: NCBC Research shares, which adds up to 60.3mn shares at the offer price of SR12.0 per share.
JUNE 2009 METHANOL CHEMICALS COMPANY 136
Company Page No. Banking and Financials Saudi Cement 138 Petrochemicals
Yamama Cement 139 Cement
Southern Cement 140 Retail
Qassim Cement 141 Energy and Utilities
Yanbu Cement 142 Agriculture and Food
Eastern Cement 143 Telecom and IT
Arabian Cement 144 Insurance
Tabuk Cement 145 Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transportation
Media and Publishing
Hotels and Tourism
CEMENT
Also known as Saudi Cement SCC Price SR58.5 Saudi Cement Company (SCC) was established in 1955 to produce and trade in Pricing / Valuation as on May 27, 2009 cement products. SCC runs two plants–at Hofuf and Ain Dar– with an annual
Mkt cap SR6.0bn ($1,593.3mn) installed capacity of 6.0mn tonnes of cement at the beginning of 2008. In the same Sh. outstanding 102.0 mn year, the company produced 5.4mn tonnes of cement and 6.4 mn tonnes of clinker.
Key statistics Company financials
52 week range H/L (SR) 129.5/45.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,116 1,200 1,362 1,260 (7.5) 4.1 3m 6.72 1.79 EBITDA SRmn 604 745 789 713 (9.7) 5.7 12m 7.05 1.88 Net Income SRmn 484 638 686 621 (9.5) 8.7 Raw Beta 6m 3yr Assets SRmn 2,211 2,705 3,861 4,540 17.6 27.1 1.09 0. 90 Equity SRmn 1,970 2,422 2,739 2,848 4.0 13.1 Total Debt SRmn - - 695 1,208 73.9 NM Reuters 3030.SE Cash & Equiv SRmn 290 75 272 31 (88.4) (52.3) Bloomberg SACCO AB EBITDA Mgn % 54.1 62.1 58.0 56.6 - - Price perform (%) 1M 3M 12M Net Mgn % 43.4 53.1 50.4 49.3 - - Absolute (%) (18) 17 (54) ROE % 24.2 29.0 26.6 22.2 - - Market (%) 6 32 (39) ROA % 22.8 26.0 20.9 14.8 - - Sector (%) (6) 19 (44) Div Payout % 75.8 57.6 74.3 57.4 - - Website: www saudicement com sa EPS SR 23.7 6.3 6.7 6.1 (9.5) -
BVPS SR 96.6 23.7 26.9 27.9 4.0 - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 15.8 18.9 9.3 P/B (x) 4.1 4.7 2.0 Product segment 2007 Geographic 2007 P/Sales (x) 8.4 9.5 4.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.7 3.9 6.2 Cement Manufacturing 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 1.15 Source: Company NCBC Research
MSCI Saudi (domestic – mid cap) 12.85 • Business brief: SCC has been losing ground in the domestic market. This is
Free float (%) primarily due to the rising competition in Central Saudi Arabia and the company’s Free float 86.42 focus on the export markets. Consequently, SCC is not the largest cement selling company in Saudi Arabia despite being the largest cement producer in the country. In Relative share price perf. 2008, the company’s share in the country’s total production has fallen to 16.3% from 11, 0 0 0 15 0 9,000 17.4% in the previous year. SCC also has a 36% equity stake in United Cement 10 0 7,000 Company, Bahrain, and holds another 33.3% stake in Cement Product Industry Co. 50 5,000 Ltd., which meets the cement packaging requirements of SCC and its partner 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 companies.
TASI Saudi Cement (RHS) • Financials: SCC’s revenues decreased 7.5% y-o-y during 2008 to SR1,259.6 mn.
This could be mainly attributed to the ban on cement exports, implemented in Saudi Top 5 shareholders (%) Arabia during June 2008. EBITDA margin stood at 56.6% in 2008, a 136 basis points General Organization for Social 8.5 decline y-o-y. The company’s net margin has also slid marginally to 49.3% in 2008 Insurance (GOSI) Khaled Abdul Rahman Saleh Al Rajhi 7.9 from 50.4% in the previous fiscal year. Public Pension Authority (PPA) 5.0 • Recent developments: SCC’s Q109 net profit declined 12.3% y-o-y to SR152 mn as
the government had introduced a ban on cement exports to ease supply bottlenecks.
Source: NCBC Research In April 2009, SCC announced the commencement of commercial operations of two new production lines with a combined annual output of 6.6 mn tons.
JUNE 2009 SAUDI CEMENT COMPANY 138
CEMENT
Also known as Yamama Saudi Cem. YSCC Price SR39.3 Yamama Saudi Cement Company (YSCC) was founded in Riyadh in 1961 by Late Pricing / Valuation as on May 27, 2009 Prince Mohammad Bin Saud Al-Kabir. YSCC commenced production with a meager capacity of 0.9mn tonnes pa. However, in 2008, the company’s cement sales stood at Mkt cap SR5.3bn ($1,416.7mn) over 4.0mn tonnes in the domestic market and 0.3mn tonnes in the export market. Sh. outstanding 135.0mn
Key statistics Company financials
52 week range H/L (SR) 76.8/28.1 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 791 950 1,186 1,123 (5.3) 12.4 3m 9.21 2.46 EBITDA SRmn 528 646 826 809 (2.1) 15.3 12m 15.50 4.14 Net Income SRmn 501 601 731 611 (16.5) 6.8 Raw Beta 6m 3yr Assets SRmn 2,706 3,128 3,604 3,589 (0.4) 9.9 0.70 0.89 Equity SRmn 1,576 1,939 2,365 2,841 20.1 21.7 Total Debt SRmn 710 761 581 563 (3.2) (7.5) Reuters 3020.SE Cash & Equiv SRmn 565 260 441 643 45.9 4.4 Bloomberg YACCO AB EBITDA Mgn % 66.8 68.0 69.7 72.0 - - Price perform (%) 1M 3M 12M Net Mgn % 63.3 63.3 61.7 54.4 - - Absolute (%) (5) 20 (48) ROE % 34.3 34.2 34.0 23.5 - - Market (%) 6 32 (39) ROA % 13.6 20.6 21.7 17.0 - - Sector (%) (6) 19 (44) Div Payout % 53.9 44.9 55.4 44.2 - - Website www.yamamacement com sa EPS SR 55.7 4.5 5.4 4.5 (16.5) - BVPS SR 175.2 16.4 17.5 21.0 20.1 - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 17.6 17.4 7.5 P/B (x) 5.5 5.4 1.6 Product segment 2007 Geographic 2007 11.2 10.7 4.1 P/Sales (x) %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.5 3.2 5.9 Cement Production 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 1.04 MSCI Saudi (domestic – mid cap) 11.23 Source: Company, NCBC Research
Free float (%) • Business brief: YSCC’s cement production accounted for 13.3% of the total cement Free float 87.65 production in Saudi Arabia for 2008. This was a moderate decline from 15.4% reported in 2007. The company also holds stake in companies such as Sudani Relative share price perf. Kuwaiti Holding Co (6.67%), Kafaa for Steel Company (6.00%), Industrialization and 11, 0 0 0 80 Energy Services Co (5.62%), and Arabian Shield Cooperative Insurance Co (5.00%). 9,000 60 7,000 40 • Financials: Company’s sales declined 5.3% y-o-y to SR1,122.9 mn. YSCC’s EBITDA 5,000 20 3,000 - margin, which stood at 72.0% in 2008, has witnessed improvement as compared to M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 FY05. However, the net margin has been declining over the past 3 years, and stood
TASI Yamamah Cement (RHS) at 54.4% in 2008.
• Recent developments: In April 2009, YSCC announced a 36% y-o-y fall in Q109 net Top 5 shareholders (%) profit to SR125.9mn mainly due to lower sales volume during the period as well as a Prince Sultan Mohammed Saud 9.7 AlKabeer Al Saud periodic maintenance on some of its main production lines. In August 2008, Yamama General Organization for Social 7.1 Cement announced that it is likely to become a founding partner in Hail Cement Co., Insurance (GOSI) a joint stock company under establishment. In late 2008, the company acquired 5% Public Pension Authority (PPA) 5.0 stake in Hail Cement Company for SR60 mn.
Source: NCBC Research
JUNE 2009 YAMAMA SAUDI CEMENT 139
CEMENT
Also known as Southern Cement SPCC
Price SR60.0 Southern Province Cement Company (SPCC) is one of the top three cement Pricing / Valuation as on May 27, 2009 producers in KSA. Established in 1978, the company operates three production
Mkt cap SR8.4bn ($2,243.0mn) facilities in Jizan, Bisha and Tihama with a combined capacity to produce over 6mn Sh. outstanding 140.0mn tonnes of cement each year. In 2008, SPCC sold nearly 4.9mn tonnes of cement.
Key statistics Company financials
52 week range H/L (SR) 84.5/45.1 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,024 1,026 1,155 1,298 12.4 8.2 3m 4.56 1.22 EBITDA SRmn 690 688 769 864 12.4 7.8 12m 5.93 1.58 Net Income SRmn 615 624 704 791 12.4 8.8 Raw Beta 6m 3yr Assets SRmn 2,230 2,491 2,648 2,749 3.8 7.2 0.40 0.65 Equity SRmn 1,973 2,201 2,345 2,360 0.6 6.2 Total Debt SRmn ------Reuters 3050.SE Cash & Equiv SRmn 678 27 33 64 95.7 (54.5) Bloomberg SOCCO AB EBITDA Mgn % 67.4 67.0 66.6 66.6 - - Price perform (%) 1M 3M 12M Net Mgn % 60.0 60.8 60.9 60.9 - - Absolute (%) (5) 15 (27) ROE % 31.8 29.9 31.0 33.6 - - Market (%) 6 32 (39) ROA % 28.4 26.4 27.4 29.3 - - Sector (%) (6) 19 (44) Div Payout % 387.3 89.7 89.5 88.5 - - Website: www spcc com.sa EPS SR 4.4 4.5 5.0 5.7 12.4 8.8
BVPS SR 14.1 15.7 16.7 16.9 0.6 6.2 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 16.4 17.4 8.2 P/B (x) 4.7 5.2 2.8 Product segment 2007 Geographic 2007 P/Sales (x) 10.0 10.6 5.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 5.5 5.2 10.7 Cement Production 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.85 MSCI Saudi (domestic – mid cap) 7.59 Source: Company, NCBC Research
• Business brief: SPCC has been able to maintain its domestic market share in 2008 Free float (%) Free float 45.37 despite the strengthening competition. In terms of sales volumes, the company held 15.5% share in the domestic cement market, slightly lower than 2007. The company Relative share price perf. holds 5.62% stake in Industrialization and Energy Services Company. 11, 0 0 0 10 0 9,000 80 • Financials: SPCC’s cement sales volumes for FY08 increased by 6.7% which 60 7,000 40 caused 12.4% y-o-y rise in revenues to SR1,297.9 mn. EBITDA margin rose to 66.6% 5,000 20 in 2008, thus remaining at the same level as in 2007. Net margin has remained 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 consistent at almost nearly 61% in the past three fiscal years.
TASI Southern Cement (RHS) • Recent developments: In April 2009, SPCC announced a 15% y-o-y decline in
Q109 net profits to SR200.2mn. Capital Market Authority (CMA) fined the company in Top 5 shareholders (%) December 2008 because it disclosed their nine-month and semi-annual results of Public Investment Fund 37.4 FY08 before submitting them for review. In the recent past, SPCC completed capacity General Organization for Social 13.0 Insurance (GOSI) expansions at its plants. In 2007, the company stated that its new Tihama Cement factory commenced operations with a daily production capacity of 5,000 tonnes of clinker.
Source: NCBC Research
JUNE 2009 SOUTHERN CEMENT 140
CEMENT
Also known as Qassim Cement QCC Price SR115.3 Qassim Cement Company (QCC) was founded in 1976 in Buraydah, which lies in the Pricing / Valuation as on May 27, 2009 central region of KSA, 330 km northwest of Riyadh. Commercial production started
Mkt cap SR5.2bn ($1,384.8mn) in 1981 with the opening of a 2,000 tonnes per day clinker facility. In 2008, QCC Sh. outstanding 45.0mn produced 3.22 mn tonnes of cement and 3.38 mn tonnes of clinker.
Key statistics Company financials
52 week range H/L (SR) 188.3/73.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 494 543 847 820 (3.2) 18.4 3m 11.54 3.08 EBITDA SRmn 329 365 609 597 (1.9) 22.0 12m 13.74 3.67 Net Income SRmn 282 316 540 517 (4.4) 22.4 Raw Beta 6m 3yr Assets SRmn 1,631 1,755 2,059 2,270 10.2 11.7 0.78 1.01 Equity SRmn 1,188 1,295 1,523 1,724 13.1 13.2 Total Debt SRmn 219 219 242 244 0.5 3.6 Reuters 3040.SE Cash & Equiv SRmn 196 224 207 336 62.5 19.7 Bloomberg QACCO AB EBITDA Mgn % 66.7 67.1 71.9 72.8 - - Price perform (%) 1M 3M 12M Net Mgn % 57.0 58.1 63.8 63.0 - - Absolute (%) 2 41 (38) ROE % 24.5 25.4 38.3 31.8 - - Market (%) 6 32 (39) ROA % 20.6 18.6 28.3 23.9 - - Sector (%) (6) 19 (44) Div Payout % 73.5 65.6 52.5 69.6 - - Website: www qcc com.sa EPS SR 31.3 7.0 12.0 11.5 (4.4) -
BVPS SR 132.0 28.8 33.9 38.3 13.1 - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 22.1 15.1 7.0 P/B (x) 5.4 5.3 2.1 Product segment 2008 Geographic 2008 P/Sales (x) 12.8 9.6 4.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.0 3.5 9.9 Cement Production 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.63 MSCI Saudi (domestic – mid cap) 7.02 Source: Company, NCBC Research
Free float (%) Business brief: QCC has held a steady share in the domestic cement market for many Free float 53.94 years. In 2008, the company accounted for 10% of the total cement sales in the Kingdom from 9.1% in 2005. Of late, QCC had started exporting some of its products to the Relative share price perf. neighboring countries. However, the ban on cement exports, implemented in 2008, is 11, 0 0 0 200 likely to impact company’s export revenues 9,000 15 0 7,000 10 0 Financials: In 2008, the company’s sales decreased 3.2% y-o-y to SR 820.2 mn in line 5,000 50 3,000 - with the sluggish revenue outlook in the industry. Company’s’ total sale volumes fell 7.6% M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 y-o-y to 3.2mn tonnes in 2008. Net income margin declined by 80 basis points to 63% y-o- TASI Qassim Cement (RHS) y due to poor sales performance
Top 5 shareholders (%) Recent developments: In April 2009, QCC announced a 5.4% y-o-y decline in Q109 net Public Investment Fund 23.3 profits to SR151.5mn mainly due to decline in the cement prices. QCC’s proposal of General Organization for Social 17.5 building a new gypsum plant in the Al Asyah area was rejected by Al Asyah Municipality in Insurance (GOSI) September 2007. The council had voted unanimously against granting the license as the Public Pension Authority (PPA) 5.0 plant is too close to residential area and could cause health problems
Source: NCBC Research
JUNE 2009 QASSIM CEMENT COMPANY 141
CEMENT
Also known as Yanbu Cement YCC
Price SR49.0 Jeddah-based Yanbu Cement Company (YCC) was established in 1977 through a Pricing / Valuation as on May 27, 2009 plant with an initial production capacity of 3,000 tonnes of clinker per day at Ras Baridi near Yanbu on the west coast of Saudi Arabia. The company produced 4.3 Mkt cap SR5.1bn ($1,373.8mn) Sh. outstanding 105.0mn and 3.6 mn tonnes of cement and clinker respectively in 2008.
Key statistics Company financials
52 week range H/L (SR) 83.3/34.2 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 779 843 1,171 1,094 (6.6) 12.0 3m 7.17 1.91 EBITDA SRmn 548 602 776 680 (12.4) 7.4 12m 6.22 1.66 Net Income SRmn 454 512 661 560 (15.3) 7.3 Raw Beta 6m 3yr Assets SRmn 2,243 2,250 2,563 2,600 1.4 5.0 0.92 0.79 Equity SRmn 1,942 2,085 2,324 2,356 1.4 6.6 Total Debt SRmn 114 15 19 14 (25.8) (50.6) Reuters 3060.SE Cash & Equiv SRmn 89 43 38 132 251.9 14.3 Bloomberg YNCCO AB EBITDA Mgn % 70.4 71.4 66.3 62.2 - - Price perform (%) 1M 3M 12M Net Mgn % 58.2 60.7 56.5 51.2 - - Absolute (%) (0) 3 (40) ROE % 22.9 25.4 30.0 23.9 - - Market (%) 6 32 (39) ROA % 20.8 22.8 27.5 21.7 - - Sector (%) (6) 19 (44) Div Payout % 92.6 92.2 79.5 75.0 - - Website: www.yanbucement.com EPS SR 21.6 4.9 6.3 5.3 (15.2) - BVPS SR 18.5 19.9 22.1 22.4 1.4 - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 14.8 15.0 7.3 P/B (x) 3.6 4.3 1.7 Product segment 2008 Geographic 2008 P/Sales (x) 9.0 8.5 3.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 6.2 5.3 10.3 Cement Manufacturing 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.61 MSCI Saudi (domestic – mid cap) 6.96 Source: Company, NCBC Research
Free float (%) • Business brief: YCC is engaged in the production and marketing of cement and its Free float 52.62 derivatives. The company has been losing its position in the domestic cement market—it was the largest seller of cement in Saudi Arabia during 2003 and 2004. Relative share price perf. The Company’s market share, (in terms of sales volumes), in the domestic market 11, 0 0 0 10 0 has slid to 14.4% in 2008 from 17.3% in 2007. YCC also has a subsidiary (Yanbu Al 9,000 80 60 7,000 Shuaiba Paper Products) that produces paper bags for the retail sales of cement. 40 5,000 20 • Financials: Company’s cement sales declined 6.6% y-o-y to SR1,093.5 mn in 2008. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 This was mainly due to 7.6% y-o-y decline in the sales volumes to 4.3 mn tonnes.
TASI Yanbu Cement (RHS) Consequently, EBITDA margin declined by 410 basis points to reach 62.2% in 2008.
• Recent developments: In April 2009, YCC announced a 10% y-o-y decline in its Top 5 shareholders (%) Q109 net profits to SR151.8mn mainly due to a decline in sales during the period. In Sulaiman Abdul Aziz Saleh Al Rajhi 23.7 July 2008, the company announced the expansion of clinker capacity by 3 mn ton on General Organization for Social 11.7 Insurance (GOSI) Red Sea coast with a total cost of SR1.7 bn ($453.3 mn). YCC signed a contract Public Investment Fund 10.0 with Sinoma of China for setting up the cement plant within 30 months. YCC has Abdullah Abdul Aziz Saleh Al Rajhi 5.8 also entered into a contract with M/s Pillard of Germany to upgrade the burning and
storage systems of some of its old kilns. Source: NCBC Research
JUNE 2009 YANBU CEMENT COMPANY 142
CEMENT
Also known as Eastern Cement EPCC Price SR45.8 Eastern Cement Co. (EPCC) was established in 1982 with a capacity of 7,000 tonnes Pricing / Valuation as on May 27, 2009 of clinker per day at Khursaniyah (Dammam). EPCC expanded its plant capacity by adding new production lines, producing as much as 3.1mn tonnes of cement in Mkt cap SR3.9bn ($1,051.7mn) 2008. EPCC has been regularly exporting cement to neighboring countries. Sh. outstanding 86.0 mn
Key statistics Company financials
52 week range H/L (SR) 85.0/37.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 552 773 924 799 (13.5) 13.1 3m 5.63 1.50 EBITDA SRmn 341 502 600 511 (14.8) 14.4 12m 7.17 1.92 Net Income SRmn 299 456 541 429 (20.7) 12.8 Raw Beta 6m 3yr Assets SRmn 2,000 2,215 2,496 2,201 (11.8) 3.2 0.42 0.68 Equity SRmn 1,695 1,833 2,114 1,875 (11.3) 3.4 Total Debt SRmn 166 202 185 155 (16.2) (2.3) Reuters 3080.SE Cash & Equiv SRmn 312 602 628 253 (59.8) (6.8) Bloomberg EACCO AB EBITDA Mgn % 61.8 65.0 64.9 63.9 - - Price perform (%) 1M 3M 12M Net Mgn % 54.2 59.0 58.6 53.7 - - Absolute (%) (3) 12 (45) ROE % 18.9 25.8 27.4 21.5 - - Market (%) 6 32 (39) ROA % 16.7 21.6 23.0 18.3 - - Sector (%) (6) 19 (44) Div Payout % 21.6 77.0 95.3 59.4 - - Website: www.eastern-cement.com.sa EPS SR 23.2 5.2 6.3 5.0 (20.7) - BVPS SR 131.4 21.3 24.6 21.8 (11.3) - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 13.4 14.1 8.0 P/B (x) 3.3 3.6 1.8 Product segment 2008 Geographic 2008 P/Sales (x) 7.9 8.3 4.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 5.7 6.7 7.4 Saudi Arabia 81 NA Rest of World 19 NA Weightage (%) TASI (free float weight) 0.60 MSCI Saudi (domestic – small cap) 6.54 Source: Company, NCBC Research
Free float (%) • Business brief: In 2008, the company held 8.5% market share (in terms of sales Free float 68.06 volumes) in the Saudi Arabian cement market as compared to 8.8% in 2007. The decrease in production declined company sales in 2008—export volumes almost Relative share price perf. halved to 0.56 mn tones. However, domestic sales volumes increased 7.5% to 2.5 11, 0 0 0 10 0 mn tonnes. EPCC owns 50% stake in Brainsa, 30% stake in Arabian Yemeni Cement 9,000 80 60 7,000 Company, Yemen, and 5.4% stake in Industrialization and Energy Services 40 5,000 20 Company. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: Revenues for FY08 fell by 13.5% y-o-y to SR798.8 mn. The net profit for TASI Eastern Cement (RHS) FY 08 declined by 20.7% y-o-y to SR429.3 mn. Fall in sales could be mainly due to
export ban implemented in 2008. Accordingly, EBITDA margin fell by 98 bps to 63.9% Top 5 shareholders (%) in FY08 Public Pension Authority (PPA) 10.6 Public Investment Fund 10.0 • Recent developments: In April 2009, EPCC announced a 37% y-o-y decline in General Organization for Social 10.0 Q109 net profits to SR97mn. In July 2007, a unit of the company, Arabian Yemeni Insurance (GOSI) Cement Company, signed an agreement for a $125mn loan with the IMF for installing
an electricity station and other facilities at a plant in eastern Yemen.
Source: NCBC Research
JUNE 2009 EASTERN PROVINCE CEMENT CO. 143
CEMENT
Also known as Arabian Cement Arabian Cement Price SR46.5 Arabian Cement Company (ACC) was the first company to start cement production Pricing / Valuation as on May 27, 2009 in Saudi Arabia (1959). ACC mainly produces portland cement, Portland pozzolan cement, sulfate-resistant cement and ready mix concrete. ACC reported production Mkt cap SR3.7bn ($993.3mn) of 2.7 mn tonnes of cement and 2.4 mn tonnes of clinker in 2008. Sh. outstanding 80.0mn
Key statistics Company financials
52 week range H/L (SR) 83.3/29.2 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 687 748 722 917 27.1 10.1 3m 5.10 1.36 EBITDA SRmn 397 421 436 400 (8.2) 0.3 12m 8.64 2.31 Net Income SRmn 331 334 392 322 (18.0) (1.0) Raw Beta 6m 3yr Assets SRmn 1,751 1,810 2,366 3,647 54.2 27.7 0.70 0.79 Equity SRmn 1,630 1,647 1,841 2,236 21.5 11.1 Total Debt SRmn - - 282 1,060 275.5 NM Reuters 3010.SE Cash & Equiv SRmn 57 1 117 451 287.1 99.7 Bloomberg ARCCO AB EBITDA Mgn % 57.7 56.3 60.4 43.6 - - Price perform (%) 1M 3M 12M Net Mgn % 48.1 44.6 54.3 35.0 - - Absolute (%) (1) 37 (43) ROE % 21.7 20.4 22.5 15.8 - - Market (%) 6 32 (39) ROA % 19.9 18.7 18.8 10.7 - - Sector (%) (6) 19 (44) Div Payout % 72.5 71.9 71.4 75.0 - - Website www.arabiacement.com EPS SR 27.6 5.6 5.6 4.0 (28.2) - BVPS SR 135.8 27.5 26.3 27.9 6.3 - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 14.5 19.6 7.7 P/B (x) 2.9 4.2 1.1 Product segment 2008 Geographic 2008 P/Sales (x) 6.5 10.6 2.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 5.0 3.6 9.7 Cement Production 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.59 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) 7.29 • Business brief: ACC, the oldest cement company in the Kingdom, produced 8.3% of
Free float (%) the total cement production in Saudi Arabia in 2008, 100 basis points lower than the Free float 71.15 contribution reported in 2007. The company has a cooperation agreement with Italcementi to establish a cement plant in Labuna, in western Saudi Arabia by 2010. Relative share price perf. ACC also has operations in Bahrain and Jordan through its subsidiaries. 11, 0 0 0 10 0 9,000 • Financials: ACC’s revenues increased 27.1% y-o-y to SR 917.3 mn in FY 08. 7,000 50 5,000 However, its EBITDA margin declined considerably to 43.6% in FY 08, as compared 3,000 - to 60.4% in FY 07. Net margin declined to 35.0% in FY 08 from 54.3% in FY 07, while M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 net income declined 18.0% y-o-y to SR 321.5 mn in FY 08. TASI Arab Cement (RHS) • Recent developments: In May 2009, ACC announced plans to launch its first plant
Top 5 shareholders (%) outside Saudi Arabia, to be based in Jordan, with an annual production capacity of 2 Sulaiman Abdul Aziz Saleh Al Rajhi 11.8 mn tonnes by 1Q-10. In April 2009, the company announced its net profit for 1Q-09, National Commercial Bank (NCB) 11.3 which declined 10% y-o-y to SR103.8mn. In January 2008, the company raised Abdul Aziz Abdullah Sulaiman Al 7.1 SR500mn through a right issue that increased the company’s capital to SR800mn. Sulaiman The proceeds from the issue would be utilized to finance the company’s capacity Abdullah Abdul Aziz Saleh Al Rajhi 5.7 Public Pension Authority (PPA) 5.1 expansion in Rabigh plant and facilitate investments in greenfield projects in Saudi Source: NCBC Research Arabia and Jordan. ACC plans to invest $900 mn in projects, which is expected to more than double its annual production capacity to 7mn tonnes by 2010.
JUNE 2009 ARABIAN CEMENT COMPANY 144
CEMENT
Also known as TCC Tabuk Cement
Price SR22.0 Founded in 1994, Tabuk Cement Company (TCC) is the smallest cement company in Pricing / Valuation as on May 27, 2009 KSA in terms of market capitalization. In 2008, the company produced 1.1mn tonnes
Mkt cap SR2.0bn ($528.7mn) of cement at its plant located in the north-west region of the country. TCC’s strategic Sh. outstanding 90.0 mn location enables it to cater to the demand for cement in the northern regions.
Key statistics Company financials
52 week range H/L (SR) 38.3/16.3 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 304 380 341 291 (14.7) (1.5) 3m 6.40 1.71 EBITDA SRmn 219 276 263 196 (25.5) (3.7) 12m 5.08 1.36 Net Income SRmn 154 218 220 157 (28.9) 0.5 Raw Beta 6m 3yr Assets SRmn 1,035 1,154 1,366 1,226 (10.3) 5.8 0.60 0.85 Equity SRmn 824 838 1,031 1,052 2.0 8.4 Total Debt SRmn ------Reuters 3090.SE Cash & Equiv SRmn 9 10 3 2 - - Bloomberg TACCO AB EBITDA Mgn % 72.2 72.7 77.2 67.5 - - Price perform (%) 1M 3M 12M Net Mgn % 50.8 57.2 64.6 53.9 - - Absolute (%) 0 17 (41) ROE % 18.9 26.2 23.6 15.1 - - Market (%) 6 32 (39) ROA % 14.4 19.9 17.5 12.1 - - Sector (%) (6) 19 (44) Div Payout % 90.4 0.6 102.0 86.1 - - Website: www tcc-sa.com EPS SR 11.1 3.1 2.5 1.7 (28.9) - BVPS SR 58.9 12.0 11.5 11.7 2.0 - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 13.4 17.2 11.4 P/B (x) 3.5 3.7 1.7 Product segment 2008 Geographic 2008 P/Sales (x) 7.6 11.1 6.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 5.9 7.6 Saudi Arabia 100.0 100.0
Weightage (%)
TASI (free float weight) 0.42 MSCI Saudi (domestic – small cap) 4.13 Source: Company, NCBC Research
Free float (%) • Business brief: TCC held 3.9% market share of the domestic cement market in Free float 94.69 2008, (in terms of sales volumes), a decrease from 5.1% in 2007. The company has a 3.37% stake in Industrialization & Energy Services Company, a support services Relative share price perf. and product manufacturing company catering to the energy sector. 11, 0 0 0 40 9,000 30 • Financials: Sales fell 14.7% y-o-y to SR290.9 mn in 2008. This could be ascribed to 7,000 20 a 15.1% y-o-y decline in the sales volumes to 1.2 mn tonnes. TCC reported EBITDA 5,000 10 margin of 67.5% in 2008, a 971 basis points decline over the previous year. Declined 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 sales and higher expenses associated with revamping of the production line led to a
TASI Tabuk Cement (RHS) fall in the bottom-line. Net income fell 28.9% y-o-y to SR156.8 mn in 2008. Consequently, company’s net margin stood at 53.9% in 2008 from 64.6% in 2007.
Top 5 shareholders (%) • Recent developments: In April 2009, TCC announced a 33.8% decline in net profits Khaled Saleh Abdul Rahman Al 6.7 Shethri to SR33.5mn driven by a decline in sales as well as cement prices during the period. In February 2007, the company announced plans to construct a new production line with a daily capacity of 5,000 tonnes. On February 11, 2007, the Capital Market Authority agreed to increase TCC’s capital from SR700 mn to SR900 mn by issuing
bonus shares. Source: NCBC Research
JUNE 2009 TABUK CEMENT 145
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JUNE 2009 SAUDI ARABIA FACTBOOK 146
Company Page No. Banking and Financials Jarir Marketing 148 Petrochemicals
Fawaz Abdulaziz Alhokair 149 Cement
Aldrees Petroleum 150 Retail
Saudi Automotive 151 Energy and Utilities
Ahmed H Fitaihi Company 152 Agriculture and Food
Abdullah Al-Othaim 153 Telecom and IT
National Agriculture 154 Insurance
Alkhaleej Training 155 Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transportation
Media and Publishing
Hotels and Tourism
RETAIL
Also known as Jarir Marketing Co JARIR
Price SR177.3 Jarir Marketing Company (Jarir) was established in Riyadh in 1979. Jarir is engaged Pricing / Valuation as on May 27, 2009 in the retail and wholesale trading of office & school supplies, infotainment
Mkt cap SR5.3bn ($1,419.9mn) equipment, books, etc. Jarir is also involved in the acquisition of land and Sh. outstanding 30.0mn residential & commercial buildings.
Key statistics Company financials
52 week range H/L (SR) 205.0/135.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,210 1,505 1,741 2,520 44.7 27.7 3m 10.79 2.88 EBITDA SRmn 188 261 289 368 27.4 25.0 12m 10.32 2.76 Net Income SRmn 176 243 276 333 20.5 23.6 Raw Beta 6m 3yr Assets SRmn 746 843 1,069 1,163 8.8 16.0 0.51 0.56 Equity SRmn 510 633 609 687 12.8 10.5 Total Debt SRmn 62 1 190 192 1.1 45.7 Reuters 4190.SE Cash & Equiv SRmn 32 33 18 24 32.4 (8.5) Bloomberg JARIR AB EBITDA Mgn % 15.5 17.3 16.6 14.6 - - Price perform (%) 1M 3M 12M Net Mgn % 14.6 16.2 15.9 13.2 - - Absolute (%) 8 15 (4) ROE % 41.8 42.6 44.5 51.4 - - Market (%) 6 32 (39) ROA % 25.6 30.6 28.9 29.8 - - Sector (%) 9 20 (16) Div Payout % 59.9 49.3 86.9 81.1 - - Website: www jarirbookdtore.com EPS SR 29.4 8.1 9.2 11.1 20.4 (27.7)
BVPS SR 84.9 21.1 20.3 22.9 12.7 (35.4) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 18.2 17.1 15.5 P/B (x) 7.0 7.8 7.5 Product segment 2007 Geographic 2007 P/Sales (x) 2.9 2.7 2.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.7 5.1 5.2 Stationery Retail 87 Saudi Arabia 87
Stationery Wholesale 13 Rest of Middle East 13 Weightage (%)
TASI (free float weight) 1.04 Source: Company, NCBC Research
MSCI Saudi (domestic) - • Product profile: Jarir’s business activities are divided into four broad segments:
Free float (%) School Supplies; Office Supplies; Computer Accessories and Entertainment Free float 87.33 Products; Books. Jarir’s fully owned subsidiaries include Jarir Egypt Financial Leasing Co., United Bookstore (UAE), Jarir Trading Co. (UAE), United Company for Office Relative share price perf. Supplies and Stationeries (Qatar), and Jarir Bookstore (Kuwait). 11,000 250
200 9,000 • Financials: Jarir’s revenues grew at a CAGR of 27.7% during 2005-08, and reported 15 0 7,000 10 0 a robust growth of 44.7% y-o-y in 2008. The company’s EBITDA increased 27.4% y- 5,000 50 o-y in 2008. However, growth in cost of sales and operating expenses outpaced the 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 growth in revenues during the year, leading to decline in EBITDA margins to 14.6% in TASI Jarir (RHS) 2008. The company’s net income in 2008 increased 20.5% y-o-y to SR332.8mn.
Top 5 shareholders (%) • Recent developments: In May 2009, the co. increased its capital from SR300mn to Jarir Commercial Investment Co. 12.0 SR400mn through issue of four bonus shares for every three shares held. In April Mohd Abdul Rahman Nasser Al Aqeel 9.0 2009, the co. reported 10.0% y-o-y rise in the Q1 FY09 net income to SR107mn. In Nasser Abdulrahman Nasser Al Aqeel 9.0 February 2009, Jarir announced opening of a new bookstore in Riyadh. In both Abdullah Abdulrahman Nasser Al 9.0 Aqeel September & December 2008, Jarir launched a new bookstore in Dhahran (KSA). In Abdul Karim Abdul Rahman Nasser Al 9.0 September 2008, Jarir entered into a partnership with Western Digital Corporation for Aqeel retailing the latter’s portable storage devices in Saudi. In July 2008, the company Source: NCBC Research received the award for the most transparent co. in the BMG’s Transparency Award.
JUNE 2009 JARIR MARKETING CO 148
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Fawaz Abdulaziz Alhokair Price SR29.2 Fawaz Abdulaziz AlHokair Company (AlHokair), established in 1990, is engaged in Pricing / Valuation as May 27, 2009 retail trading and real estate activities. AlHokair has also diversified into food &
Mkt cap SR2.0bn ($545.8mn) entertainment, furniture, financial services, telecom, fitness & healthcare, and Sh. outstanding 70.0mn automotive sectors.
Key statistics Company financials*
52 week range H/L (SR) 51.0/21.3 YoY CAGR(%) 20062007 2008 2009 (%) (06-09) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,294 1,481 1,584 1,888 19.2 13.4 3m 22.99 6.14 EBITDA SRmn 305 287 254 234 (8.0) (8.5) 12m 25.51 6.81 Net Income SRmn 246 247 201 202 0.5 (6.3) Raw Beta 6m 2yr Assets SRmn 759 963 1,233 1,590 28.9 28.0 1.03 0.98 Equity SRmn 527 774 905 863 (4.7) 17.9 Total Debt SRmn 7 - 102 370 264.1 281.4 Reuters 4240.SE Cash & Equiv SRmn 13 66 28 24 (12.2) 24.1 Bloomberg ALHOKAIR AB EBITDA Mgn % 23.6 19.3 16.1 12.4 - - Price perform (%) 1M 3M 12M Net Mgn % 19.0 16.7 12.7 10.7 - - Absolute (%) 16 16 (38) ROE % 52.4 38.0 24.0 30.9 - - Market (%) 6 32 (39) ROA % 36.2 28.7 18.3 14.3 - - Sector (%) 9 20 (16) Div Payout % - - 95.6 60.5 - - Website: www alhokair.com.sa EPS SR 6.2 6.2 2.9 2.9 0.5 (22.2)
BVPS SR 7.5 11.1 12.9 12.3 (4.7) 17.9 Valuation multiples Source: Company, NCBC Research, *The company’s year ending is 31st March.
2007 2008 2009 Segment-wise business analysis P/E (x) 16.2 18.9 8.0 P/B (x) 5.2 4.2 1.9 Product segment 2008 Geographic 2008 P/Sales (x) 2.7 2.4 0.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 5.1 7.5 Apparel Stores 100.0 Saudi Arabia 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.18 • Business brief: AlHokair operates more than 700 fashion stores and is the retail MSCI Saudi (domestic – mid cap) 1.29 franchisee of over 40 global brands. The company’s product offerings include adult Free float (%) apparel, kids & teen fashion, footwear, eyewear, and accessories. AlHokair has two Free float 39.00 subsidiaries – Al Waheeda Equipment Co. (95.0% stake) and Haifa Badai Al Kalam and Partners International Co. for Trading (95.0% stake). Relative share price perf. 11,000 60 • Financials: AlHokair recorded 19.2% y-o-y growth in revenues to SR1,888.8mn 50 9,000 40 7,000 30 during FY 2009. However, the EBITDA margin declined to 12.4% in FY 2009 from 20 5,000 10 16.1% in FY 2008 mainly due to 34.8% y-o-y increase in selling, general and 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 administrative (SG&A) expenses to SR629.9mn. AlHokair’s net income grew by a TASI AlHokair (RHS) meager 0.5% y-o-y from SR201.4mn in FY 2008 to SR202.4mn in FY 2009;
supported by income from associates of SR12.9mn. Top 5 shareholders (%) Saudi Fas Holding Co. 49.0 • Recent developments: In April 2009, the company reached a final agreement to Fawaz Abdul Aziz Fahd Al Hokair 7.0 acquire Wehbi Commercial Co. for SR175mn. In February 2009, AlHokair announced Salman Abdul Aziz Fahd Al Hokair 7.0 the appointment of Simon Marshal as the new CEO of the company with effect from Abdul Hameed Abdul Aziz Fahd Al 7.0 March 2009. In January 2009, the company announced that it has signed a Hokair Memorandum of Understanding with a Saudi retail company for buying some of the Source: NCBC Research latter's assets having an approximate value of SR80-120mn.
JUNE 2009 ALHOKAIR 149
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Also known as Aldrees Petroleum APTSCO. Aldrees Price SR27.4 Aldrees Petroleum & Transport Services Co. (Aldrees) has three main operations — Pricing / Valuation as on May 27, 2009 petroleum, transport and Super 2 division (manages coffee, pastry and car-washing
Mkt cap SR0.7bn ($182.9mn) centers). The company owns a 98% stake in Aldrees Sudan, which is engaged in Sh. outstanding 25.0mn marine, land & air transportation.
Key statistics Company financials
52 week range H/L (SR) 45.0/17.6 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 784 784 867 1,134 30.9 13.1 3m 22.72 6.07 EBITDA SRmn 51 51 74 93 25.5 22.5 12m 14.17 3.78 Net Income SRmn 39 41 50 53 4.7 10.3 Raw Beta 6m 3yr Assets SRmn 290 416 532 664 24.9 31.9 0.93 1.01 Equity SRmn 204 245 296 317 7.1 15.8 Total Debt SRmn - - 76 122 60.5 - Reuters 4200.SE Cash & Equiv SRmn 8 11 13 20 51.8 32.8 Bloomberg ALDREES AB EBITDA Mgn % 6.4 6.5 8.5 8.2 - - Price perform (%) 1M 3M 12M Net Mgn % 5.0 5.3 5.8 4.7 - - Absolute (%) 4 17 (34) ROE % 19.5 18.4 18.6 17.2 - - Market (%) 6 32 (39) ROA % 12.9 11.7 10.6 8.8 - - Sector (%) 9 20 (16) Div Payout % - - 59.52 71.0 - - Website: www aldreestransport.com EPS SR 9.8 2.1 2.5 2.1 (16.2) (40.1)
BVPS SR 8.2 9.8 11.8 12.7 7.1 15.8 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 37.7 26.1 11.8 P/B (x) 6.4 4.4 2.0 Product segment 2007 Geographic 2007 P/Sales (x) 2.0 1.5 0.5 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - 2.3 6.0 Gas Stations 87.8 Saudi Arabia 100.0
Transport 11.9 Weightage (%) Super 2 division 0.3 TASI (free float weight) 0.15 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) 0.40 • Business brief: Aldrees Petroleum division is engaged in the wholesale and retail
Free float (%) distribution of petrol products, with a network of 300 gas stations as of 2006, under Free float 100.00 the brand - ‘Petrol’. It also services contracts for fuel supply to government and private companies. The Aldrees Transportation division operates and maintains a Relative share price perf. fleet of trucks, trailers and tank trucks to transport goods within and outside Saudi 11, 0 0 0 50 Arabia. The Super 2 division manages coffee and cake stores under the brand – 9,000 40 30 ‘Super Café’ and car wash & car detailing under the brand –‘Super Wash’ located 7,000 20 within the company’s gas station network. 5,000 10 3,000 - • Financials: Aldrees recorded a robust 30.9% y-o-y growth in revenues during 2008. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 However, the EBITDA margin contracted 30 basis points y-o-y to 8.2% due to higher TASI Aldrees (RHS) operating expenses. Consequently, net income growth was contained to a meager
Top 5 shareholders (%) 4.7% y-o-y to SR52.8mn during the period.
Abdul Mohsen Mohammed Saad Al 8.5 • Recent developments: The company’s net profit for 1Q-09 rose 11% y-o-y to Drees Hamad Mohammed Saad Al Drees 6.7 SR13.8mn. In January 2009, Aldrees’s board elected Hamad Aldrees as its new chairman, Abdulmohsen Aldrees as the vice-chairman and re-elected Abdulilah Aldrees as the Managing Director (M.D.) of the company. In June 2008, the company won contract of SR232mn to supply petroleum materials for Northern Cement Source: NCBC Research Company and the transport beans for Soya Company.
JUNE 2009 ALDREES PETROLEUM 150
RETAIL
Also known as Saudi Automotive SASCO Price SR14.9 Saudi Automotive Services Company (SASCO), headquartered in Riyadh and Pricing / Valuation as on May 27, 2009 established in 1982 provides a variety of services and utilities for cars, motorists
Mkt cap SR0.7bn ($179.0mn) and travelers. SASCO owns specialized maintenance workshops in Saudi Arabia. It Sh. outstanding 45.0mn also owns and manages supermarkets, rest areas and restaurants for travelers.
Key statistics Company financials
52 week range H/L (SR) 21.3/9.7 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 153 166 192 214 11.8 11.9 3m 36.07 9.63 EBITDA SRmn 31 20 33 33 (1.9) 1.9 12m 27.03 7.22 Net Income SRmn 78 (10) 33 36 6.3 (23.0) Raw Beta 6m 3yr Assets SRmn 538 433 481 469 (2.5) (4.5) 1.06 1.21 Equity SRmn 477 374 422 413 (2.2) (4.7) Total Debt SRmn ------Reuters 4050.SE Cash & Equiv SRmn 111 76 36 73 105.7 (12.9) Bloomberg SACO AB EBITDA Mgn % 20.2 12.2 17.4 15.3 - - Price perform (%) 1M 3M 12M Net Mgn % 50.8 (5.9) 17.4 16.6 - - Absolute (%) 6 25 (22) ROE % 19.1 (2.3) 8.4 8.5 - - Market (%) 6 32 (39) ROA % 16.6 (2.0) 7.3 7.5 - - Sector (%) 9 20 (16) Div Payout % ------Website: www sasco.com.sa EPS SR 26.7 (0.2) 0.7 0.8 6.6 NM
BVPS SR 79.4 8.3 9.4 9.2 (2.2) NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NM 36.0 14.6 P/B (x) 3.1 2.9 1.3 Product segment 2007 Geographic 2007 P/Sales (x) 7.0 6.3 2.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.0 0.0 Stations & Rest Area 87
Automobile Club 13 Weightage (%) TASI (free float weight) 0.15 MSCI Saudi (domestic – mid cap) 0.73 Source: Company, NCBC Research
• Business brief: SASCO offers services such as car maintenance and repair, spare Free float (%) Free float 100.00 parts, car rescue, first aid, issuance of car test certificates, and international driving licenses. The company also runs a network of supermarkets, petrol pumps, housing Relative share price perf. facilities, rest areas, restaurants, and other facilities across Saudi Arabia to service 11, 0 0 0 25 motorists and travelers. In addition, SASCO is involved in creating clubs such as the 20 9,000 15 Saudi Automobile Touring Association (SATA), which is concerned with motor sports. 7,000 0 5,000 • Financials: SASCO recorded 11.8% y-o-y growth in revenues to SR214.3mn in 2008 5
3,000 - from SR191.7mn in 2007. However, the EBITDA margins of the company fell 210 M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 basis points in 2008 due to higher cost of sales as well as operating (S,G&A) TASI SASCO (RHS) expenses. Nevertheless, the company posted 6.3% y-o-y net income growth from
Top 5 shareholders (%) SR33.4mn in 2007 to SR35.5mn in 2008 due to an increase in investment income Ibrahim Mohammed Ibrahim Al- 6.0 during the year. Hadithi • Recent developments: In April 2009, the company announced its 1Q-09 results wherein it reported a y-o-y increase of 3.8% in net profit to SR 5.5mn, In March 2009, SASCO in partnership with NCB has announced 0% down-payment & low 4.99% interest scheme to Saudi customers on purchase of Chevrolet and GMC. Source: NCBC Research
JUNE 2009 SAUDI AUTOMOTIVE SERVICES COMPANY 151
RETAIL
Also known as Ahmed H. Fitaihi Co Fitaihii Price SR15.2 Ahmed H. Fitaihi Company (AHF), established in 1992, is engaged in the design, Pricing / Valuation as on May 27, 2009 manufacture and wholesale & retail distribution of gems, jewelry and precious
Mkt cap SR0.8bn ($202.9mn) stones. The company has two marketing subsidiaries - Marina B Creation Vados Sh. outstanding 50.0mn and Marina B Geneve, which market its products across the globe.
Key statistics Company financials
52 week range H/L (SR) 24.3/8.9 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 120 111 120 194 62.5 17.5 3m 41.33 11.04 EBITDA SRmn 19 13 13 34 169.6 20.6 12m 35.36 9.44 Net Income SRmn 9 11 1 19 2,208.1 27.8 Raw Beta 6m 3yr Assets SRmn 687 694 765 720 (5.9) 1.6 0.96 1.01 Equity SRmn 627 627 637 560 (12.1) (3.7) Total Debt SRmn 28 37 87 71 (18.4) 36.4 Reuters 4180.SE Cash & Equiv SRmn 250 32 15 14 (7.8) (61.8) Bloomberg AHFCO AB EBITDA Mgn % 16.2 12.2 10.6 17.6 - Price perform (%) 1M 3M 12M Net Mgn % 7.7 10.0 0.7 9.9 - - Absolute (%) 19 31 (28) ROE % 1.9 1.8 0.1 3.2 - - Market (%) 32 (39) ROA % 1.6 1.6 0.1 2.6 - - Sector (%) 9 20 (16) Div Payout % ------Website: www.fitaihi com sa EPS SR 2.9 0.3 0.0 0.4 1,815.7 (48.9)
BVPS SR 196.2 16.5 15.3 11.2 (27.0) (61.5) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 112.0 NM 27.5 P/B (x) 2.0 2.8 0.9 Product segment 2008 Geographic 2008 P/Sales (x) 11.1 14.8 2.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - - -
Source: Company, NCBC Research
Weightage (%) • Business brief: AHF’s product portfolio includes precious stones, jewelry, consumer TASI (free float weight) 0.13 MSCI Saudi (domestic –small cap) 1.32 products, beauty products, kitchenware, leather products and clothing, accessories,
perfumes, medical equipment, industrial parts, etc. The company has presence in the Free float (%) hospital industry through its 19.3% investment in International Medical Center and a Free float 78.73 5.7% stake in Dar Al Fouad Hospital. AHF also holds a 20% stake in Fitaihi Junior.
Relative share price perf. The company owns two premium department stores under the brand name "FITAIHI"
11, 0 0 0 25 in Jeddah and Riyadh, in addition to other outlets.
9,000 20 15 • Financials: AHF’s revenues grew by 62.5% y-o-y to SR194.3mn in 2008. The 7,000 10 5,000 5 company’s EBITDA margins increased by 700 basis points to reach 17.6% owing to 3,000 - higher revenues and lower operating (S,G&A) expenses. Driven by this and decrease M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Fitaihi (RHS) in other non-operating expenses, the net income grew significantly from SR0.8mn in
2007 to SR19.2mn in 2008. Top 5 shareholders (%) • Recent developments: In April 2009, the company reported 26.6% y-o-y decline in Ahmed Hussain Ahmed Fitaihi 21.2 Q1-09 net income to SR6.4mn. In August 2008, AHF’s subsidiary bought 5% stake in Oriental Weavers Carpet Co. for EGP153mn. On May 07, 2008, the company announced setting up of two companies that will invest in real estate sector, each with a capital of SR100mn (USD26.6mn). In the same month, the company’s Source: NCBC Research shareholders gave approval to raise capital by 30% to SR500mn through a bonus
issue of 1:3.34.
JUNE 2009 AHMED H.FITAIHI COMPANY 152
RETAIL
Also known as Abdullah Al-Othaim Al-Othaim Price SR41.2 Abdullah Al-Othaim Markets Company (Al-Othaim), established in 1980, is a Pricing / Valuation as on May 27, 2009 subsidiary of Saudi Arabia-based Al-Othaim Holding Company. The company is a
Mkt cap SR0.9bn ($247.5mn) food and consumer products retailer and wholesaler. AlOthaim also holds a 13.7% Sh. outstanding 22.5mn stake in AlOthaim Real Estate Investment and Development Company.
Key statistics Company financials
52 week range H/L (SR) 86.0/23.9 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,452 1,823 2,320 2,915 25.6 26.1 3m 13.15 3.51 EBITDA SRmn 63 77 90 107 17.9 19.0 12m NA NA Net Income SRmn 49 58 60 62 4.2 8.0 Raw Beta 6m 1yr Assets SRmn 461 598 784 1,081 37.8 32.8 1.01 NA Equity SRmn 225 238 237 299 26.3 10.0 Total Debt SRmn 3 95 110 285 159.5 344.5 Reuters 4001.SE Cash & Equiv SRmn 44 22 18 27 48.1 (15.5) Bloomberg AOTHAIM AB EBITDA Mgn % 4.4 4.2 3.9 3.7 - - Price perform (%) 1M 3M 12M Net Mgn % 3.4 3.2 2.6 2.1 - - Absolute (%) 2 14 NA ROE % 33.1 25.1 25.2 23.2 - - Market (%) 6 32 (39) ROA % 13.9 11.0 8.7 6.7 - - Sector (%) 9 20 (16) Div Payout % - - 102.4 54.2 - - Website: www othaimmarkets com EPS SR - 2.6 2.7 2.8 4.2 -
BVPS SR 10.0 10.6 10.5 13.3 26.3 10.0 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) - - 14.4 Product segment 2008 Geographic 2008 P/B (x) - - 3.0 P/Sales (x) - - 0.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - - 3.8 NA NA
Source: Company, NCBC Research Weightage (%) TASI (free float weight) 0.11 • Business brief: AlOthaim primarily operates through four business models MSCI Saudi (domestic – mid cap) hypermarkets, supermarkets, convenience stores, and wholesale stores. The company owns and operates a chain of 77 stores spread across Riyadh region, north Free float (%) Free float 51.00 and Aseer. Al-Othaim also has ten warehouses provided with the latest dry and cold storage facilities and accompanied by a fleet of distribution vehicles. The company Relative share price perf. also plans to open stores in Jeddah and Medina by 2010. 11,000 80 70 9,000 60 • Financials: During the period 2005-08, Al-Othaim’s revenues more than doubled, 7,000 50 40 witnessing a robust CAGR of 26.1%. However, the company has reported 5,000 30 3,000 20 deteriorating EBITDA margins over the years due to higher cost of sales. The trend Jul-08 Oct-08 Jan-09 M ay-09 continued in 2008 with the company reporting a 25.6% y-o-y increase in revenues TASI A. Othaim M arkets (RHS) from SR2,320.1mn in 2007 to SR2,914.9mn. In 2008, the company’s EBITDA margin Top 5 shareholders (%) declined to 3.7%. Accordingly, Al-Othaim’s bottom-line witnessed a modest growth of Al Othaim Holding Company 49.0 4.2% y-o-y from SR59.8mn in 2007 to SR62.3mn in 2008 Abdullah Saleh Ali Al Atheem 6.0 Fahd Abdullah Al Atheem 5.0 • Recent developments: In April 2009, the company announced its 1Q-09 results Huda Abdullah Al Atheem 5.0 wherein it reported 30% y-o-y decline in net profit to SR16.4mn. In November 2008, Abeer Abdullah Al Atheem 5.0 the company appointed CISCO for meeting the infrastructure needs of its Source: NCBC Research communication network. In June 2008, the company announced its Initial Public Offer
of 6.75mn shares at the price of SR40 per share and was listed on Tadawul under the
Retail sector on July 14, 2008.
JUNE 2009 ABDULLAH AL-OTHAIM 153
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Also known as National Agriculture THIMAR
Price SR35.6 National Agriculture Marketing Co (THIMAR), headquartered in Riyadh, is engaged Pricing / Valuation as on May 27, 2009 in the production, procurement, processing and marketing of agricultural products,
Mkt cap SR0.4bn ($95.1mn) accessories, meat, and other supplies through its various dealers. The company Sh. outstanding 10.0mn was established in 1987 and holds a 100% stake in Wasmi Meat.
Key statistics Company financials
52 week range H/L (SR) 39.4/10.3 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 84 104 122 146 20.0 20.1 3m 62.82 16.78 EBITDA SRmn (1) (7) 1 2 96.0 NM 12m 32.85 8.77 Net Income SRmn 2 (16) 3 (8) NM NM Raw Beta 6m 3yr Assets SRmn 119 108 121 118 (2.5) (0.1) 0.95 1.43 Equity SRmn 105 89 91 84 (8.5) (7.3) Total Debt SRmn - 5 2 NA NA NM Reuters 4160.SE Cash & Equiv SRmn 2 18 3 2 (37.0) 5.4 Bloomberg THIMAR AB EBITDA Mgn % (1.3) (6.3) 0.7 1.2 - - Price perform (%) 1M 3M 12M Net Mgn % 2.9 (15.5) 2.1 (5.3) - - Absolute (%) 34 105 10 ROE % 2.4 (16.7) 2.8 (8.8) - - Market (%) 6 32 (39) ROA % 2.2 (14.3) 2.2 (6.5) - - Sector (%) 9 20 (16) Div Payout % ------Website: www.thimar com.sa EPS SR 4.2 (1.6) 0.3 (0.8) NM NM
BVPS SR 52.5 8.9 9.1 8.3 (8.4) NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NM 205.8 NM P/B (x) 4.9 5.9 1.8 Product segment 2008 Geographic 2008 P/Sales (x) 4.2 4.4 1.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.0 0.0
Weightage (%) TASI (free float weight) 0.08 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) 0.00 • Business brief: THIMAR is primarily involved in the sale of agricultural and meat
Free float (%) products to its clients, which include hotels, restaurants, and the military sector. In Free float 100.00 addition, the company provides services for the operation, management, and marketing of agricultural projects. THIMAR is also involved in the wholesale and retail Relative share price perf. trading of agricultural and meat products. In addition, the company grants credit 11, 0 0 0 40 facilities to its customers for payment within a month. 9,000 30 7,000 20 • Financials: THIMAR has reported consistent revenue growth over the previous years 5,000 10 with a CAGR of 20.1% during 2005-08. Keeping in line with the trend, in 2008, 3,000 - revenues grew 20.0% y-o-y. Driven by revenue growth and decline in operating M ay-08Aug-08Nov-08Feb-09M ay-09 (SG&A) expenses, the company reported significant EBITDA growth of 96% y-o-y TASI Thim'ar (RHS) during the year. This resulted in a 50 basis points increase in the EBITDA margins
Top 5 shareholders (%) during 2008. However, the company posted a net loss of SR7.7mn during 2008 compared to a profit of SR2.6mn in 2007, mainly due to investment losses as well as decline in other income.
• Recent developments: The company reported a net loss of SR1.51mn in 1Q-09,
compared to a loss of SR 951,131 for the same period last year. In June 2008, Abdel Source: NCBC Research Rahman Saleh Al Hadheef was appointed as chairman of the company’s Board of Directors.
JUNE 2009 NATIONAL AGRICULTURE MARKETING COMPANY 154
RETAIL
Alkhaleej Training Also known as Alkhaleej
Price SR48.1 Alkhaleej Training and Education Company (Alkhaleej), was established in 1992 and Pricing / Valuation as on May 27, 2009 conducts training programs in the fields of IT, electronics, English language, and
Mkt cap SR0.7bn ($192.7mn) administrative and financial services. The company has more than 81 branches in Sh. outstanding 15.0m Saudi Arabia and in more than 17 locations in the Middle East.
Key statistics Company financials
52 week range H/L (SR) 68.8/23.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 213 242 301 346 14.9 17.5 3m 37.07 9.90 EBITDA SRmn 57 58 60 70 15.7 7.1 12m 22.94 6.12 Net Income SRmn 39 37 36 41 13.7 1.8 Raw Beta 6m 1yr Assets SRmn 178 236 302 357 18.4 26.1 1.39 0.98 Equity SRmn 93 115 154 195 26.3 27.8 Total Debt SRmn 25 42 45 89 100.7 53.9 Reuters 4290.SE Cash & Equiv SRmn 12 8 26 34 29.7 41.1 Bloomberg ALKHLEEJ AB EBITDA Mgn % 26.6 23.8 20.0 20.1 - - Price perform (%) 1M 3M 12M Net Mgn % 18.2 15.3 12.0 11.8 - - Absolute (%) 3 54 (23) ROE % 41.6 35.6 26.8 23.5 - - Market (%) 6 32 (39) ROA % 21.8 17.9 13.4 12.4 - - Sector (%) 9 20 (16) Div Payout % 18.6 39.0 - 18.3 - - Website: www alkhaleej.com.sa EPS SR 5.1 4.8 4.7 4.1 (12.6) (6.8)
BVPS SR 9.3 11.5 15.4 19.5 26.3 27.8 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) - 36.7 11.0 P/B (x) - 8.6 2.3 Product segment 2008 Geographic 2008 P/Sales (x) - 4.4 1.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - - 1.7 Computer training 63.2
Language schools 21.8 Weightage (%) Other professional training 15.0 TASI (free float weight) 0.07 Source: Company,NCBC Research
MSCI Saudi (domestic – mid cap) • Business brief: Alkhaleej executes its training programs through its various divisions
Free float (%) including New Horizons Computer Learning Centers (the largest independent IT Free float 41.20 training company), Direct English Centers, Platinum Center for Advanced Training Solutions (provides advanced computer courses); Takniat for Training, Business & Relative share price perf. Professional Development (specializes in management training); Kawader (employs 11,000 80 9,000 60 the graduates of its programs) and E-Learning (provides more than 2000 courses 7,000 40 online), 5,000 20 3,000 - • Financials: Alkhaleej has recorded a CAGR of 17.5% in revenues over the period M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Alkhaleej Trng (RHS) 2005-08 due to its established training franchise in the Kingdom. The company’s
revenues increased 14.9% y-o-y during 2008. The stable revenue growth caused the Top 5 shareholders (%) company’s EBITDA margin to remain steady at 20.1%. The company’s net income Abdul Aziz Rashid Abdul Rahman Al 20.3 Rashid rose 13.7% during 2008 to SR41.0mn in 2008. Abdul Aziz Hamaad Nasser Al 13.3 • Recent developments: For 1Q-09, the Company registered a decline in net profit of Bulaihid Ahmed Ali Ahmed Al Shedwy 13.3 7% y-o-y to SR10.23mn. In March 2009, CMA approved Alkhaleej request to increase AlWaleed Abdul Razzaq Saleh Al 11.8 its capital from SR100mn to SR150mn by issuing one bonus share for every two held. Duraian In July 2008, Alkhaleej bought 11% stake in Injuavon Global System for SR5mn. In Ahmed Mohammed Salim Al Sirry 7.6 June 2008, the company got the market regulator’s approval to increase its capital to Source: NCBC Research
SR100mn through a bonus issue of 1:4.
JUNE 2009 ALKHALEEJ TRAINING 155
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JUNE 2009 SAUDI ARABIA FACTBOOK 156
Company Page No. Banking and Financials Saudi Electricity 158 Petrochemicals
National Gas 159 Cement
Retail
Energy and Utilities
Agriculture and Food
Telecom and IT
Insurance
Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transportation
Media and Publishing
Hotels and Tourism
ENERGY AND UTILITIES
Also known as SEC Saudi Electric
Price SR9.9 Saudi Electricity Company (Saudi Electric) is the largest power generator in Saudi Pricing / Valuation as on May 27, 2009 Arabia. Established in 2000, the company engages in the generation, transmission,
Mkt cap SR41.2bn ($11,014.5mn) and distribution of electric power across the Kingdom. Saudi Electric was formed as Sh. outstanding 4,166.6mn a result of the consolidation of 10 regional electricity companies.
Key statistics Company financials
52 week range H/L (SR) 13.0/8.9 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 18,761 19,707 20,980 22,294 6.3 5.9 3m 25.84 6.90 EBITDA SRmn 6,995 7,447 7,701 7,626 (2.3) 2.4 12m 25.80 6.89 Net Income SRmn 1,483 1,379 1,424 1,075 (24.5) (10.2) Raw Beta 6m 3yr Assets SRmn 117,563 127,208 136,510 145,156 6.3 7.3 0.25 0.74 Equity SRmn 46,262 47,129 48,135 48,523 0.8 1.6 Total Debt SRmn 8,341 9,757 19,764 20,142 69.2 58.9 Reuters 5110.SE Cash & Equiv SRmn 1,008 4,201 5,589 800 (85.7) (7.4) Bloomberg SECO AB EBITDA Mgn % 37.3 37.8 36.7 34.7 - - Price perform (%) 1M 3M 12M Net Mgn % 7.9 7.0 6.8 5.0 - - Absolute (%) 4 5 (24) ROE % 3.2 3.0 3.0 2.2 - - Market (%) 6 32 (39) ROA % 1.3 1.1 1.1 0.8 - - Sector (%) 5 6 (23) Div Payout % 196.7 211.5 204.8 233.3 - - Website: www se com sa EPS SR 0.4 0.3 0.3 0.3 (24.5) (10.2) BVPS SR 11.1 11.3 11.6 11.6 0.8 (1.6) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 39.3 43.2 35.9 P/B (x) 1.1 1.3 0.8 Product segment H12008 Geographic H12008 P/Sales (x) 2.7 2.9 1.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 5.4 4.7 6.5 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 1.59 Source: Company, NCBC Research
MSCI Saudi (domestic – large cap) 2.62 • Business brief: SEC monopolizes the generation, transmission, and distribution of
Free float (%) electricity to residential, industrial, commercial, and agricultural customers in the Free float 17.28 Kingdom. The Co. also exports and imports energy, and invests in various Saudi power projects. SEC served approx. 5.2mn subscribers and reported a total available Relative share price perf. capacity of 36,949 MW at the end of 2007. 11, 0 0 0 15
9,000 • Financials: SEC’s revenues increased 6.3% y-o-y in 2008 due to rising demand led 10 7,000 by economic growth; however, there was substantial decline in net income to 5 5,000 SR1,074.8 mn from SR1,424.1 mn in 2007, mainly due to higher cost of sales. . 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Recent developments: In May 2009, SEC signed a SR82mn contract for setting up
TASI Saudi Electricity (RHS) of a fuel transportation pipeline from Saudi Aramco distribution station to the Jizan power plant. During the same month, SEC awarded a SR224mn contract to Saudi Top 5 shareholders (%) Services for Electro Mechanic Works Co. for the construction of 380kV cables. SEC Government of Saudi Arabia 74.3 also signed two contracts totaling SR409mn with Saudi Co. for Electrical and ARAMCO 6.9 Mechanical Ltd. and Mohammed Al-Ajimi Corp. to install and extend cables. In April
2009, SEC reported a net loss of SR771mn for the 1Q-09, the same as the
corresponding quarter last year. In March 2009, KSA’s Electricity and Cogeneration
Source: NCBC Research Authority announced plans to split SEC into four independent power generation companies to encourage privatization in the sector.
JUNE 2009 SAUDI ELECTRICITY COMPANY 158
ENERGY AND UTILITIES
Also known as GASCO National Gas
Price SR23.4 National Gas & Industrialization Company (GASCO) was founded in 1963 as a result Pricing / Valuation as on May 27, 2009 of merger of two companies. GASCO is engaged in filling, refilling and distribution
Mkt cap SR1.8bn ($468.6mn) of liquefied petroleum gas (LPG), designing and execution gas networks; selling Sh. outstanding 75.0mn and installing gas tanks and gas cylinders.
Key statistics Company financials
52 week range H/L (SR) 32.5/14.9 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,281 1,340 1,392 1,471 5.7 4.7 3m 12.89 3.44 EBITDA SRmn 107 122 145 116 (19.8) 2.6 12m 18.13 4.84 Net Income SRmn 175 111 139 149 6.7 (5.2) Raw Beta 6m 3yr Assets SRmn 1,600 1,270 1,494 1,297 (14.1) (7.1) 0.50 1.00 Equity SRmn 1,207 992 1,140 941 (14.0) (6.7) Total Debt SRmn 3 - - - - (100.0) Reuters 2080.SE Cash & Equiv SRmn 1 5 19 46 136.0 226.3 Bloomberg NGIC AB EBITDA Mgn % 8.4 9.1 10.4 7.9 - - Price perform (%) 1M 3M 12M Net Mgn % 13.6 8.3 10.0 10.1 - - Absolute (%) 10 14 (19) ROE % 15.0 10.1 13.1 14.0 - - Market (%) 6 32 (39) ROA % 11.0 7.8 10.1 10.7 - - Sector (%) 5 6 (23) Div Payout % 81.7 67.3 80.7 75.0 - - Website: www.gasco.com.sa EPS SR 2.3 1.5 1.9 2.0 6.7 (5.2) BVPS SR 16.1 13.2 15.2 13.1 (14.0) (6.7) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 21.7 18.6 8.7 P/B (x) 2.4 2.3 1.4 Product segment H12008 Geographic H12008 P/Sales (x) 1.8 1.9 0.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.1 4.3 8.6 Real Estate Construction Engg Services 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.27 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) 2.41 • Business brief: GASCO sells LPG gas cylinders across KSA (in sizes of 26.5 liters
Free float (%) and 52.5 liters). The company also provides various types of gas tanks and related Free float 68.95 accessories. About 350 carriers of GASCO have a capacity of 40,000 liters each, while the remaining 42 have a capacity ranging from 11,000–23,000 liters each. The Relative share price perf. filling plants are located in Riyadh, Jeddah, Dammam, Al Madinah, Taif, Bureidah and 11, 0 0 0 40 Khamis Mushait. The company also designs and implements gas networks for retail 9,000 30 and industrial customers. 7,000 20
5,000 10 • Financials: On a y-o-y basis, GASCO’s sales increased by 5.7% in 2008, while net
3,000 - income rose 6.7% due to increase in investment income. However, higher cost of M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 sales led to decline in EBIDTA margins to 7.9% in 2008 from 10.4% in 2007. The TASI Gas&Industrialization (RHS) company’s EBITDA was down to SR116.0 mn in 2008 from SR144.7 mn in 2007.
Top 5 shareholders (%) • Recent developments: In May 2009, GASCO signed a MoU for the setting up of a Saeed Ali Ghadran Al Ghamdi 11.9 natural gas distribution station in Hail by 2011 for a total cost of SR100mn. The Public Investment Fund 10.9 company’s net profit for the 1Q-09 decreased 57% y-o-y to, SR12.5mn. In January General Organization for Social 6.1 2009, Abdullah Al-Ali Al-Naim was appointed as the Chairman of the Board of Insurance Directors. In July 2008, Saudi Arabia’s Council of Ministers approved the proposal of
the Saudi Economic Council to maintain GASCO’s distribution of gas derivatives for a Source: NCBC Research further five years.
JUNE 2009 NATIONAL GAS 159
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JUNE 2009 SAUDI ARABIA FACTBOOK 160
Company Page No. Banking and Financials Savola Group 162 Petrochemicals
Almarai Company 163 Cement
National Agriculture 164 Retail
Hail Agriculture 165 Energy and Utilities
Qassim Agriculture 166 Agriculture and Food
Jazan Development 167 Telecom and IT
Saudi Dairy & Foodstuff 168 Insurance
Al-Jouf Agriculture 169 Multi Investment
Food Products 170 Industrial Investment
Anaam International 171 Building and Construction
Halwani Brothers 172 Real Estate
Saudi Fisheries 173 Transportation
Tabuk Agriculture 174 Media and Publishing
Ash Sharqiyah Development 175 Hotels and Tourism
AGRICULTURE & FOOD INDUSTRIES
Also known as Savola Group Savola
Price SR23.1 Savola Group is a leading retailer of foods in the Middle East region, with Pricing / Valuation as on May 27, 2009 operations extending as far as North Africa and Central Asia. The group’s business
Mkt cap S11.6bn ($3,084.1mn) interests are divided into two segments: Savola Foods Sector (edible oils, sugar Sh. outstanding 500.0mn and foods) and Savola Retail Sector (retail outlets, real estate and plastics).
Key statistics Company financials
52 week range H/L (SR) 38.3/16.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 6,857 9,097 10,410 13,795 32.5 26.2 3m 24.35 6.50 EBITDA SRmn 657 745 826 990 19.8 14.6 12m 31.64 8.45 Net Income SRmn 1,202 1,149 1,230 202 (83.5) NM Raw Beta 6m 3yr Assets SRmn 8,117 11,275 11,590 14,527 25.3 21.4 0.99 1.13 Equity SRmn 2,985 6,084 7,157 6,550 (8.5) 29.9 Total Debt SRmn 2,562 2,395 1,903 4,709 147.4 22.5 Reuters 2050.SE Cash & Equiv SRmn 265 2,894 335 544 62.5 27.0 Bloomberg SAVOLA AB EBITDA Mgn % 9.6 8.2 7.9 7.2 - - Price perform (%) 1M 3M 12M Net Mgn % 17.5 12.6 11.8 1.5 - - Absolute (%) 0 38 (38) ROE % 47.6 25.3 18.6 3.0 - - Market (%) 6 32 (39) ROA % 16.8 11.8 10.8 1.5 - - Sector (%) 4 21 (22) Div Payout % 29.9 32.6 45.7 247.1 - - Website: www savola com EPS SR 40.1 3.1 3.3 0.4 (87.7) NM
BVPS SR 99.5 16.2 19.1 13.1 (31.4) NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 15.3 14.6 59.8 Product segment 2008 Geographic 2007 P/B (x) 2.9 2.5 1.8 P/Sales (x) 1.9 1.7 0.9 %Rev % Net Inc/(Loss) Breakup %Rev % Net Inc/(Loss) Div yield (%) 2.1 3.1 4.1 Food Manufacturing 58 0 Saudi Arabia 73
Retail 36 76 Iran 12 Weightage (%) Plastics 624Egypt 10 TASI (free float weight) 1.96 Rest 5 Source: Company, NCBC Research MSCI Saudi (domestic – large cap) 2.74
• Business brief: Savola enjoys a leading position in edible oils and sugar retailing via Free float (%) its 79 retail outlets spread across the Kingdom. The group operates through affiliates Free float 75.73 including Afia International (95% stake), Azizia Panda United (80%), and United Relative share price perf. Sugar Co. (65%). It has diversified into real estate with stakes in United Properties 11, 0 0 0 40 Co. (100%) and Kinan Intl. Real Estate Development Co. (30%) amongst others. 9,000 30 7,000 20 • Financials: During 2008, Savola’s sales were up 32.5% y-o-y from SR10,410mn in 5,000 10 2007 to SR 13,795mn in 2008. EBITDA margins recorded a decline of 70 basis points 3,000 - M ay-08 Sep-08 Jan-09 M ay-09 to 7.2% in 2008 from 7.9% in 2007 due to higher cost of sales and operating TASI SAVOLA Group (RHS) expenses during the period. Higher operating expenses coupled with lower
investment income also led to a 83.5% y-o-y decline in net income from SR1,230mn Top 5 shareholders (%) in 2007 to SR202.4mn in 2008. Mohammed Ibrahim Mohammed Al 11.9 Essa • Recent developments: In April ’09, Savola upped stake in Almarai Co., Savola Abdullah Mohammed Abdullah Al 8.7 Foods Co. and Afia Egypt to 29%, 90% and 99.8%, spending SR500mn, SR167mn Rabeah General Organization for Social 9.3 and SR65mn, respectively. In the same month, Savola released 1Q-09 result, Insurance reporting 22.8% y-o-y decline in net income to SR193mn. Further, the company Al-Muhaid b Co. 8.4 announced to hike its annual edible oil refining capacity to 0.4mn tonnes by the end
of 2009. In March ‘09, Savola reiterated its expansion plans and looks to open 12 Source: NCBC Research new stores in 2009. In Jan 09, Savola got approval to set up a sugar factory in Egypt.
JUNE 2009 SAVOLA GROUP 162
AGRICULTURE & FOOD INDUSTRIES
Also known as Almarai Company Almarai
Price SR144.5 Almarai Company, based in Riyadh, is engaged in the production and distribution of Pricing / Valuation as on May 27, 2009 a range of dairy and food products as well as beverages. The company, established
Mkt cap SR15.8bn ($4,205.7mn) in 1976, sells products through its own retail outlets under several strong brands Sh. Outstanding 109.0mn such as ALMARAI and ALYOUM.
Key statistics Company financials
52 week range H/L (SR) 185.0/110.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 2,146 2,757 3,770 5,030 33.4 32.8 3m 21.82 5.83 EBITDA SRmn 559 709 1,096 1,440 31.3 37.1 12m 33.36 8.91 Net Income SRmn 386 465 667 910 36.4 33.1 Raw Beta 6m 3yr Assets SRmn 2,976 3,768 6,336 8,181 29.1 40.1 0.59 0.98 Equity SRmn 1,429 1,894 3,053 3,617 18.5 36.3 Total Debt SRmn 1,111 1,388 2,592 3,644 40.6 48.6 Reuters 2280.SE Cash & Equiv SRmn 42 67 138 247 78.7 80.9 Bloomberg ALMARAI AB EBITDA Mgn % 26.0 25.7 29.1 28.6 - - Price perform (%) 1M 3M 12M Net Mgn % 18.0 16.9 17.7 18.1 - - Absolute (%) 1 (5) (5) ROE % 30.3 28.0 27.0 27.3 - - Market (%) 6 32 (39) ROA % 14.4 13.8 13.2 12.5 - - Sector (%) 4 21 (22) Div Payout % - 89.9 40.8 41.9 - - Website: www.almarai.com EPS SR 19.3 2.2 6.1 8.4 36.4 NM BVPS SR 71.4 9.1 28.0 33.2 18.5 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 16.1 19.6 16.8 Product segment 2008 Geographic 2008 P/B (x) 4.0 4.3 4.2 P/Sales (x) 2.7 3.5 3.0 Breakup %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 5.6 2.1 2.5 Fresh Dairies 49.2 Saudi Arabia 68.7
Cheese and Butter 20.4 Other GCC 30.0 Weightage (%) Bakery Products 10.2 Other countries 1.3 TASI (free float weight) 1.47 Dairy Products 9.9 MSCI Saudi (domestic – large cap) 1.41 Fruit Juices 9.6 Other products 0.6 Source: Company, NCBC Research Free float (%) Free float 41.72 • Business brief: Almarai’s portfolio comprises fresh and long-life dairy products (such
Relative share price perf. as milk, natural and fruit yoghurts, cream and evaporated milk), several fruit juice
11, 0 0 0 200 flavors, cheese and butter, bakery products, and other items such as tomato paste 9,000 15 0 and jams. The company has a leading 27% market share in the GCC dairy market. It 7,000 10 0 has a 59% milk market share in KSA 5,000 50 3,000 - • Financials: Almarai’s revenues increased 33.4% on y-o-y basis to SR5,029.9mn in M ay-08 Sep-08 Jan-09 M ay-09
TASI Almarai (RHS) 2008 from SR3769.8mn in 2007. However, the EBITDA margin contracted 50 basis points y-o-y to 28.6% in 2008 due to higher operating (S,G&A) expenses. Revenue Top 5 shareholders (%) growth supported 36.4% y-o-y increase in net income to SR910.3mn in 2008. HH Prince Sultan Mohammed Saud 30.2 Al Kabir Al Saud • Recent developments: In May 2009, the company agreed on a share swap deal Savola Group 27.9 with Hail Agricultural Development Co. (HADCO) wherein the latter’s shareholders Omran Mohammed Al Omran and 5.7 will receive 1 share of Almarai for 5 shares in HADCO. In April 2009, Almarai Company reported a 21.7% y-o-y growth in the 1Q-09 net income to SR197.4mn. In March
2009, Almarai announced to enter the infant formula milk market with an investment Source: NCBC Research of SR650mn. In Feb 2009, Almarai announced a JV with PepsiCo Inc. for investing in dairy and juice processors in Asia, Africa and Middle East.
JUNE 2009 ALMARAI COMPANY 163
AGRICULTURE & FOOD INDUSTRIES
Also known as National Agriculture NADEC
Price SR38.4 National Agriculture Development Company (NADEC) commenced operations in Pricing / Valuation as on May 27, 2009 1981 with a 20% government stake. The company focuses on agricultural
Mkt cap SR2.3bn ($615.2mn) production, food processing and distribution. NADEC operates in three business Sh. outstanding 60.0 mn segments – agricultural, dairy and juice products, all sold under the NADEC brand.
Key statistics Company financials
52 week range H/L (SR) 45.3/23.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 703 852 1,083 1,339 23.6 24.0 3m 18.67 4.98 EBITDA SRmn 142 183 196 258 31.6 22.0 12m 13.66 3.65 Net Income SRmn 58 81 116 80 (30.5) 11.6 Raw Beta 6m 3yr Assets SRmn 1,270 1,368 1,900 2,414 27.0 23.9 0.84 1.08 Equity SRmn 942 977 1,064 1,060 (0.4) 4.0 Total Debt SRmn 57 103 445 922 107.0 153.6 Reuters 6010.SE Cash & Equiv SRmn 27 4 17 18 7.1 (12.3) Bloomberg NADEC AB EBITDA Mgn % 20.2 21.4 18.1 19.3 - - Price perform (%) 1M 3M 12M Net Mgn % 8.2 9.5 10.7 6.0 - - Absolute (%) 12 12 (12) ROE % 6.3 8.5 11.3 7.6 - - Market (%) 6 32 (39) ROA % 4.9 6.2 7.1 3.7 - - Sector (%) 4 21 (22) Div Payout % 77.2 69.8 - 56.0 - - Website: www nadec.com.sa EPS SR 7.8 2.2 2.8 1.3 (52.5) NM
BVPS SR 126.5 25.9 25.9 17.7 (31.9) NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 19.7 22.0 23.6 P/B (x) 1.6 2.4 1.8 Product segment 2007 Geographic 2007 P/Sales (x) 1.9 2.3 1.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.5 - 2.4 Dairies, Fresh & Canned vegetables 70 Saudi Arabia 100 Wheat, Corn & Potatoes farming 30 Weightage (%) TASI (free float weight) 0.26 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 2.71 • Business brief: The Company offers a wide range of products under each of its
Free float (%) operating segments. Under its agricultural segment, NADEC offers manufactured Free float 50.04 products such as tomato paste, grains, vegetables, fruits, fodder, olives and honey. The dairy product segment offers long-life products (including cheese and milk), Relative share price perf. deserts and special products. The juice segment offers a range of fresh and long-life 11, 0 0 0 50 9,000 40 juices in different size containers. 30 7,000 20 Financials: NADEC’s revenues have shown consistent growth with 23.6% y-o-y 5,000 10 • 3,000 - growth in 2008 and a CAGR of 24.0% during 2005-08. Driven by higher sales, M ay-08 Sep-08 Jan-09 M ay-09 NADEC’s EBITDA also grew 31.6% y-o-y. However, the company’s net income TASI NADEC (RHS) tumbled 30.5% in 2008 largely due to higher interest expenses during the year. The
Top 5 shareholders (%) ROE of the company fell to 7.6% while ROA also declined to 3.7% in 2008. Public Investment Fund 20.0 • Recent developments: In April 2009, the company recorded a net loss of SR4.4mn Suleiman Abdul Aziz Saleh Al Rajhi 19.7 for 1Q-09 vs. SR4.1mn net profit in 1Q-08. In February 2009, the company won an Saleh Abdul Aziz Saleh Al Rajhi 11.4 Abdullah Abdul Aziz Saleh Al Rajhi 8.3 initial court ruling over a land dispute against Saudi Aramco. In November ’08, Riyad Mohammed Abdullah Al NADEC announced to enhance focus in the GCC region due to the growing demand 7.5 Humaidan and signed a long-term contract with UAE based Planet Nutrition. In April 2008, the Source: NCBC Research company announced, its shareholders approval of one-for-two bonus shares thus
making capital to 600 mn Saudi riyals from 400 mn Saudi riyals.
JUNE 2009 NATIONAL AGRICULTURE 164
AGRICULTURE & FOOD INDUSTRIES
Also known as Hail Agriculture HADCO
Price SR27.4 Hail Agriculture Development Company (HADCO) headquartered in Hail, was Pricing / Valuation as on May 27, 2009 established in 1982. In Nov.08, Almarai offered to buy HADCO through a share swap
Mkt cap SR0.8bn ($219.5mn) arrangement, which is pending for shareholders’ and regulatory approvals. The Sh. outstanding 30.0mn company markets diversified agricultural products under the brand ‘HADCO’.
Key statistics Company financials
52 week range H/L (SR) 29.4/13.9 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 244 283 333 395 18.7 17.5 3m 22.79 6.09 EBITDA SRmn 72 86 112 132 18.0 22.3 12m 19.49 5.20 Net Income SRmn 31 28 51 65 26.7 27.9 Raw Beta 6m 3yr Assets SRmn 516 577 621 619 (0.4) 6.3 0.94 1.11 Equity SRmn 397 414 451 495 9.7 7.6 Total Debt SRmn - 41 45 20 (55.0) NM Reuters 6030.SE Cash & Equiv SRmn 24 15 31 10 (68.2) (25.9) Bloomberg HAACO AB EBITDA Mgn % 29.7 30.5 33.7 33.5 - - Price perform (%) 1M 3M 12M Net Mgn % 12.7 9.9 15.4 16.4 - - Absolute (%) 7 30 7 ROE % 8.1 6.9 11.8 13.7 - - Market (%) 6 32 (39) ROA % 6.5 5.1 8.5 10.5 - - Sector (%) 4 21 (22) Div Payout % 48.4 53.6 29.3 23.1 - - Website: www hadco.com.sa EPS SR 5.2 0.9 1.7 2.2 26.7 NM
BVPS SR 66.2 13.8 15.0 16.5 9.7 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 29.7 19.9 9.8 P/B (x) 2.0 2.3 1.3 Product segment 2008 Geographic 2008 P/Sales (x) 2.9 3.1 1.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 1.8 1.5 2.4 Poultry 59.0 33.1 Agriculture 41.0 66.9 Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.18 MSCI Saudi (domestic –small cap) 1.0 • Business brief: HADCO operates through two main divisions—Agriculture and Poultry—over an area of 35,000 hectares. Under the Agriculture segment, HADCO Free float (%) grows various products including wheat; yellow corn; alfalfa; palm trees producing Free float 99.99 dates and grapes. Under the Poultry segment, the company operates six poultry
Relative share price perf. farms, and has an annual capacity of 215,000 hens and 31mn eggs.
11, 0 0 0 40 • Financials: HADCO’s revenues increased 18.7% y-o-y to SR394.9mn in 2008 driven 9,000 30 7,000 20 by growth in the Agriculture and Poultry segment. Driven by this, the company’s 5,000 10 EBITDA grew 18.0% y-o-y to SR132.3mn. However, EBITDA margins declined 20 3,000 - basis points y-o-y to 33.5% in 2008 mainly due to higher operating (S,G&A and M ay-08 Sep-08 Jan-09 M ay-09
TASI Hail Agriculture (RHS) amortization) expenses.
• Recent developments: In May 2009, the company agreed on a share swap deal Top 5 shareholders (%) with Almarai Co. wherein the formers’ shareholders will receive 1 share of Almarai for Saleh Abdulaziz Al Rajhi and Co. 6.0 5 shares in HADCO. In April 2009, the company announced 73.0% y-o-y decline 1Q- 09 net income to SR4.9mn. In February 2009, HADCO entered into a rental contract with Ministry of Agriculture for a 28.5 mn sq meter land in Hail primarily aimed at expansion of poultry business. HADCO announced, in February 2009, plans to invest Source: NCBC Research in farming activity in Sudan. In November 2008, the company appointed a financial
and legal advisor to evaluate Saudi based Al Marai Company bid to take over the
company through a share swap of 1:6 shares for HAIL’s shareholders.
JUNE 2009 HAIL AGRICULTURE 165
AGRICULTURE & FOOD INDUSTRIES
Also known as Qassim Agriculture GACO
Price SR12.0 Qassim Agriculture Co. (GACO) was established in 1985 and is headquartered in Pricing / Valuation as on May 27, 2009 Qassim. The company invests in agricultural businesses and livestock. With the
Mkt cap SR0.6bn ($159.5mn) acquisition of the Al Bandaria Group, the company made an entry into the yogurt Sh. outstanding 50.0mn segment.
Key statistics Company financials
52 week range H/L (SR) 15.5/6.4 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 37 66 49 88 79.6 33.2 3m 47.05 12.56 EBITDA SRmn 10 16 13 1 (91.2) (50.9) 12m 26.77 7.15 Net Income SRmn 72 (55) (3) 0 NM (84.1) Raw Beta 6m 3yr Assets SRmn 567 504 498 574 15.2 0.4 0.99 1.24 Equity SRmn 464 407 404 406 0.3 (4.4) Total Debt SRmn 10 8 6 6 2.3 (17.1) Reuters 6020.SE Cash & Equiv SRmn 11 52 12 2 (86.2) (46.8) Bloomberg QAACO AB EBITDA Mgn % 25.5 24.0 26.2 1.3 - - Price perform (%) 1M 3M 12M Net Mgn % 191.3 (83.2) (5.8) 0.3 - - Absolute (%) 11 35 (22) ROE % 17.4 (12.5) (0.7) 0.1 - - Market (%) 6 32 (39) ROA % 14.7 (10.2) (0.6) 0.1 - - Sector (%) 4 21 (22) Div Payout % NA NA NA 0.0 - - Website: NA EPS SR 7.2 (1.1) (0.1) 0.0 NM (90.7)
BVPS SR 46.4 8.1 8.5 8.1 (4.9) (44.1) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NM NM NM P/B (x) 2.6 2.8 0.9 Product segment 2007 Geographic 2007 P/Sales (x) 16.0 23.1 4.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA Wheat & Corn Farming 71 Saudi Arabia 100.0 100.0 Dates Production 26 Weightage (%) Dairies Production 3 TASI (free float weight) 0.13 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 0.96 • Business brief: GACO’s main business line involves investment in agricultural
Free float (%) products and livestock. In addition, GACO produces 2,500 tons of dates, 25,000 tons Free float 100.00 of corn, and 42,000 tons of wheat annually. GACO is also a distributor of dates and dairy products. To meet its internal requirements, the company also invests in the Relative share price perf. construction of cooling stores; transportation; and import of fodder, cereals, and 11, 0 0 0 20 9,000 15 agricultural equipment. GACO has invested approximately SR20mn in Saudi based 7,000 10 companies. 5,000 5 3,000 - • Financials: GACO’s revenues grew significantly by 79.6% y-o-y to SR88.4mn in 2008. M ay-08 Sep-08 Jan-09 M ay-09 However, its EBITDA tumbled 91.2% during the year due to increased cost of sales, TASI Qassim Agriculture (RHS) resulting in EBTIDA margin of 1.3% in 2008 as compared to 26.2% in 2007. GACO’s
Top 5 shareholders (%) bottom-line of SR0.3mn turned into positive territory in 2008, after two consecutive year of losses, driven by higher other non-operating income during the year.
• Recent developments: In April 2009, the company reported 80.0% y-o-y decline in
1Q-09 net income to SR0.1mn. In December 2008, the company completed acquisition of Al Bandariah Group for SR153.6mn. On July 02, 2008, GACO received Source: NCBC Research six-year Murbaha facility worth SR 75mn ($20 mn) from Al Rajhi Bank for buying
property in Medina and Mekkah. On June 30, 2008, the Company announced its plans to begin a new SR250mn (USD66.7 mn) poultry project.
JUNE 2009 QASSIM AGRICULTURE CO. 166
AGRICULTURE & FOOD INDUSTRIES
Also known as Jazan Development JAZADCO Price SR12.8 Jazan Development Co. (JAZADCO), headquartered in Gazan was established in 1993 Pricing / Valuation as on May 27, 2009 to conduct agriculture and aquaculture activities in KSA. JAZADCO’s subsidiaries
Mkt cap SR0.6bn ($170.9mn) include Solenda Aquaculture (U.K.) with a 50% stake, Jannat Agricultural Investment Sh. outstanding 50.0mn Company (25% stake) and Tabuk Fisheries Company (20% stake).
Key statistics Company financials
52 week range H/L (SR) 18.5/7.7 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 19 19 27 42 55.3 30.1 3m 28.04 7.49 EBITDA SRmn (4) 1 4 0 (87.9) NM 12m 17.90 4.78 Net Income SRmn 69 137 14 20 39.0 (33.8) Raw Beta 6m 3yr Assets SRmn 451 836 795 723 (9.0) 17.0 0.74 1.16 Equity SRmn 422 805 769 675 (12.1) 16.9 Total Debt SRmn - - - 20 - - Reuters 6090.SE Cash & Equiv SRmn 3 445 110 83 -24.6 191.5 Bloomberg GIZACO AB EBITDA Mgn % (19.2) 3.5 13.1 1.0 - - Price perform (%) 1M 3M 12M Net Mgn % 362.0 732.4 53.3 47.7 - - Absolute (%) 29 42 (29) ROE % 19.8 22.3 1.8 2.7 - - Market (%) 6 32 (39) ROA % 17.8 21.2 1.8 2.6 - - Sector (%) 4 21 (22) Div Payout % 18.3 36.6 175.1 126.0 - - Website: www jazadco.com.sa EPS SR 13.7 2.7 0.3 0.4 39.0 NM
BVPS SR 84.4 16.1 15.4 13.5 (12.1) NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 8.9 87.4 23.4 P/B (x) 1.5 1.6 0.7 Product segment 2008 Geographic 2008 P/Sales (x) 64.8 46.6 11.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 4.1 2.0 5.4
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.14 • Business brief: JAZADCO provides a range of products under its two operating MSCI Saudi (domestic) N/A segments—agriculture and aquaculture. The agriculture segment owns and operates Free float (%) a farm cultivated with tropical fruits such as figs, mangos, guavas, and bananas, Free float 98.79 while the aquaculture segment operates a shrimp farming project. JAZADCO sells its products across Saudi Arabia and exports to other Gulf Cooperation Council (GCC) Relative share price perf.
11, 0 0 0 20 and European countries. 9,000 15 • Financials: JAZADCO’s revenues grew 55.3% y-o-y to SR41.6mn in 2008. However, 7,000 10 5,000 5 EBITDA margins contracted by 12.1 percentage points to 1% in 2008 due to massive 3,000 - rise in cost of sales during the year. On the other hand, the company’s net profit M ay-08 Sep-08 Jan-09 M ay-09
TASI Jazan Development (RHS) registered an increase of 39.0% y-o-y to SR19.8mn in 2008.
• Recent developments: In April 2009, the company recorded 98.6% y-o-y decline in Top 5 shareholders (%) 1Q-09 net income to SR0.07mn. In February 2009, JAZADCO signed contract worth Khaled Saleh Abdul Rahman Al 5.1 Shethry $41 mn for the sale of shrimp. In January 2009, Al-Khabeer Merchant Finance Corporation signed an agreement with JAZADCO for setting up a SR400mn real estate fund for the Jazan Economic City project. In November 2008, the company
started experimental operation of SR35.6mn bottling factory project in Jazan with an
annual capacity of 46mn liters. In March 2008, JAZADCO announced that it had Source: NCBC Research signed an agreement with Tabuk Fisheries Company (Saudi), under which each company would acquire a 23.06% stake in Fjord Marin (Turkey).
JUNE 2009 JAZAN DEVELOPMENT CO 167
AGRICULTURE & FOOD INDUSTRIES
Saudi Dairy & Foodstuff
Price SR27.5 Jeddah-based Saudia Dairy & Foodstuff Company (SADAFCO) commenced Pricing / Valuation as on May 27, 2009 operations in 1977 focusing on dairy products. The company later diversified its
Mkt cap SR0.9bn ($238.7mn) product line by entering into joint ventures with food companies. SADAFCO now Sh. outstanding 32.5mn has a portfolio comprising more than 100 products sold under the SAUDIA brand.
Key statistics Company financials
52 week range H/L (SR) 43.8/15.7 YoY CAGR(%) 20062007 2008 2009 (%) (06-09) Avg daily turnover (mn) SR US$ Net Revenues SRmn 825 769 878 922 5.0 3.8 3m 11.33 3.02 EBITDA SRmn 52 93 104 102 (2.3) 24.8 12m 17.66 4.72 Net Income SRmn (25) 35 56 29 (48.9) NM Raw Beta 6m 3yr Assets SRmn 770 732 764 711 (6.9) (2.6) 0.86 1.24 Equity SRmn 455 488 515 502 (2.4) 3.3 Total Debt SRmn 139 22 6 1 (80.2) (79.2) Reuters 2270.SE Cash & Equiv SRmn 60 105 83 50 (39.8) (5.9) Bloomberg SADAFCO AB EBITDA Mgn % 6.3 12.2 11.9 11.0 - - Price perform (%) 1M 3M 12M Net Mgn % (3.0) 4.5 6.4 3.1 - - Absolute (%) 1 45 (21) ROE % (5.0) 7.4 11.2 5.6 - - Market (%) 6 32 (39) ROA % (3.0) 4.6 7.5 3.9 - - Sector (%) 4 21 (22) Div Payout % - 93.2 87.0 0.0 - - Website: www.sadafco.com EPS SR (0.8) 1.1 1.7 0.9 (48.9) NM
BVPS SR 14.0 15.0 15.8 15.5 (2.4) 3.3 Valuation multiples Source: Company, NCBC Research
2007 2008 2009 Segment-wise business analysis P/E (x) 43.1 10.1 27.3 P/B (x) 3.1 1.1 1.6 Product segment 2008 Geographic 2008 P/Sales (x) 2.0 0.6 0.8 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.2 8.6 0.0 Long Shelf Life UHT 69.8 GCC 100.0 100.0 Ice-creams 8.9 Weightage (%) Tomato paste 7.3 TASI (free float weight) 0.12 Cheeses 5.6 MSCI Saudi (domestic) N/A Juices & Flavored Milk 5.2
Snacks & Canned Peas/beans 2.9 Free float (%) Other Dressings 0.4 Free float 58.21 Source: Company, NCBC Research
Relative share price perf. • Business brief: The company operates through five main segments—milk, juices,
11, 0 0 0 50 snacks, ice cream, and other foodstuffs. Under the milk segment, SADAFCO offers 9,000 40 30 customers a wide range of milk packs and milk shakes. The ice cream segment sells 7,000 20 a number of ice cream flavors, while the snacks segment includes a few types of 5,000 10 3,000 - crispies. The other foodstuffs segment produces tomato paste and hummus. M ay-08 Sep-08 Jan-09 M ay-09
TASI SADAFCO (RHS) • Financials: SADAFCO‘s revenue grew 5.0% on y-o-y basis to SR922.3mn for the
year ended March 2009. However, the company’s EBITDA margin declined to 11.0% Top 5 shareholders (%) as rise in cost of sales and administrative expenses surpassed the revenue growth. United Industries Company 30.1 Net profit declined 48.9% y-o-y to SR28.7mn in FY09. The fall in the net income was Al Samih Trading Company 11.6 mainly due to increase in cost of sales, administrative expenses as well as the losses Global Investment House 8.9 on investment income.
• Recent developments: In April 2008, the company sold land in Riyadh for SR20mn, Source: NCBC Research making a profit of SR15.4mn.
JUNE 2009 SAUDI DAIRY & FOODSTUFF 168
AGRICULTURE & FOOD INDUSTRIES
Also known as Al-Jouf Agriculture JADCO
Price SR28.0 Al-Jouf Agriculture Development Co. (ALJOUF) was established in 1988. The Pricing / Valuation as on May 27, 2009 company is headquartered in Al Jouf and is engaged in processing, selling
Mkt cap SR0.6bn ($149.5n) agricultural, and livestock products. ALJOUF sells its products across Saudi Arabia Sh. Outstanding 20.0mn and in the neighboring states through a network of channels and marketing outlets.
Key statistics Company financials
52 week range H/L (SR) 38.5/15.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 145 174 189 213 12.5 13.6 3m 9.75 2.60 EBITDA SRmn 41 84 95 96 1.3 32.9 12m 15.51 4.14 Net Income SRmn 11 38 52 55 6.3 68.8 Raw Beta 6m 3yr Assets SRmn 393 489 507 545 7.5 11.5 1.06 1.19 Equity SRmn 318 380 430 472 9.8 14.1 6070.SE Total Debt SRmn - 11 1 6 459.0 NM Reuters Cash & Equiv SRmn 8 37 12 28 129.5 51.2 Bloomberg JADCO AB EBITDA Mgn % 28.3 48.0 50.3 45.3 - - Price perform (%) 1M 3M 12M Net Mgn % 7.9 21.8 27.3 25.8 - - Absolute (%) 1 38 (21) ROE % 3.7 10.9 12.7 12.2 - - Market (%) 6 32 (39) ROA % 3.0 8.6 10.4 10.4 - - Sector (%) 4 21 (22) Div Payout % 0.0 0.0 19.4 18.2 - - Website: www.aljouf com sa EPS SR 2.8 1.9 2.6 2.7 6.3 NM
BVPS SR 79.4 19.0 21.5 23.6 9.8 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 18.4 16.7 7.6 P/B (x) 1.8 2.0 0.9 Product segment 1H 08 Geographic 1H 08 P/Sales (x) 4.0 4.5 2.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 1.2 2.4 Grain, Fruits and Vegetables 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.12 MSCI Saudi (domestic – mid cap) 0.91 • Business brief: ALJOUF’s core activity comprises processing and marketing agricultural and animal products. The company’s product portfolio includes potatoes Free float (%) (table and manufacturing) and potato seeds, onion and onion seeds, fruits such as Free float 95.20 peaches, plums, apples and almonds. In addition, the portfolio includes products such
Relative share price perf. as olive oil, bee honey, wheat and barley, and alfalfa fodder for livestock and fodder
11, 0 0 0 40 dealers. ALJOUF has expanded its product profile by including milk production and 9,000 30 processing (under the brand AL-SAFWA DAIRIES), and sheep breeding & fattening. 7,000 20 5,000 10 • Financials: ALJOUF’s revenues have shown consistent growth with a CAGR of 3,000 - 13.6% during 2005-08 and a 12.5% y-o-y growth in 2008 to SR212.8mn. However, M ay-08 Sep-08 Jan-09 M ay-09
TASI Jouff Agriculture (RHS) the EBITDA of the company grew by a meager 1.3% due to increase in cost of sales and other operating expenses during the year resulting in a 500 basis points Top 5 shareholders (%) contraction in EBITDA margins.
• Recent developments: The company’s net income in 1Q-09 grew 79% y-o-y to
SR13.8mn. In Feb 2009, ALJOUF announced to convert itself into a holding company. The new entity is expected to have three firms under its control. In Jan 2008, the company announced two contracts to provide clover crop worth SR61 mn. Source: NCBC Research In Nov 2008, Al JOUF recognized strategic plans to venture into new activities,
primarily aimed at reducing its reliance on wheat. In April 2008, the company’s Board approved to hike the capital of the company to SR250 mn through 1:4 bonus issue.
JUNE 2009 AL-JOUF AGRICULTURE 169
AGRICULTURE & FOOD INDUSTRIES
Also known as Wafra, Wafra Food Food Products Co Products Company Price SR22.8 Riyadh-based Food Products Company was established in 1989 to provide Saudi Pricing / Valuation as on May 27, 2009 families with high quality food products. It is one of the leading food manufacturing
Mkt cap SR0.5bn ($121.8mn) companies, concentrating on the processing, marketing, distribution, and export of Sh. outstanding 20.0mn value added foodstuffs. The company’s target markets are Asia and the Middle East.
Key statistics Company financials
52 week range H/L (SR) 28.5/8.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 50 54 65 76 16.4 14.7 3m 61.12 16.32 EBITDA SRmn 9 11 19 18 (3.3) 25.9 12m 35.05 9.36 Net Income SRmn (48) 5 8 14 87.3 NM Raw Beta 6m 3yr Assets SRmn 128 175 183 186 1.8 13.2 1.46 1.26 Equity SRmn 100 149 158 170 7.6 19.2 Total Debt SRmn 8 6 3 0 (100.0) NM Reuters 2100.SE Cash & Equiv SRmn 2 3 7 5 (21.7) 32.3 Bloomberg FPCO AB EBITDA Mgn % 18.2 20.4 29.0 24.1 - - Price perform (%) 1M 3M 12M Net Mgn % (95.3) 9.4 11.6 18.7 - - Absolute (%) 7 70 (9) ROE % (36.2) 4.1 4.9 8.6 - - Market (%) 6 32 (39) ROA % (29.9) 3.4 4.2 7.7 - - Sector (%) 4 21 (22) Div Payout % ------Website: www.wafrah.com EPS SR (11.9) 0.3 0.4 0.7 87.3 NM
BVPS SR 25.1 7.4 7.9 8.5 7.6 (30.3) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 140.2 103.3 15.8 P/B (x) 4.8 4.9 1.3 Product segment 2008 Geographic 2008 P/Sales (x) 13.3 11.9 2.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0 0 0 Cereals, Pasta, Frozen products 100.0 GCC Countries 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.10 MSCI Saudi (domestic – small cap) 0.65 • Business brief: The company’s recognized brand name is WAFRA. The company
has a 10.0% stake in Jannat Agricultural Investment Co. The operations of Food Free float (%) Products Company can be classified into four segments, with a state-of-the-art plant Free float 100.00 for each segment. The different plants are as follows: meat factory (offers beef and
Relative share price perf. chicken burgers, kebabs, frankfurters, etc.), vegetable factory (offers frozen french
11, 0 0 0 30 fries, potato wedges, and varieties of peanuts), pasta factory (produces a wide range 9,000 20 of pasta under its various brands), and breakfast cereals (supplies corn flakes, 7,000 10 5,000 frosted flakes, and rice crispies). 3,000 - M ay-08 Sep-08 Jan-09 M ay-09 • Financials: Food Products Company’s sales increased 16.4% on y-o-y basis to
TASI Food (RHS) SR75.6mn in 2008 driven by the expansion in marketing outlets. However, the rise in
cost of raw materials led to a 3.3% y-o-y decline in the EBITDA to SR18.2mn. This Top 5 shareholders (%) resulted in EBITDA margins falling 590 basis points to 24.1% in 2008. Nevertheless, the substantial increase in other non-operating income during the year helped the
company’s net income to grow 87.3% y-o-y to SR14.1mn.
• Recent Developments: The company reported 3.0% y-o-y decline in 1Q-09 net income to SR 2.8mn. In March 2009, Saudi agricultural companies established a Source: NCBC Research consortium, which included Food Products Co., to direct $40mn worth of investments
in Africa’s food production.
JUNE 2009 FOOD PRODUCTS CO. 170
AGRICULTURE & FOOD INDUSTRIES
Anaam International Price SR45.0 Anaam International, headquartered in Jeddah, Saudi Arabia was established in Pricing / Valuation as on May 27, 2009 1982. The company is involved in import and wholesale trade of frozen food,
Mkt cap SR0.5bn ($131.0mn) production of animal feed, investment in industrial projects and trade of livestock Sh. outstanding 10.9mn and patents services. The company has factories and plants at Jouf and Qassim.
Key statistics Company financials
52 week range H/L (SR) 85/24.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 164 120 88 103 16.8 (14.3) 3m 2.16 0.58 EBITDA SRmn (12) (18) 9 9 (7.9) NM 12m 2.37 0.63 Net Income SRmn (35) (317) (6) 5 NM NM Raw Beta 6m 3yr Assets SRmn 703 245 247 248 0.2 (29.4) 1.16 1.35 Equity SRmn 559 109 115 120 3.8 (40.2) Total Debt SRmn 30 30 25 22 (11.7) (10.4) Reuters 4061.SE Cash & Equiv SRmn 3 42 29 15 (49.7) 68.1 Bloomberg ANAAM AB EBITDA Mgn % (7.2) (15.2) 10.6 8.4 - - Price perform (%) 1M 3M 12M Net Mgn % (21.6) (264.1) (7.1) 4.7 - - Absolute (%) 14 36 (30) ROE % (6.1) (95.0) (5.6) 4.2 - - Market (%) 6 32 (39) ROA % (4.8) (66.9) (2.5) 2.0 - - Sector (%) 4 21 (22) Div Payout % ------Website: NA EPS SR (1.5) (2.6) (0.6) 0.4 NM NM BVPS SR 23.3 0.9 10.6 11.0 3.8 (22.2) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/M N/M 77.9 P/B (x) 21.7 17.2 3.2 Product segment 2008 Geographic 2008 P/Sales (x) 19.7 22.4 3.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.0 0.0 Trucking and Transportation 1100.0 Saudi Arabia 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.10 MSCI Saudi (domestic) N/A • Business brief: Anaam International is involved in import, export, supply, trade,
transportation and breeding of livestock in Saudi Arabia. The company also trades Free float (%) in marine equipment and other activities related to production and transportation of Free float 89.40 meat, management and operation of slaughter houses, processing of meat import, Relative share price perf. wholesale trade of frozen food, production of animal feed and investment in 11, 0 0 0 10 0 industrial projects. The total production capacity of the company is 66,000 tons of 9,000 80 60 animal feed per year. 7,000 40 5,000 20 • Financials: Anaam’s revenues increased 16.8% on y-o-y basis to SR103.1 mn in 3,000 - M ay-08 Sep-08 Jan-09 M ay-09 2008 driven by increased demand for its products. However, the EBITDA fell 7.9% TASI Anaam Holding (RHS) y-o-y to SR8.6 mn resulting in EBITDA margins contracting by 220 basis points.
This was a result of a substantial rise in cost of sales, Conversely, its net income Top 5 shareholders (%) increased to SR4.9mn in 2008 compared to a loss of SR6.3mn in 2007 mainly due HH Prince Abdullah Bin Turki Abdul 10.7 Aziz Al Saud to increase in income from subsidiaries as well as decline in other non-operating
Price Mishal Abdullah Turki Al Saud 6.8 expenses.
• Recent Developments: In April 2009, the company reported a net loss of SR2.7mn for 1Q-09 as compared to the net profit of SR4.5mn in the same period of the Source: NCBC Research previous year. In July 2008, the company issued a bank guarantee of SR21.8mn to
release the lien of mortgage on its lands in the Saudi Al Jouf Province.
JUNE 2009 ANAAM INTERNATIONAL HOLDING 171
AGRICULTURE & FOOD INDUSTRIES
Halwani Brothers Co. Price SR40.0 Halwani Brothers Company (HB), headquartered in Jeddah, Saudi Arabia was Pricing / Valuation as on May 27, 2009 established in 1952. It is engaged in production, marketing and distribution of food
Mkt cap SR1.1bn ($305.2mn) products within and outside Saudi Arabia. It has over 26 brands and 15 factories Sh. outstanding 28.6mn and plants in Saudi Arabia and Egypt.
Key statistics Company financials
52 week range H/L (SR) 40.0/14.5 YoY CAGR(%) 2006 2007 2008 (%) (06-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 517 551 758 37.4 21.1 3m 57.40 15.33 EBITDA SRmn 66 61 79 29.1 9.4 6m 58.29 15.57 Net Income SRmn 39 33 38 14.4 (0.9) Raw Beta 6m 1yr Assets SRmn 424 438 647 47.4 23.4 0.78 NA Equity SRmn 254 267 485 81.2 38.0 Total Debt SRmn 45 51 66 27.4 20.2 Reuters 6001.SE Cash & Equiv SRmn 34 15 188 1143.4 134.9 Bloomberg HB AB EBITDA Mgn % 12.7 11.0 10.4 - - Price perform (%) 1M 3M 12M Net Mgn % 7.5 6.0 5.0 - - Absolute (%) 61 96 NA ROE % 15.3 12.8 10.1 - - Market (%) 6 32 (39) ROA % 9.2 7.7 7.0 - - Sector (%) 4 21 (22) Div Payout % - - 112.3 - - Website: www.halwani.com sa EPS SR 9.7 1.7 1.3 (19.9) NM
BVPS SR 63.6 13.4 17.0 26.9 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A N/A 15.4 P/B (x) N/A N/A 1.2 Product segment 2008 Geographic 2008 P/Sales (x) N/A N/A 0.8 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A 7.29
Weightage (%) TASI (free float weight) 0.11 MSCI Saudi (domestic) N/A Source: Company, NCBC Research
• Business brief: HB is involved in production of cheese, ice-cream, frozen and Free float (%) Free float 44.49 processed meat, jams, grains, juices, dates and halawa and manufacture of tissues. It has production capacity of 12,200 tons of Tahina per year, 20,100 tons of Halwa Relative share price perf. per year, 22,950 tons of meat per year, 3,000 tons of cheese per year, 3,348 tons of 7,000 50 40 Arabic sweets per year, 4,500 tons of dairy products per year and 9,996 tons of jam 30 5,000 per year. 20 10 3,000 - • Financials: HB’s revenues increased 37.4% y-o-y to SR757.5mn in 2008. However, Oct-08 M ar-09 the company’s EBITDA margin declined 60 basis points y-o-y to 10.4% due to TASI H B (RHS) increase in cost of sales. The company’s net income recorded a 14.4% y-o-y growth from SR33.3mn in 2007 to SR38.2mn in 2008. Top 5 shareholders (%) Dalat Industrial Investment Co 55.5 • Recent developments: In April 2009, the company recorded 60.4% y-o-y decline in Mohammed Abdulhamid Mahmoud 6.9 1Q-09 net income to SR12.5mn. In September 2008, the company sought a loan Halwani from Saudi Industrial Development Fund for building an industrial complex in Jeddah for SR380mn. In July 2008, the company announced its initial public offering for 8.57mn shares at SR20 each that will boost its capital to SR285.7mn. The IPO Source: NCBC Research received a huge response from the public and was oversubscribed over 9 times.
JUNE 2009 HALWANI BROTHERS CO 172
AGRICULTURE & FOOD INDUSTRIES
Also known as Saudi Fisheries Co Alasmak Price SR53.0 Saudi Fisheries Company, based in Dammam, commenced operations in 1981. The Pricing / Valuation as on May 27, 2009 company has national as well as international recognition in seafood manufacturing
Mkt cap SR1.1bn ($283.0mn) and distribution under its flagship brand ALASMAK. Saudi Fisheries manufactures Sh. outstanding 20.0mn the products at its own processing plants and delivers them using its own fleet.
Key statistics Company financials
52 week range H/L (SR) 61.0/14.9 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 82 98 106 123 15.9 14.5 3m 102.41 27.35 EBITDA SRmn (30) (16) (23) (12) NM NM 12m 49.69 13.27 Net Income SRmn (39) (29) (31) (24) NM NM Raw Beta 6m 3yr Assets SRmn 162 261 227 203 (10.2) 7.9 1.07 1.44 Equity SRmn 102 221 190 166 (12.8) 17.8 Total Debt SRmn 20 - - NA NA NA Reuters 6050.SE Cash & Equiv SRmn 2 12 3 2 (28.9) 10.4 Bloomberg SFICO AB EBITDA Mgn % (37.3) (16.2) (21.4) (9.7) - - Price perform (%) 1M 3M 12M Net Mgn % (47.2) (29.5) (29.0) (19.8) - - Absolute (%) 18 61 4 ROE % (32.0) (17.9) (14.9) (13.7) - - Market (%) 6 32 (39) ROA % (22.3) (13.7) (12.6) (11.3) - - Sector (%) 4 21 (22) Div Payout % ------Website: www mcdc com.sa EPS SR (19.2) (1.7) (1.5) (1.2) (20.6) NM
BVPS SR 25.4 11.0 9.5 8.3 (12.8) (31.1) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/M N/M N/M P/B (x) 7.2 6.9 3.0 Product segment 1H 08 Geographic 1H 08 P/Sales (x) 16.2 12.4 4.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA Aquaculture and Fishing 100.0 100.0 GCC Countries 100.0 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.09 • Business brief: Saudi Fisheries derives its revenues from four operating segments: MSCI Saudi (domestic – small cap) 0.47 1 value-added products (production capacity of 2,000 tons), individually quick frozen or Free float (%) IQF products (capacity of 1,000 tons), fish products and a novel product called Free float 38.49 Alasmak Tuna. The value-added segment comprises of fish sticks, fish burgers, shrimp nuggets, king shrimp and golden crispy shrimp; the IQF segment comprises of Relative share price perf. IQF shrimp in retail packs; offerings under fish products include fresh, frozen whole, 11, 0 0 0 80 9,000 60 gutted, steaks, chunks, and fillets. The company-owned chain of retail shops and fish 7,000 40 service counters handles the distribution process. 5,000 20 3,000 - • Financials: Saudi Fisheries has historically reported losses despite a consistent top- M ay-08 Sep-08 Jan-09 M ay-09 TASI Saudi Fisheries (RHS) line growth, primarily due to its high input costs. During 2008, the company reported a 15.9% y-o-y growth in revenues to SR122.7mn. However, the company’s bottom-line Top 5 shareholders (%) continued to depict dismal performance, with a net loss of SR24.3mn during the year. Public investment Fund 40.0 Nevertheless, the company reported lower losses as compared to the previous year HH Sheikh Mete’eb Bin Abdul Aziz Al 21.5 mainly due to reduced cost of sales and administrative and overhead expenses. Saud • Recent developments: In April 2009, the company reported its 1Q-09 results and posted a net loss of SR4.0mn in 1Q-09 as compared to a net loss of SR4.2mn in the
same period of the previous year. In December 2008, the company’s Board adjusted Source: NCBC Research its rights issue recommendation from 20mn shares to 47.4mn shares at the price of
SR10.3 per share.
JUNE 2009 SAUDI FISHERIES CO 173
AGRICULTURE & FOOD INDUSTRIES
Also known as Tabuk Agriculture TADCO
Price SR27.8 Tabuk Agriculture Development Company (TADCO), headquartered in Tabuk, was Pricing / Valuation as on May 27, 2009 established in 1983, focusing on agricultural production, food processing and distribution. TADCO range of products include fruits, vegetables, forage products, Mkt cap SR0.6bn ($148.5mn) Sh. outstanding 20.0mn grains and seeds, and processed products such as olive oil and honey.
Key statistics Company financials
52 week range H/L (SR) 44.0/14.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 130 150 146 172 18.0 9.7 3m 41.21 11.00 EBITDA SRmn 37 46 47 51 9.3 11.0 12m 26.64 7.11 Net Income SRmn 42 26 21 24 13.6 (17.7) Raw Beta 6m 3yr Assets SRmn 461 448 448 435 (3.0) (1.9) 1.31 1.22 Equity SRmn 317 387 391 370 (5.4) 5.2 Total Debt SRmn 7 6 5 4 (20.0) (17.0) Reuters 6040.SE Cash & Equiv SRmn 69 50 19 4 (78.4) (61.2) Bloomberg TAACO AB EBITDA Mgn % 28.6 30.5 32.0 29.6 - - Price perform (%) 1M 3M 12M Net Mgn % 32.5 17.4 14.2 13.7 - - Absolute (%) 17 49 (30) ROE % 12.5 7.4 5.3 6.2 - - Market (%) 6 32 (39) ROA % 9.4 5.8 4.6 5.3 - - Sector (%) 4 21 (22) Div Payout % 47.3 76.6 48.2 42.4 - - Website: www tadco-agri.com EPS SR 10.6 1.3 1.0 1.2 13.6 NM
BVPS SR 79.2 19.3 19.5 18.5 (5.4) NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 28.7 54.6 15.3 P/B (x) 1.9 2.9 1.0 Product segment 2007 Geographic 2007 P/Sales (x) 5.0 7.8 2.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.7 0.9 2.8 Fruit and Vegetable 41.0 Saudi Arabia 100.0
Wheat and Barley 36.7 Weightage (%) Animal Food Production 20.8 TASI (free float weight) 0.09 Other Food Manufacturing 1.6 MSCI Saudi (domestic – small cap) 0.51 Source: Company, NCBC Research
• Business brief: TADCO produces 20,000 MT of onions, 150,000 MT of table Free float (%) Free float 72.50 potatoes, 58,000 MT of wheat and more than 1mn MT of Alfalfa each year. The company also grows 7,000 MT of grapes, peaches, apricots, pears and plums Relative share price perf. annually. TADCO is actively involved in environment protection, water resource 11, 0 0 0 50 management and human resource development. 9,000 40 30 7,000 20 • Financials: TADCO’s revenues increased 18.0% on y-o-y basis to SR171.8mn in 5,000 10 3,000 - 2008. Driven by revenues, EBITDA grew 9.3% y-o-y to SR50.9mn during the year. M ay-08 Sep-08 Jan-09 M ay-09 Furthermore, the company’s net income increased 13.6% to SR23.6mn in the same TASI Tabuk Agriculture (RHS) period.
Top 5 shareholders (%) Recent developments: In May 2009, TADCO entered into a memorandum of Abdullah Abdul Aziz Saleh Al Rajhi 25.0 understanding (MoU) with Jannat Agricultural Investment Co. and the Arab Authority for Agricultural Investment and Development (AAAID) to set up an agricultural investment
subsidiary outside the Kingdom. In April 2009, the company reported 48% y-o-y decline in
1Q-09 net income to SR10.0mn. In March 2009, Saudi agricultural companies established Source: NCBC Research a consortium, which included TADCO, to direct $40mn worth of investments in Africa’s food production.
JUNE 2009 TABUK AGRICULTURE 174
AGRICULTURE & FOOD INDUSTRIES
Also known as Ash Sharqiyah Dev. SHADCO
Price SR44.0 Asharqiyah Agriculture Development Company (ASH SHARQIYAH) was established Pricing / Valuation as on May 27, 2009 in 1986. The company provides meat and agricultural products, carries out agricultural projects, rehabilitation of land and irrigation works. ASH SHARQIYAH Mkt cap SR0.3bn ($88.1mn) Sh. outstanding 7.5mn owns stakes Al Hassa Food Industries, United Dairy Farms and Pure Breed Poultry.
Key statistics Company financials
52 week range H/L (SR) 48.0/11.9 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 56 53 54 51 (4.1) (3.8) 3m 37.47 10.00 EBITDA SRmn 11 11 17 21 24.9 39.7 12m 22.36 5.97 Net Income SRmn 11 1 3 (12) NM NM Raw Beta 6m 3yr Assets SRmn 143 146 144 133 (7.3) (3.4) 2.03 1.37 Equity SRmn 113 114 117 104 (11.4) (4.3) Total Debt SRmn 10 12 10 11 16.9 8.4 Reuters 6060.SE Cash & Equiv SRmn 0 4 1 1 (34.4) 295.9 Bloomberg ASACO AB EBITDA Mgn % 19.7 21.5 31.9 41.5 - - Price perform (%) 1M 3M 12M Net Mgn % 18.9 0.9 6.4 (24.2) - - Absolute (%) 22 119 4 ROE % 9.7 0.4 3.0 (11.3) - - Market (%) 6 32 (39) ROA % 7.9 0.3 2.4 (9.0) - - Sector (%) 4 21 (22) Div Payout % NA NA NA - - - Website: www asharqiyah com.sa EPS SR 7.0 0.1 0.5 (1.7) NM NM
BVPS SR 75.4 13.8 15.7 13.8 (12.2) (57.2) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 840.0 141.2 NM P/B (x) 3.7 4.1 1.3 Product segment 2007 Geographic 2007 P/Sales (x) 7.9 9.0 2.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA Meat & Dairy Cattle 46.9 Saudi Arabia 100.0 100.0
Wheat & Corn Farming 27.5 Weightage (%) Grains Wholesale 22.4 TASI (free float weight) 0.07 Milk & Dairies Wholesale 3.0 MSCI Saudi (domestic) Other Farm Products 0.3
Source: Company, NCBC Research
Free float (%) • Business brief: ASH SHARQIYAH is involved in the production and marketing of Free float 99.97 wheat, barley and fodder crops such as alfalfa and Rhodes grass, wheat and barley Relative share price perf. straw and potatoes. Under its Animal Husbandry Project, the company produces and 11, 0 0 0 50 markets 14.5mn litres of milk annually. Other projects undertaken include calf and 9,000 40 30 7,000 sheep breeding, production of bio-fertilizers and honey production. 20 5,000 10 3,000 - • Financials: ASH SHARQIYAH’s revenue dipped 4.1% y-o-y in 2008 to SR51.3mn, M ay-08 Sep-08 Jan-09 M ay-09 after reporting near to flat growth in 2007. Furthermore, the company reported a net TASI Eastern Agriculture (RHS) loss of SR12.4mn in 2008 as compared to net income of SR3.4mn in 2007. This was
mainly due to a substantial increase in cost of sales and lower other income. Top 5 shareholders (%) • Recent Developments: In 1Q-09, the company reported a net profit of SR0.5mn as
compared to the net loss of SR2.5mn in the same period of the previous year.
Source: NCBC Research
JUNE 2009 ASH SHARQIYAH DEVELOPMENT COMPANY 175
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JUNE 2009 SAUDI ARABIA FACTBOOK 176
Company Page No. Banking and Financials Saudi Telecom 178 Petrochemicals
Etihad Etisalat 179 Cement
Zain KSA 180 Retail
Etihad Atheeb 181 Energy and Utilities
Agriculture and Food
Telecom and IT
Insurance
Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transport
Media and Publishing
Hotels and Tourism
TELECOMMUNICATION
Also known as Saudi Telecom STC Price SR50.5 Saudi Telecom (STC) was established in 1998 as Saudi Arabia’s sole telecom Pricing / Valuation as on May 27, 2009 operator and is still the only integrated operator in Saudi Arabia and provides
Mkt cap SR101.0bn ($26,969.3mn) landline, mobile, and internet services. Apart from Saudi Arabia, STC has its Sh. outstanding 2,000.0mn operations in Indonesia, India, South Africa and Kuwait.
Key statistics Company financials
52 week range H/L (SR) 71.3/33.7 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 32,540 33,786 34,458 47,445 37.7 13.4 3m 39.83 10.64 EBITDA SRmn 17,198 16,484 16,716 20,289 21.4 5.7 12m 74.79 19.97 Net Income SRmn 12,527 12,786 12,038 11,467 (4.7) (2.9) Raw Beta 6m 3yr Assets SRmn 44,744 46,122 68,811 99,909 45.2 30.7 0.77 0.77 Equity SRmn 32,855 34,154 35,876 37,766 5.3 4.8 Total Debt SRmn - - 13,580 31,908 135.0 - Reuters 7010.SE Cash & Equiv SRmn 4,005 2,909 7,618 8,064 5.8 33.8 Bloomberg STC AB EBITDA Mgn % 52.9 48.8 48.5 42.8 - - Price perform (%) 1M 3M 12M Net Mgn % 38.5 37.8 34.9 24.2 - - Absolute (%) 7 41 (21) ROE % 39.3 38.2 34.4 31.1 - - Market (%) 6 32 (39) ROA % 28.8 28.1 20.9 13.6 - - Sector (%) 4 20 (27) Div Payout % 83.1 89.9 83.3 65.4 - - Website: www stc.com.sa EPS SR 6.2 6.4 6.0 5.7 (5.0) (2.7)
BVPS SR 16.4 17.1 17.9 18.9 5.6 5.1 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 12.9 13.9 8.6 P/B (x) 4.8 4.7 2.6 Product segment %Rev Geographic 2008 P/Sales (x) 4.9 4.9 2.1 2007 2008 Breakup %Rev % Net Inc Div yield (%) 6.9 6.0 7.6 Wireless Telecommunication 73.0 66.0 - -
Wired Telecommunication 27.0 34.0 Weightage (%) TASI (free float weight) 3.72 Source: Company, NCBC Research
MSCI Saudi (domestic – large cap) 6.26 • Business brief: STC generates its revenue from the wireless and the wire-line
Free float (%) segments and has five business divisions—Al Hatif, Al Jawal, Saudi Data, Saudinet, Free float 16.44 and STC Online. Al Hatif offers landline communication, public telephones, prepaid cards, and business services. STC’s mobile operations are under the Al Jawal brand. Relative share price perf. Saudi Data mainly provides data solutions to businesses. Saudi Net is Saudi Arabia’s 11, 0 0 0 80 9,000 60 first ISP while STC Online offers electronic bill payment services 7,000 40 • Financials: STC’s revenues increased 37.7% year-on-year (y-o-y) to SR47.4bn in 5,000 20 3,000 - 2008. The company’s EBITDA margins declined 570 basis points from 48.5% in 2007 M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 to 42.8% in 2008 due to increase in selling, general and administration expenses. As TASI STC (RHS) a result, net profit declined 4.7% y-o-y to SR11.5bn in 2008 from SR12bn in 2007 that
was adversely impacted by foreign exchange loss. Top 5 shareholders (%) Public Investment Fund 70.0 • Recent developments: In May 2009, STC entered into a partnership with Dilithium General Organization for Social 6.9 for offering mobile video solutions to its customers. STC’s net profit for 1Q-09 Insurance - Saudi Arabia declined 18% y-o-y to SR 2.49bn due to foreign currency fluctuations. In April 2009, Public Pension Authority 6.6 STC launched its unified international roaming service utilizing strategic partnerships
with mobile services providers. In March 2009, Bahrain’s Telecommunications Source: NCBC Research Regulatory Authority announced that STC had fulfilled all the requirements for the mobile license it had won in January 2009 for a bid of BD86.7mn.
JUNE 2009 SAUDI TELECOM 178
TELECOMMUNICATION
Also known as Etihad Etisalat Co Mobily Price SR36.4 Etihad Etisalat Company (Mobily), the second largest mobile operator in Saudi Pricing / Valuation as on May 27, 2009 Arabia in terms of market value, was established in 2004 by UAE-based Emirates
Mkt cap SR25.5bn ($6,803.7mn) Telecommunications Corporation (Etisalat). The company commenced operations Sh. outstanding 700.0mn in 2005, providing public wireless telecommunication services.
Key statistics Company financials
52 week range H/L (SR) 45.8/21.9 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,662 6,183 8,440 10,795 27.9 86.6 3m 32.35 8.64 EBITDA SRmn (60) 2,125 3,239 3,794 17.2 NM 12m 42.42 11.33 Net Income SRmn (1,167) 700 1,380 2,092 51.6 NM Raw Beta 6m 3yr Assets SRmn 16,204 17,689 19,881 27,192 36.8 18.8 0.75 1.00 Equity SRmn 3,833 4,533 5,913 9,754 65.0 36.5 Total Debt SRmn 8,948 9,440 8,923 9,790 9.7 3.0 Reuters 7020.SE Cash & Equiv SRmn 185 548 703 1,264 79.7 89.7 Bloomberg EEC AB EBITDA Mgn % (3.6) 34.4 38.4 35.1 - - Price perform (%) 1M 3M 12M Net Mgn % (70.3) 11.3 16.3 19.4 - - Absolute (%) (4) 5 (16) ROE % (30.5) 16.7 26.4 26.7 - - Market (%) 6 32 (39) ROA % (7.2) 4.1 7.3 8.9 - - Sector (%) 4 20 (27) Div Payout % - - 18.1 25.1 - - Website: www.mobily.com.sa EPS SR (2.1) 1.4 2.8 3.0 NM NM
BVPS SR 7.70 9.10 11.80 13.9 NM NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 37.1 26.6 10.4 P/B (x) 5.7 6.2 2.2 Product segment 2008 Geographic 2008 P/Sales (x) 4.2 4.4 2.0 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 0.7 2.4 Wireless Telecommunication 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 3.33 • Business brief: Mobily offers Global System for Mobile communications (GSM), 3G MSCI Saudi (domestic – large cap) 1.35 system, and 3.5G technology (services such as video calling, live television, Free float (%) video/audio on demand, high speed Internet and multiplayer gaming). The company’s Free float 58.48 services and products also include voice service, mobile internet, billing and payment, credit transfer, Kalemni, Mobily Hawwel, Mobily Al Hilal (news) and Mobily Ranan. Relative share price perf. Mobily markets its products via four functional lines—channel distribution, corporate & 11, 0 0 0 50 VIP sales, flagship stores, and commercial support. Currently, it has a subscriber 9,000 40 30 base of 11.1mn, representing around 39% of KSA’s mobile market. 7,000 20 5,000 10 • Financials: Mobily’s revenues grew 27.9% year-on-year (y-o-y) to SR10.8bn in FY08 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 mainly due to rise in demand for mobile broadband services and expanding customer
TASI M obily (RHS) base. The net profits for FY08 amounted to SR2.1bn, a y-o-y rise of 51.6%. Improvement in net margin was also helped by lower interest expenses. Top 5 shareholders (%) • Recent developments: Mobily’s net profit for 1Q-09 increased 47% y-o-y to SR Etisalat - UAE 27.4 480mn on the back of rising demand in broadband and wholesale sales. In April General Organization for Social 11.2 Insurance - Saudi Arabia 2009, Mobily commenced a branch in Hail with an investment of SR250mn. In March 2009, Mobily announced the allocation of SR1bn for developing its 3.75G network and signed a SR435mn contract with Motorola for enhancing its GSM coverage in
Saudi. In January 2009, Mobily signed a SR200mn deal with Etihad Atheeb Telecom Source: NCBC Research to enhance the latter’s data transmission capacity.
JUNE 2009 ETIHAD ETISALAT CO 179
TELECOMMUNICATION
Also known as Zain KSA ZAIN
Price SR12.1 Mobile Telecommunications Company Saudi Arabia (ZAIN KSA), a member of Pricing / Valuation as on May 27, 2009 Mobile Telecommunications Group (Zain), Kuwait, was established in 2007 in Saudi Arabia to provide wireless telecommunications services. ZAIN KSA offers Mkt cap SR16.9bn ($4,523.4mn) multimedia applications such as video calling and content services. Sh. outstanding 1,400.0mn
Key statistics Company financials
52 week range H/L (SR) 28.0/10.0 YoY CAGR(%) 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 505 - - 3m 188.78 50.41 EBITDA SRmn (1,242) - - 12m 272.34 72.72 Net Income SRmn (2,278) -- Raw Beta 6m 1yr Assets SRmn 26,665 - - 0.69 0.86 Equity SRmn 11,722 - - 7030.SE Total Debt SRmn 13,176 - - Reuters Cash & Equiv SRmn 584 - - Bloomberg ZAINKSA AB EBITDA Mgn % NM - - Price perform (%) 1M 3M 12M Net Mgn % NM - - Absolute (%) 13 15 (52) ROE % (19.4) - - Market (%) 6 32 (39) ROA % (8.5) - - Sector (%) 4 20 (27) Div Payout % - - - Website: www.sa.zain.com EPS SR (1.6) - -
BVPS SR 8.4 - - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A N/A NM P/B (x) N/A N/A 1.3 Product segment 2008 Geographic 2008 P/Sales (x) N/A N/A 29.5 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A -
Weightage (%) TASI (free float weight) 1.71 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) 3.88 • Business brief: ZAIN KSA is the third mobile operator in KSA and offers multimedia
Free float (%) applications, classic and value-added voice messaging and data services. The Free float 45.00 company launched commercial services in August 2008 and has added 2mn active subscribers (approx. 7% market share) between August-December 2008. ZAIN KSA Relative share price perf. plans to build its own network by 2010 and is targeting positive EBITDA in 2010. 11, 0 0 0 30 9,000 20 • Financials: ZAIN KSA recorded revenues of SR505.2mn in 2008. However, during 7,000 10 5,000 the year, the company incurred a loss of SR1,242.4mn and SR2,278.2mn at the 3,000 - EBITDA and bottom line, respectively. The operational loss was due to to the newly M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Zain (RHS) launched operations of the company.
• Recent developments: In May 2009, ZAIN KSA announced that it has tied up with Top 5 shareholders (%) 19 mobile phone operators in 6 countries for roaming services. The company posted Mobile Telecommunications Company 25.0 a net loss of SR765.4mn in 1Q-09 compared to a net loss of SR2.28bn in the 4Q-08. Faden Commercial & Real Estate 6.8 Establishment In March 2009, ZAIN KSA announced plans to expand its private network to 13 cities Saudi Plastics 6.8 across KSA and expects to reach 85% of the inhabited areas by the end of 2009. In Public Pension Authority 5.0 March 2009, Zain Group’s CEO Dr Saad Al Barrak was appointed the CEO of ZAIN
KSA after the resignation of Dr. Marwan Al-Ahmadi. In September 2008, ZAIN Group Source: NCBC Research raised additional capital of USD4.49bn increasing the total Zain shares to 4.28bn with total shareholders equity amounting to USD6.42bn.
JUNE 2009 ZAIN KSA 180
TELECOMMUNICATION
Also known as Etihad Atheeb ATHEEB
Price SR17.9 Etihad Atheeb Telecommunications Company (ATHEEB), a joint venture between Pricing / Valuation as on May 27, 2009 KSA-based Atheeb Trading Co., Al-Nahla Trading Co. and Traco Group and Bahrain Telecom, was established in 2008 to provide fixed and wireless telecommunications Mkt cap SR1.8bn ($478.0mn) Sh. outstanding 100.0mn services in KSA.
Key statistics Company financials
52 week range H/L (SR) 20.1/13.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn ------3m N/A N/A EBITDA SRmn ------12m N/A N/A Net Income SRmn ------Raw Beta 6m 3yr Assets SRmn ------NA NA Equity SRmn ------Total Debt SRmn ------Reuters 7040.SE Cash & Equiv SRmn ------Bloomberg EAT AB EBITDA Mgn % ------Price perform (%) 1M 3M 12M Net Mgn % ------Absolute (%) 3 N/A N/A ROE % ------6 32 (39) Market (%) ROA % ------4 20 (27) Sector (%) Div Payout % ------Website: www.go.com.sa EPS SR ------BVPS SR ------Valuation multiples Source: Company, NCBC Research
2006 2007 2008 P/E (x) N/A N/A N/A Segment-wise business analysis P/B (x) N/A N/A N/A Product segment 2008 Geographic 2008 P/Sales (x) N/A N/A N/A %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A N/A
Weightage (%)
TASI (free float weight) 0.12 Source: Company, NCBC Research MSCI Saudi (domestic – mid cap) • Business brief: ATHEEB was set up to build, operate, and maintain the second fixed Free float (%) line telecommunication network in KSA. The company aims to provide innovative and Free float 30.50 high technology solutions, such as video services, Internet telephony, and broadband
Relative share price perf. internet, apart from voice telephone communications and data services. ATHEEB obtained a fixed telephony license for SR5mn and a 3.5GHz frequency spectrum for 6,400 21 5,800 19 SR520mn. Batelco is likely to provide technical services and expertise to ATHEEB. 5,200 17 The company plans to launch commercial services in 2009. 4,600 15 4,000 13 • Financials: N.A. 21-M ar 22-Apr 26-M ay TASI Atheeb (RHS) • Recent developments: In May 2009, Wipro Ltd signed a partnership agreement with
ATHEEB for deploying an end-to-end IT solutions and the underlying infrastructure Top 5 shareholders (%) components. In April 2009, the Communications and Information Technology Atheeb Group 16.1 Commission awarded ATHEEB license for fixed-line telecom operations in Saudi. In Bahrain Telecom 15.0 January 2009, ATHEEB floated 30mn shares at SR10 each in an IPO, which was Al Nahla Group 13.7 Traco Group 5.8 oversubscribed by 3.5 times. In January 2009, it signed a SR200mn contract with General Orgn. For Social Insurance 5.0 Etihad Etisalat Co. to expand its data transmission capacity. In March 2008, ATHEEB Source: NCBC Research signed contracts worth USD333mn with Motorola (for WiMax technology), China- based ZTE Corp. (for Core Network solutions) and India-based Wipro (for IT services) for executing the first phase of its network infrastructure plan in KSA.
JUNE 2009 ETIHAD ATHEEB 181
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JUNE 2009 SAUDI ARABIA FACTBOOK 182
Company Page No. Banking and Financials Tawuniya 184 Petrochemicals
Malath Cooperative 185 Cement
SABB Takaful 186 Retail
Saudi Re 187 Energy and Utilities
Al Sagr Company 188 Agriculture and Food
Medgulf 189 Telecom and IT
BUPA Arabia 190 Insurance
Alahli Takaful 191 Multi Investment
Saudi IAIC Cooperative 192 Industrial Investment
Trade Union Cooperative 193 Building and Construction
Sanad Insurance 194 Real Estate
Saudi United 195 Transport
Saudi Fransi Cooperative 196 Media and Publishing
Gulf Union Cooperative 197 Hotels and Tourism
Arabia Insurance 198
United Cooperative Assurance 199
Saudi Indian 200
Arabian Shield Cooperative 201
Saudi Arabian Cooperative 202
Al-Ahlia Insurance 203
Allied Cooperative 204
INSURANCE
Also known as Tawuniya Tawuniya
Price SR41.3 The Company for Cooperative Insurance, widely known as Tawuniya was Pricing / Valuation as on May 27, 2009 established in Riyadh in 1986. NCCI provides both Islamic and conventional general
Mkt cap SR2.1bn ($551.4mn) and family insurance services. The company’s subsidiaries include, United Sh. outstanding 50.0mn Insurance Company and Cooperative Real Estate Investment Company.
Key statistics Company financials
52 week range H/L (SR) 97.5/24.8 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn 838 997 1,095 1,272 16.1 14.9 3m 12.86 3.43 Total Revenues SRmn 1,218 1,289 1,564 1,602 2.4 9.6 12m 10.66 2.85 Net Income SRmn 313 468 525 67 (87.2) (40.1) Raw Beta 6m 3yr Assets SRmn 4,164 4,252 5,308 5,097 (4.0) 7.0 1.37 0.93 Equity SRmn 1,686 1,756 1,847 1,073 (41.9) (14.0) Investments SRmn 1,671 1,717 1,863 1,081 (42.0) (13.5) Reuters 8010.SE Technical Reserves SRmn 869 1,596 2,392 2,783 16.4 47.4 Bloomberg TAWUNIYA AB Combined Ratio % 107.5 90.9 100.9 110.1 - - Price perform (%) 1M 3M 12M Net Mgn % 25.7 36.3 33.6 4.2 - - Absolute (%) (8) 33 (50) ROE % 25.4 27.2 29.1 4.6 - - Market (%) 6 32 (39) ROA % 8.5 11.1 11.0 1.3 - - Sector (%) (2) 48 (26) Div Payout % 478.8 106.8 95.3 153.8 - - Website: www tawuniya.com.sa EPS SR 6.3 9.4 10.5 1.3 (87.2) (40.1)
BVPS SR 33.7 35.1 36.9 21.5 (41.9) (14.0) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 11.1 14.3 25.3 P/B (x) 3.0 4.1 1.6 Product segment 2008 Geographic 2008 P/Sales (x) 4.1 4.8 1.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 9.5 6.7 6.1 NA NA Saudi Arabia 100.0
Weightage (%) TASI (free float weight) 0.25 Source: Company, NCBC Research
MSCI Saudi (domestic – mid cap) • Business brief: NCCI’s product portfolio falls under two broad categories – retail and
Free float (%) corporate. The retail segment includes motor vehicle, medical, fire & property and Free float 53.62 miscellaneous & accident insurance, while the corporate segment offers motor vehicle, medical, fire & property, casualty, engineering, marine, aviation and energy Relative share price perf. insurance services. To aid its insurance services, NCCI has entered into agreement 11, 0 0 0 10 0 9,000 80 with international re-insurers such as Munich Re. 60 7,000 40 • Financials: NCCI’s net premium earned grew 16.1% yoy during 2008. Consequently, 5,000 20 3,000 - total revenues also increased by 2.4% yoy. The company has been able to grow its M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 premium due to its dominant position in growing insurance segments such as motor TASI Tawuniya (RHS) insurance and health insurance. However, NCCI's investment portfolio suffered
losses of SR110.75 mn, which led to an 87.2% yoy reduction in net income in 2008. Top 5 shareholders (%) Public Pension Authority 23.5 • Recent developments: NCCI declared its 1Q-09 results on April 20, 2009. The General Organization for Social 22.8 company’s net profit surged 9.9% y-o-y to SR26.0mn during the quarter. Cash Insurance dividend of SR2 per share was approved in the annual general meeting held in March
2009. In February 2008, NNCI entered into an agreement with Bahrain Kuwait Insurance Company (Manama) and Al-Ain Ahlia Insurance Co. (UAE) to market Source: NCBC Research ‘Manasik’ for health care insurance to foreign pilgrims.
JUNE 2009 THE COMPANY FOR CO-OPERATIVE INSURANCE 184
INSURANCE
Also known as Malath Cooperative Malath Insurance
Price SR31.2 Malath Cooperative Insurance and Reinsurance Company (Malath) was established Pricing / Valuation as on May 27, 2009 in 2006. Headquartered in Riyadh, Malath is the second insurance company (after
Mkt cap SR0.9bn ($249.9mn) National Company for Cooperative Insurance (NCCI)) to be listed on the Saudi Stock Sh. outstanding 30.0mn Exchange. Besides general insurance, it provides facultative reinsurance products.
Key statistics Company financials
52 week range H/L (SR) 114.8/19.4 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn 2 27 - - 75.89 20.26 3m Total Revenues SRmn 3 44 - - 80.21 21.42 12m Net Income SRmn (17) (39) - - Raw Beta 6m 2yr Assets SRmn 330 447 35.5 - 0.80 0.65 Equity SRmn 283 233 (17.7) - Investments SRmn 275 144 (47.6) - Reuters 8020.SE Technical Reserves SRmn 13 122 879.0 - Bloomberg MALATH AB Combined Ratio % NM 263.4 - - Price perform (%) 1M 3M 12M Net Mgn % NM NM - - Absolute (%) 6 40 (60) ROE % (6.1) (15.0) - - Market (%) 6 32 (39) ROA % (5.2) (19.9) - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: www malath com sa EPS SR (0.6) (1.3) - -
BVPS SR 9.4 7.8 (17.7) - Valuation multiples Source: Company, NCBC Research, figures for FY2007 are from April- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 16.2 4.2 Product segment 2008 Geographic 2008 P/Sales (x) NA NM 22.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.10 MSCI Saudi (domestic – small cap) 2.85 Source: Company, NCBC Research
• Business brief: Malath is engaged in general insurance, medical care insurance and Free float (%) Free float 47.48 facultative inward reinsurance activities. The company derives its premium income mainly from motor, medical, property, aviation, marine cargo & hull, energy, Relative share price perf. engineering, and other lines of business based on market conditions. 11, 0 0 0 15 0 9,000 10 0 • Financials: Company earned net insurance premium of SR27.4mn during 2008. This 7,000 50 coupled with earnings from reinsurance and underwriting activities enabled Malath to 5,000 3,000 - record total revenues of SR44.2mn in the same period. However, as the company is M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 a new establishment, it incurred high operating expenses, which caused net loss of TASI M alath Insurance (RHS) SR38.7mn in 2008.
• Recent developments: Malath declared its 1Q-09 results on April 18, 2009. The Top 5 shareholders (%) company recorded a net profit of SR2.1mn during 1Q-09 against a loss of SR3.1mn in the corresponding quarter a year ago. The Board of Directors appointed Mr. Ali Bin Sulaiman Al Ayed as new Chief Executive Officer with effect from July 1, 2008. Mr. Al
Ayed replaced Mr. Ibrahim Abdul Shaheed who had resigned in February 2008.
Source: NCBC Research
JUNE 2009 MALATH INSURANCE 185
INSURANCE
Also known as Saudi British SABB Takaful Bank Takaful Price SR115.3 SABB Takaful was established in 2007 at Riyadh as an associate company of SABB Pricing / Valuation as on May 27, 2009 and HSBC. SABB Takaful conducts activities through SABB’s established
Mkt cap SR1.2bn ($307.7mn) distribution network (over 70 branches) and direct sales team across Saudi Arabia. Sh. outstanding 10.0mn SABB offers all its insurance products in compliance with shariah law.
Key statistics Company financials
52 week range H/L (SR) 158.5/20.0 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn 5 53 - - 3m 38.19 10.20 Total Revenues SRmn 6 57 - - 12m 31.20 8.33 Net Income SRmn (45) (4) - - Raw Beta 6m 2yr Assets SRmn 79 185 135.5 - 1.55 1.00 Equity SRmn 55 51 (7.7) - Investments SRmn 59 28 (53.6) - Reuters 8080.SE Technical Reserves SRmn 6 91 1,444.7 - Bloomberg SABBT AB Combined Ratio % NM 100.6 - - Price perform (%) 1M 3M 12M Net Mgn % (728.1) (6.4) - - Absolute (%) 21 58 65 ROE % (80.4) (6.8) - - Market (%) 6 32 (39) ROA % (56.7) (2.8) - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: www sabbtakaful.com EPS SR (4.5) (0.4) - -
BVPS SR 5.5 5.1 (7.7) - Valuation multiples Source: Company, NCBC Research, figures for FY2007 are from May – December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 21.0 6.5 Product segment 2008 Geographic 2008 P/Sales (x) NA NM 5.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.09 MSCI Saudi (domestic – small cap) 0.33 Source: Company, NCBC Research
• Business brief: SABB Takaful offers Family, General, Corporate and Group Takaful Free float (%) Free float 35.00 products. Under the Family Takaful segment, the company provides cover for education, savings, single contribution, retirement to provide individuals with financial Relative share price perf. support. General Takaful provides cover for everyday risks during travel, home, and 11, 0 0 0 200 personal accident. Corporate Takaful provides cover for marine cargo, commercial 9,000 15 0 7,000 10 0 fire protection, and solutions for SMEs. 5,000 50 • Financials: SABB Takaful’s revenues grew to SR56.6mn in 2008 as compared to 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 SR6.1mn in 2007 (May – December 2007). As a result, the company reported a net TASI SABB Takaful (RHS) loss of only SR3.6mn in 2008 against a loss of SR44.6mn in 2007. Company’s total
asset base increased 135.5% yoy to SR185.0mn and technical reserves substantially Top 5 shareholders (%) increased to SR91.0mn in 2008 from SR5.9mn in 2007. SABB 32.5 HSBC Holding Co. 31.0 • Recent developments: SABB Takaful reported its 1Q-09 results on April 21, 2009. The company’s net loss surged to SR5.7mn in 1Q-09 compared to a net loss of SR4.5mn in 1Q-08. In March 2009, the company received the award of Best Takaful
Provider from Euromoney magazine. In February 2009, SABB Takaful entered into an Source: NCBC Research agreement with Saudi Arabian Airlines Co. to provide insurance products.
JUNE 2009 SABB TAKAFUL 186
INSURANCE Saudi Re for Coop. Reins
Saudi Re headquartered in Riyadh is a first cooperative reinsurance company of Price SR12.0 Saudi Arabia, established in May 2008. It provides life and non-life Sharia-compliant Pricing / Valuation as on May 27, 2009 reinsurance products under the purview of The Saudi Arabian Monetary Agency Mkt cap SR1.2bn ($320.4mn) (SAMA) for treaty and facultative types of reinsurance in all classes of business. Sh. outstanding 100.0mn
Key statistics Company financials
52 week range H/L (SR) 19.3/7.8 YoY CAGR(%) 2008* (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - - - 36.23 9.68 3m Total Revenues SRmn - - - 26.02 6.95 12m Net Income SRmn 26 - - Raw Beta 6m 1yr Assets SRmn 1,033 - - 0.87 0.82 Equity SRmn 1,026 - - Investments SRmn 1,012 - - Reuters 8200.SE Technical Reserves SRmn 1 - - Bloomberg SAUDIRE AB Combined Ratio % NM - - Price perform (%) 1M 3M 12M Net Mgn % NM - - Absolute (%) 3 19 (35) ROE % 2.5 - - Market (%) 6 32 (39) ROA % 2.5 - - Sector (%) (2) 48 (26) Div Payout % - - - Website: www saudi-re.com EPS SR 0.3 - -
BVPS SR 10.3 - - Valuation multiples Source: Company, NCBC Research * 2008 figures are for 8 months period ending December 31, 2008
2006 2007 2008 P/E (x) NA NA 34.0 Segment-wise business analysis P/B (x) NA NA 0.9 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NM Div yield (%) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%)
TASI (free float weight) 0.11
MSCI Saudi (domestic – small cap) NA Source: NCBC Research
Free float (%) • Product profile: Saudi Re offers a wide range of insurance related products such as Free float 40.00 marine insurance (hull and cargo), engineering insurance (machinery breakdown,
Relative share price perf. contractor’s risks), motor insurance and insurance for third party liability.
11, 0 0 0 20 • Financials: In 2008, the company posted a net profit of SR25.9mn in 2008, which is 9,000 15 primarily attributable to income from other sources partially offset by high general and 7,000 10 5,000 5 administrative expenses. Total asset base as on 2008 was SR1,033.3mn, while the 3,000 - shareholder’s equity stood at SR1,025.5mn M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Saudi Re (RHS) • Recent developments: Saudi Re reported its 1Q-09 results on April 20, 2009. The
company recorded a net profit of SR0.1mn in 1Q-09. Corresponding figures for the Top 5 shareholders (%) year-ago period are not available. In April 2009, the company announced that it could Ahmed Hamad Al Gosa bi and Co 5.0 proceed with its Takaful life insurance portfolio, after receiving the license from Saudi Jordan Islamic Finance Bank 5.0 Arabian Monetary Agency (SAMA). In October 2008, Standard and Poor’s assigned a
BBB+ rating to Saudi Re, citing stable outlook. In August 2008, Saudi Re became the
first company in Saudi Arabia to receive a Reinsurance license by Saudi Arabian Source: NCBC Research Monetary Agency. In March 2008, Saudi Re offered 40mn shares (40% of the capital) to the public. The issue was oversubscribed by more than three times.
JUNE 2009 SAUDI RE FOR COOPERATIVE REINSURANCE COMPANY 187
INSURANCE
Also Known as Al Sagr Company Al Sagr Saudi
Al Sagr Company for Cooperative Insurance (Sagr Insurance) started operations in Price SR51.0 Saudi Arabia in 1983 as a branch of Al Sagr National Insurance Co. (ASNIC), Dubai. Pricing / Valuation as on May 27, 2009 Headquartered in Al Khobar, Sagr Insurance operates via its three branches in Mkt cap SR1.0bn ($272.4mn) Dammam, Riyadh and Jeddah. Sh. outstanding 20.0mn
Key statistics Company financials
52 week range H/L (SR) 55.8/9.3 YoY CAGR(%) 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - - - 52.33 13.97 3m Total Revenues SRmn - - - 26.84 7.17 12m Net Income SRmn 3 - - Raw Beta 6m 1yr Assets SRmn 208 - - 0.09 0.92 Equity SRmn 203 - - Investments SRmn 185 - - Reuters 8180.SE Technical Reserves SRmn - - - Bloomberg SAGR AB Combined Ratio % - - - Price perform (%) 1M 3M 12M Net Mgn % - - - Absolute (%) 25 83 84 ROE % 1.2 - - Market (%) 6 32 (39) ROA % 1.2 - - Sector (%) (2) 48 (26) Div Payout % - - - Website: www alsagrsaudi.com EPS SR 0.1 - -
BVPS SR 10.1 - - Valuation multiples Source: Company, NCBC Research, financials for FY 2008 are from February- December 2008.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA 96.8 P/B (x) NA NA 1.2 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.10 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) NA • Product profile: Sagr Insurance offers a wide range of products to its customers that
Free float (%) include fire and general insurance (property, engineering, liability and miscellaneous), Free float 42.00 marine insurance (cargo and hull), motor insurance, life insurance and medical insurance services. The company also provides jewelry merchant insurance and Relative share price perf. hotel/furnished apartments—blanket insurance. In addition, Sagr Insurance provides 11, 0 0 0 60 50 9,000 reinsurance services —the company has Reinsurance Treaties with eight re-insurers 40 7,000 30 in the Middle East and Europe. They include ALLIANZ RE (Germany), CONVERIUM 20 5,000 10 (Germany), ODYSSEY RE (France), TAKAFUL RE (UAE), and B.E.S.T. RE (Tunis). 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: Sagr Insurance reported net income of SR2.5mn in 2008. The company’s TASI Sagr Insurance (RHS) total assets stood at SR208.0mn in 2008, while the total equity was SR202.5mn.
Top 5 shareholders (%) • Recent developments: Sagr Insurance reported its 1Q-09 results on April 20, 2009. Al Saqar National Insurance Co. 26.0 The company recorded a net profit of SR0.7mn in 1Q-09. Corresponding figures for Arabian RedLand Industrial Services 5.0 the year-ago period are not available. In February 2009, the company received final Abdullah Rasheed Al Rasheed & 5.0 approval from the General Secretariat of the Council of Health Insurance to operate in Sons Co. the field of medical insurance. The purchase of SR29.5mn insurance portfolio (as of December 31, 2006) of Al Sagr (Bahrain) Saudi Insurance Company was approved in Source: NCBC Research the annual general meeting held in February 2009. In addition to this, the company will also purchase 15% of the 2007 and 2008 portfolio.
JUNE 2009 AL SAGR COMPANY 188
INSURANCE
Also known as Medgulf Medgulf Saudi
Price SR20.8 Mediterranean & Gulf Insurance & Reinsurance Co. (MEDGULF) is a subsidiary of Pricing / Valuation as on May 27, 2009 the Medgulf Group, a leading insurance and reinsurance company in the Middle
Mkt cap SR1.7bn ($444.3mn) East operating in Saudi Arabia, Bahrain, Lebanon, Turkey, Jordan, UAE, and UK. Sh. outstanding 80.0mn Established in 2006, it currently operates through its offices in Jeddah and Khobar.
Key statistics Company financials
52 week range H/L (SR) 35.5/13.0 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA NA - - 17.00 4.54 3m Total Revenues SRmn NA NA - - 12.34 3.29 12m Net Income SRmn 7 (3) NM - Raw Beta 6m 2yr Assets SRmn 807 807 (0.1) - 0.88 0.94 Equity SRmn 807 791 (1.9) - Investments SRmn 758 773 2.0 - Reuters 8030.SE Technical Reserves SRmn NA NA - - Bloomberg MEDGULF AB Combined Ratio % NA NA - - Price perform (%) 1M 3M 12M Net Mgn % NA NA - - Absolute (%) (9) 22 (22) ROE % 0.8 (0.3) - - Market (%) 6 32 (39) ROA % 0.8 (0.3) - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: www medgulf com.sa EPS SR 0.09 (0.03) - -
BVPS SR 10.1 9.9 (1.9) - Valuation multiples Source: Company, NCBC Research, figures for FY2007 are from April- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 5.4 1.7 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.08 MSCI Saudi (domestic – small cap) Source: Company, NCBC Research
• Business brief: MEDGULF offers various insurance products such as aviation Free float (%) Free float 22.57 insurance, banker’s blanket bonds, burglary insurance, contractor’s all risk insurance, credit insurance, employer’s liability insurance, fidelity guarantee insurance, marine Relative share price perf. cargo and hull insurance, and motor insurance. The company also provides 11, 0 0 0 40 insurances for fire and allied perils, life, medical, personal accident, product and 9,000 30 7,000 20 professional liability, property all-risk, public liability, workmen’s compensation, (cash 5,000 10 in transit and in vault). MEDGULF offers a one-stop solution by providing insurance 3,000 - and reinsurance services along with risk management and third party administration. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 TASI MEDGULF (RHS) • Financials: MEDGULF reported net loss of SR2.5mn in 2008 due to poor
performance of investment portfolio and increased G&A expenses in Q4-08. There Top 5 shareholders (%) was also a year-on-year marginal decline in total assets and shareholders’ equity, Mediterranean and Gulf Insurance 32.0 and Reinsurance – Bahrain which aggregated to SR806.5mn and SR790.8mn respectively in 2008. Saudi Investment Bank 21.1 • Recent developments: MEDGULF declared its 1Q-09 results on April 21, 2009. The
company’s net profit plunged 66.8% y-o-y to SR1.3mn during the quarter. In April
2009, Mr. Nahmeh Sabbagh’s appointment to the company’s board was approved in Source: NCBC Research the annual general meeting. The Company’s shares were listed on the Saudi Stock
Exchange on May 8, 2007, at SR42 against the issue price SR10.
JUNE 2009 MEDGULF 189
INSURANCE Bupa Arabia for Coop Ins
Price SR20.1 BUPA Arabia is a medical insurance company established in Jeddah in 2008 by Pricing / Valuation as on May 27, 2009 acquiring Bupa Middle East (BME). BME which has been providing health insurance
Mkt cap SR0.8bn ($214.7mn) since 1997 is a joint venture between Nazer Group and BIOL, a fully owned Sh. outstanding 40.0mn subsidiary of U.K. - based BUPA (The British United Provident Association).
Key statistics Company financials
52 week range H/L (SR) 30.8/8.9 YoY CAGR(%) 2008* (%) (05-08) Avg daily turnover (mn) SR US$ 3m 29.45 7.86 Net Insurance Premium SRmn - - - 12m 21.42 5.72 Total Revenues SRmn - - - Net Income SRmn (2) - - Raw Beta 6m 1yr Assets SRmn 393 - -
1.33 1.19 Equity SRmn 390 - - Reuters 8210.SE Investments SRmn 352 - - Bloomberg BUPA AB Technical Reserves SRmn - - - Combined Ratio % - - - Price perform (%) 1M 3M 12M Net Mgn % - - - Absolute (%) (3) 28 (29) ROE % (0.4) - - Market (%) 6 32 (39) ROA % (0.4) - - Sector (%) (2) 48 (26) Div Payout % - - Website: www bupame.com EPS SR (0.0) - - BVPS SR 9.7 - - Valuation multiples Source: Company, NCBC Research * 2008 figures are for 8 months period ending December 31, 2008 2006 2007 2008 P/E (x) NA NA NM Segment-wise business analysis P/B (x) NA NA 1.2 P/Sales (x) NA NA NA Product segment 2008 Geographic 2008 Div yield (%) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%) TASI (free float weight) 0.07 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) NA • Product profile: BUPA’s customized healthcare plans have been divided into BUPA
Free float (%) Direct and BUPA Corporate Health Care Scheme. BUPA Direct targets companies Free float 40.00 with 10 to 50 employees with three main schemes - Executive, Classic and Essential. BUPA Corporate Health Care Scheme targets companies with over 50 employees. Relative share price perf.
11, 0 0 0 40 • Financials: In 2008, the company incurred a net loss of SR1.7mn in 2008, mainly 9,000 30 due to high general and administrative expenses partially offset by income from 7,000 20 investments. Total asset base as on 2008 was SR392.5mn, while the shareholder’s 5,000 10 3,000 - equity stood at SR389.9mn M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Recent developments: BUPA reported its 1Q-09 results on April 21, 2009. The TASI Bupa Arabia (RHS) company recorded a net profit of SR1.8mn in 1Q-09. Corresponding figures for the
Top 5 shareholders (%) year-ago period are not available. In April 2009, the company announced that it has BUPA Middle East Holding 22.5 entered into a contract with the office of Dr. Mohammed Ali, according to which, the BUPA Investments Limited 15.0 latter will provide financial and investment consulting services to BUPA. In February Modern Software Solutions for 5.0 2009, the company received Saudi Arabian Monetary Agency (SAMA)’s approval to Computer Services Nadher Holding Group 5.0 proceed with its operations in health insurance. Furthermore, in February 2009, Mr. Asas Health Care Company 5.0 Pablo Juan and Mr. Anthony Cabrelli were appointed to BUPA’s board. In June Source: NCBC Research 2008, Saudi British Bank selected BUPA as a health insurance provider to its employees for the subsequent three years.
JUNE 2009 BUPA ARABIA FOR COOPERATIVE INSURANCE 190
INSURANCE
Also known as Alahli Takaful Co. ATC, Alahli Takaful Price SR149.0 AlAhli Takaful Company (ATC), established in 2006, is a joint venture between Pricing / Valuation as on May 27, 2009 National Commercial Bank, FWU AG, VHV, International Financial Corporation and a
Mkt cap SR1.5bn ($397.9mn) small share owned by local investors. Headquartered in Jeddah, the company Sh. outstanding 10.0mn provides a range of insurance products and services based on Islamic principles.
Key statistics Company financials
52 week range H/L (SR) 149.0/24.5 YoY CAGR(%) 2007* 2008 (%) (05-07) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - - - - 3m 52.40 13.99 Total Revenues SRmn - - - - 12m 28.82 7.69 Net Income SRmn (2) (10) - - Raw Beta 6m 2yr Assets SRmn 95 95 (0.5) - 0.13 0.72 Equity SRmn 94 83 (11.8) - Investments SRmn 94 72 (23.4) - Reuters 8130.SE Technical Reserves SRmn - 2 - - Bloomberg ATC AB Combined Ratio % - 140.5 - - Price perform (%) 1M 3M 12M Net Mgn % - NM - - Absolute (%) 83 137 55 ROE % (2.0) (11.4) - - Market (%) 6 32 (39) ROA % (2.0) (10.6) - - Sector (%) (2) 48 (26) Div Payout % - - - Website: www alahlitakaful.com EPS SR (0.2) (1.0) - -
BVPS SR 9.4 8.3 (11.8) - Valuation multiples Source: Company, NCBC Research; * Figures for FY 2007 are from July- December 2007
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 15.4 5.2 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.09 MSCI Saudi (domestic – small cap) 0.38 Source: NCBC Research
• Business brief: ATC’s insurance products include special programs for savings, Free float (%) Free float 26.45 retirement, and education. The Company’s “AlAhli Takaful and Savings Program” intends to match each individual’s lifestyle and fulfill saving requirements for various Relative share price perf. purposes such as retirement, children’s education, marriage, etc. The scheme 11, 0 0 0 200 provides maturity as well as death benefits. 9,000 15 0 7,000 10 0 • Financials: Despite recording gross premium written of SR6.4mn, ATC’s net 5,000 50 premium earned was only SR42 thousand during 2008. The Company’s total assets 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 aggregated to SR94.8mn, while shareholder’s equity totaled SR83.1mn at the end of TASI ATC (RHS) 2008. Technical reserves of the company at the end of 2008 stood at SR2.6mn.
• Recent developments: ATC reported its 1Q-09 results on April 21, 2009. The Top 5 shareholders (%) National Commercial Bank 30.0 company’s net loss declined to SR0.6mn in 1Q-09 compared to a net loss of FWU Group 13.1 SR1.4mn in 1Q-08. In February 2008, ATC’s Board of Directors (BOD) appointed Mr. International Finance Corporation 13.1 Omar Hashem Khalifti as the Chairman, thereby succeeding Mr. Mohammed Omar VHV Vermogensanlage 7.5 Kassem Al-Esayi. On August 18, 2007, ATC listed at SR109.7 against the issue price
of SR10 on the Saudi Stock Exchange. The company's IPO was oversubscribed 11.1 Source: NCBC Research times.
JUNE 2009 ALAHLI TAKAFUL 191
INSURANCE
Also known as Saudi IAIC Co-op. Saudi Salama
Price SR64.5 Saudi IAIC Cooperative Insurance Company (SALAMA) was established in 2006. Pricing / Valuation as on May 27, 2009 The Jeddah-based company markets its products under the SALAMA brand.
Mkt cap SR0.6bn ($172.2mn) SALAMA is engaged in providing general insurance solutions in compliance with Sh. outstanding 10.0mn Islamic Shariah and is a subsidiary of the UAE-based Islamic Arab Insurance Co.
Key statistics Company financials
52 week range H/L (SR) 230.0/22.5 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA 72 - - 3m 59.47 15.88 Total Revenues SRmn NA 76 - - 12m 42.42 11.33 Net Income SRmn (13) (20) - - Raw Beta 6m 2yr Assets SRmn 111 251 126.5 - 1.75 1.85 Equity SRmn 83 61 (25.8) -
Reuters 8050.SE Investments SRmn 103 64 (38.0) - Bloomberg SALAMA AB Technical Reserves SRmn NA 134 - - Combined Ratio % NA 114.5 - - Price perform (%) 1M 3M 12M Net Mgn % NA (26.8) - - Absolute (%) 14 73 (66) ROE % (16.2) (28.2) - - Market (%) 6 32 (39) ROA % (12.1) (11.3) - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: www salama com.sa EPS SR (1.3) (2.0) - - BVPS SR 8.3 6.1 (25.8) - Valuation multiples Source: Company, NCBC Research, figures for FY 2007 are from May- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM NA 11.8 P/B (x) 5.4 Product segment 2008 Geographic 2008 P/Sales (x) NA NA 4.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%)
TASI (free float weight) 0.06
MSCI Saudi (domestic – small cap) Source: Company, NCBC Research
Free float (%) • Business brief: SALAMA’s products are broadly classified into three segments— Free float 40.00 health, motor and general insurance. The health insurance segment offers individual and corporate health care cover. The motor insurance segment offers comprehensive Relative share price perf. and third party liability insurance cover. The general insurance segment provides 11, 0 0 0 250 9,000 200 cover for fire & property, personal accident, marine, engineering, and aviation. 15 0 7,000 10 0 • Financials: SALAMA reported revenues of SR76.1mn in 2008 primarily driven by 5,000 50 3,000 - premium income. However, the company’s net income declined to SR20.4mn mainly M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 due to loss on investment. SALMA’s equity and investments also declined by 25.8% TASI SALAMA (RHS) and 38.0% to SR61.4mn and SR64.1mn respectively.
Top 5 shareholders (%) • Recent developments: SALAMA reported its 1Q-09 results on April 21, 2009. The Arab Islamic Insurance Company 30.0 company’s net profit dived 86.2% y-o-y to SR1.6mn during the quarter. On April 30, Bin Dawood & sons Commercial Co. 5.0 2009, Mr. Shehzad Hafiz Mousaed was appointed as the General Manager after the Al Sha'er Trade, Industries and 5.0 resignation of Mr. Khaled Salem Barboud. In November 2008, SALAMA announced Construction Cooperative Group Company for 5.0 strategic alliance with NCB Capital to promote Sharia compliant insurance solutions. Trade & Construction In October 2008, the company announced launch of its new motor claim center in Jeddah, which would enable it to provide value-added services to its clients. Source: NCBC Research
JUNE 2009 SAUDI IAIC CO-OPERATIVE INSURANCE COMPANY 192
INSURANCE
Also Known as Trade Union Co-op. TUCIC, TUIC
Trade Union Cooperative Insurance & Reinsurance Company (Trade Union) was Price SR24.4 established in 2007 as a Saudi-based insurance company. The company is Pricing / Valuation as on May 27, 2009 headquartered in Al Khobar and is registered with the Council of Cooperative Mkt cap SR0.6bn ($162.9mn) Health Insurance (CCHI). Sh. outstanding 25.0mn
Key statistics Company financials
52 week range H/L (SR) 31.5/9.3 YoY CAGR(%) 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn 0 - - 39.73 10.61 3m Total Revenues SRmn 7 - - 19.73 5.27 12m Net Income SRmn (2) - - Raw Beta 6m 1yr Assets SRmn 262 - - 1.21 1.35 Equity SRmn 248 - - Investments SRmn 257 - - Reuters 8170.SE Technical Reserves SRmn 0 - - Bloomberg TRDUNION AB Combined Ratio % NM - - Price perform (%) 1M 3M 12M Net Mgn % NM - - Absolute (%) (9) 54 (12) ROE % (1.0) - - Market (%) 6 32 (39) ROA % (0.9) - - Sector (%) (2) 48 (26) Div Payout % 0.0 - - Website: www tui-sa.com EPS SR (0.1) - -
Book Value Per Share SR 9.9 - - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA NM P/B (x) NA NA 1.3 Product segment 2008 Geographic 2008 46.4 P/Sales (x) NA NA %Rev % Net Inc Breakup %Rev % Net Inc 0.0 Div yield (%) NA NA
Weightage (%) TASI (free float weight) 0.06 MSCI Saudi (domestic – small cap) NA Source: Company, NCBC Research
• Product profile: Trade Union’s product portfolio includes property insurance (fire and Free float (%) Free float 42.00 allied perils), liability insurance (general and product), marine insurance (hull, cargo and land transit), crime insurance (burglary, computer fraud), engineering insurance Relative share price perf. (machinery breakdown, contractor’s risks), motor insurance (commercial or heavy 11, 0 0 0 40 vehicles), and personal lines (household comprehensive, personal accident, new 9,000 30 7,000 20 vehicle warranty). Additionally, Trade Union provides medical and life insurance 5,000 10 products as well as reinsurance services led by Swiss Reinsurance Co. The 3,000 - company’s medical treaty is secured by Reinsurance Company Munich Re. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 TASI Trade Union (RHS) • Financials: The company recorded revenues of SR6.9mn in 2008, driven by
investment and other income. However, since the company started its core Top 5 shareholders (%) operations in March 2008 only, it incurred high operating expenses, which led to a net United Commercial Insurance Co. 22.3 loss of SR2.4mn. The company’s total asset base as on 2008 was SR261.5mn, while Al Ahlia Insurance Company 10.0 the shareholder’s equity stood at SR247.6mn.
• Recent developments: Trade Union reported its 1Q-09 results on April 21, 2009. The company recorded a net profit of SR0.8mn in 1Q-09. Corresponding figures for Source: NCBC Research the year-ago period are not available. The Company’s year-end date has been
finalized to December 31 in the EGM held in March 2009.
JUNE 2009 TRADE UNION COOPERATIVE 193
INSURANCE
Also known as Sanad Insurance SANAD Price SR34.4 Sanad Insurance & Reinsurance Cooperative Company (SANAD) was established in Pricing / Valuation as on May 27, 2009 2006. The company provides a diverse range of car, general, health, property and
Mkt cap SR0.7bn ($183.7mn) marine insurance and reinsurance services. It also has plans to expand product Sh. outstanding 20.0mn portfolio to cover insurance for agriculture, airlines, ships, petrol and power.
Key statistics Company financials
52 week range H/L (SR) 58.5/9.8 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA 3 - - 3m 46.61 12.45 Total Revenues SRmn NA 3 - - 12m 22.20 5.93 Net Income SRmn (9) (16) - - Raw Beta 6m 2yr Assets SRmn 191 221 15.6 - 1.09 0.97 Equity SRmn 191 175 (8.4) - Investments SRmn 186 173 - - Reuters 8090.SE Technical Reserves SRmn NA 22 - - Bloomberg SANAD AB Combined Ratio % NA 343.9 - - Price perform (%) 1M 3M 12M Net Mgn % NA NM - - Absolute (%) (38) 103 1 ROE % (4.7) (8.9) - - Market (%) 6 32 (39) ROA % (4.7) (7.9) - - Sector (%) (2) 48 (26) Div Payout % NA 0.0 - - Website: www sanad.com.sa EPS SR (0.5) (0.8) - -
Book Value Per Share SR 9.5 8.7 (8.4) - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 6.2 1.4 Product segment 2008 Geographic 2008 P/Sales (x) NA NA 86.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA 0.0
Weightage (%) TASI (free float weight) 0.06 MSCI Saudi (domestic – small cap) 0.61 Source: Company, NCBC Research
• Business brief: SANAD provides fire, travel, medical, motor, property, marine and Free float (%) Free float 40.0 engineering insurance products. The company also offers insurance against general accidents. In addition, SANAD offers life insurance products and reinsurance Relative share price perf. services. 11, 0 0 0 60 9,000 40 • Financials: The company recorded revenues of SR2.8mn in 2008. However, since 7,000 SANAD is a recently established company, it continued to incur high operating 20 5,000 expenses, which led to a net loss of SR16.2mn in 2008 as compared to SR9.0 mn in 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 2007. SANAD’s total asset base as on 2008 was SR221.1mn while the shareholder’s TASI SANAD (RHS) equity stood at SR175.0mn.
• Recent developments: SANAD reported its 1Q-09 results on April 20, 2009. The Top 5 shareholders (%) Al Khazna Insurance Co. 15.0 company’s net loss surged to SR4.8mn in 1Q-09 compared to a net loss of SR0.9mn Saudi Continental Insurance Co. 10.0 in 1Q-08. In May 2008, Al Khazna Insurance Co. acquired a 15.0% stake in SANAD, Ramat Marketing and Distribution Co. 5.0 through buying 3mn shares for SR96.8mn. In the same month, the company appointed Mr. Ahmad Bin Abdullah Al Akili as the new chairperson to replace Mr.
Abdullah Bin Yahia Al Muallimi. In addition, Mr. Azman Daya was appointed as the Source: NCBC Research new CEO.
JUNE 2009 SANAD INSURANCE 194
INSURANCE
Also known as Saudi United Wala’a Insurance Price SR31.0 Saudi United Cooperative Insurance Company (Walaa Insurance) was established at Pricing / Valuation as on May 27, 2009 Al-Khobar in 2006 and specializes in business risks and government agencies. The
Mkt cap SR0.6bn ($165.6mn) company markets its products and services under the WALAA brand and operates Sh. outstanding 20.0mn through its branches in Riyadh, Jeddah, Hofouf, and Makah.
Key statistics Company financials
52 week range H/L (SR) 39.4/9.6 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA NA - - 3m 31.73 8.47 Total Revenues SRmn NA NA - - 12m 16.78 4.48 Net Income SRmn (13) (2) - - Raw Beta 6m 2yr Assets SRmn 188 187 (0.3) - 1.90 1.24 Equity SRmn 187 181 (3.3) - Investments SRmn 186 182 (1.9) - Reuters 8060.SE Technical Reserves SRmn NA NA - - Bloomberg WALAA AB Combined Ratio % NA NA - - Price perform (%) 1M 3M 12M Net Mgn % NA NA - - Absolute (%) (4) 74 3 ROE % (6.9) (1.1) - - Market (%) 6 32 (39) ROA % (6.9) (1.1) - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: www.walaa.com EPS SR (0.6) (0.1) NM -
BVPS SR 9.4 9.1 (3.3) - Valuation multiples Source: Company, NCBC Research, figures for FY 2007 are from July - December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 6.7 1.6 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.06 MSCI Saudi (domestic – small cap) Source: NCBC Research
• Business brief: Walaa offers its products through four broad categories. The assets Free float (%) Free float 40.00 & earnings insurance segment offers a cover against property & business interruption. The liabilities segment covers employers, public, products, & Relative share price perf. professional risks. Under the employees segment, the company offers life, personal 11, 0 0 0 50 accident, and healthcare insurance products. Under the goods on the move segment, 9,000 40 30 7,000 Walaa offers ocean cargo and inland transit insurance products. 20 5,000 10 • Financials: The Company incurred a net loss of SR2.0mn during 2008. Walaa’s total 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 assets stood at SR186.9mn and shareholders equity at SR181.0mn at the end of TASI Walaa Insurance (RHS) 2008.
• Recent developments: Walaa reported its 1Q-09 results on April 21, 2009. The Top 5 shareholders (%) International General Insurance Co - company incurred a loss of SR2.3mn in 1Q-09 compared to a loss of SR0.3mn in 1Q- 10.5 Jordan 08. In February 2009, the company received the Saudi Arabian Monetary Agency Abdullah Mohammed Taleb Hakim 5.0 (SAMA)'s approval on offering 30 insurance products for 6 months. The company has
already received Council of Cooperative Health Insurance's approval to issue
insurance policies in August 2008. In February 2009, Walaa also obtained SAMA’s
Source: NCBC Research approval on Mr. Suleiman Bin Abdulaziz Al Tawijri’s appointment to the company’s board. In January 2009, the company appointed Mr. Andrew Martin Chweinhauser as
new Chief Executive Officer. JUNE 2009 WALAA INSURANCE 195
INSURANCE
Also known as Saudi Fransi Coop. ALLIANZ SF
Price SR81.8 Saudi Fransi Cooperative Insurance Company (ALLIANZ SF), formerly known as Pricing / Valuation as on May 27, 2009 Insaudi Insurance Company, was established in 2006 in Riyadh. The Company is a
Mkt cap SR0.8bn ($218.3mn) subsidiary of Banque Saudi Fransi (member of the Calyon Group) and Assurances Sh. outstanding 10.0mn Generales de France (member of the Allianz Group).
Key statistics Company financials
52 week range H/L (SR) 111.0/25.0 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA 7 - - 3m 60.08 16.04 Total Revenues SRmn NA 8 - - 12m 37.97 10.14 Net Income SRmn (16) (14) - - Raw Beta 6m 2yr Assets SRmn 104 210 101.8 - 0.22 0.90 Equity SRmn 84 66 (21.3) -
Reuters 8040.SE Investments SRmn 100 72 (28.2) - Bloomberg ALLIANZ AB Technical Reserves SRmn NA 58 - - Combined Ratio % NA 16.3 - - Price perform (%) 1M 3M 12M Net Mgn % NA NM - - Absolute (%) 16 25 (9) ROE % (18.8) (18.8) - - Market (%) 6 32 (39) ROA % (15.2) (9.0) - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: EPS SR (1.6) (1.4) - - BVPS SR 8.4 6.6 (21.3) - Valuation multiples Source: Company, NCBC Research, figures for FY 2007 are from July- December 2007.
2006 2007 2008 P/E (x) NA NM NM Segment-wise business analysis NA 13.7 6.3 P/B (x) Product segment 2008 Geographic 2008 P/Sales (x) NA NA 54.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%)
TASI (free float weight) 0.06 Source: Company, NCBC Research MSCI Saudi (domestic – small cap) • Business brief: ALLIANZ SF offers multiple insurance solutions through two main Free float (%) segments- individual and corporate. Under the individual solutions segment, the Free float 31.00 company provides Shariah compliant insurance products including individual financial
Relative share price perf. planning (for education, protection, and retirement), family income protection, life and
11, 0 0 0 15 0 disability insurance, and corporate solutions assurance. The corporate solutions 9,000 10 0 segment offers insurance cover against fire, general accident, construction/erection 7,000 engineering, marine cargo and employee compensation. 50 5,000 3,000 - • Financials: The Company earned net premium of SR7.1mn in 2008, however M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 incurred a net loss of SR14.2mn over the same period due to significant general and TASI ALLIANZ SF (RHS) administrative expenses. The company’s shareholder equity and investments also declined y-o-y by 21.3% and 28.2% respectively. Top 5 shareholders (%) Banque Saudi Fransi 32.5 • Recent developments: The company reported its 1Q-09 results on April 21, 2009. 16.2 AGF International Co. The company recorded a loss of SR3.3mn in 1Q-09 compared to a loss of SR3.7mn SNI Holding Co. 16.2 in the year ago period. In December 2008, ALLIANZ SF appointed Mr. Samir Bin
Mohammed on the Board of Directors (BOD) to replace Mr. Abdulaziz Al Mechaal Source: NCBC Research who resigned in February 2008. During October 2008, the company announced its plan to raise capital through issuance of new preference shares worth SR100 mn.
The company has not disclosed further details.
JUNE 2009 SAUDI FRANSI COOPERATIVE INSURANCE 196
INSURANCE
Also known as Gulf Union Co-op Gulf Union
Price SR26.9 Gulf Union Cooperative Insurance Company (Gulf Union) was established in by the Pricing / Valuation as on May 27, 2009 Gulf Union Insurance and Projects Management Holding Company. It offers Shariah-
Mkt cap SR0.6bn ($158.0mn) compliant insurance products and serves clients in Saudi Arabia as well as clients of Sh. outstanding 22.0mn its sister company - Gulf Union Insurance and Risk Management Company.
Key statistics Company financials
52 week range H/L (SR) 38.0/10.0 YoY CAGR(%) 2007* 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - - - - 44.81 11.96 3m Total Revenues SRmn - - - - 20.57 5.49 12m Net Income SRmn (22) 2 - - Raw Beta 6m 1yr Assets SRmn 208 208 (0.2) - 1.39 1.28 Equity SRmn 198 195 (1.5) - Investments SRmn 203 175 (14.0) - Reuters 8120.SE Technical Reserves SRmn - - - - Bloomberg GULFUNI AB Combined Ratio % - - - - Price perform (%) 1M 3M 12M Net Mgn % - - - - Absolute (%) (25) 66 (4) ROE % (11.0) 0.9 - - Market (%) 6 32 (39) ROA % (10.5) 0.8 - - Sector (%) (2) 48 (26) Div Payout % - - - Website: NA EPS SR (1.0) 0.1 - -
BVPS SR 9.0 8.9 (1.5) - Valuation multiples Source: Company, NCBC Research * Figures for FY 2007 are from August- December 2007
2006 2007 2008 P/E (x) NA NM 163.7 Segment-wise business analysis P/B (x) NA 6.7 1.4 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA Div yield (%) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%) TASI (free float weight) 0.05 MSCI Saudi (domestic – small cap) 0.41 Source: NCBC Research
Free float (%) • Business brief: Gulf Union is engaged in cooperative insurance and reinsurance Free float 40.00 activities excluding protection and savings insurance. The Company’s product
Relative share price perf. portfolio includes insurance for property, liability, motor, individual, health, and other
11, 0 0 0 40 related cooperative insurance activities. Apart from Dammam, Gulf Union has 9,000 30 branches in Jeddah, Khobar, and Riyadh. 7,000 20 5,000 10 • Financials: The Company recorded a net profit of SR1.7mn during 2008 benefiting 3,000 - from higher investment income, as compared to net loss of SR21.9mn in 2007. Gulf M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 Union’s total assets aggregated to SR207.5mn, while shareholder’s equity totaled TASI Gulf Union (RHS) SR195.2mn at the end of 2008.
Top 5 shareholders (%) • Recent developments: Gulf Union reported its 1Q-09 results on April 21, 2009. The Gulf Union Insurance Company 23.5 company’s net profit plunged 94.3% y-o-y to SR31,957 in 1Q-09. In May 2009, Mr
Ahmed Ali Ahmed Al- Shadwi’s appointment to the company’s board was approved in
the annual general meeting. The Company appointed Abdullah Al Nasser as a Chief Executive Officer, with effect from November 16, 2008. On September 11, 2007, Gulf Source: NCBC Research Union’s shares were listed on the Saudi Stock Exchange at SR109.75 against the
issue price of SR10. The Company’s IPO was oversubscribed 4.9 times.
JUNE 2009 GULF UNION 197
INSURANCE
Also known as Arabia Insurance AICC Price SR28.4 Arabia Insurance Cooperative Company (AICC) was established in 2007 and is Pricing / Valuation as on May 27, 2009 headquartered in Riyadh. AICC operates in partnership with Lebanon-based Arabia
Mkt cap SR0.6bn ($151.7mn) International Insurance Company (AIIC) and Jordan-based Jordan Insurance Sh. outstanding 20.0mn Company (JIC). The company has acquired the Saudi assets of AIIC and JIC.
Key statistics Company financials
52 week range H/L (SR) 37.3/9.8 YoY CAGR(%) 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn -- 3m 24.49 6.54 Total Revenues SRmn -- 12m 13.99 3.74 Net Income SRmn (27) - - 177 - - Raw Beta 6m 1yr Assets SRmn 171 - - 0.73 1.08 Equity SRmn Investments SRmn 169 - - Reuters 8160.SE Technical Reserves SRmn - - - Bloomberg AICC AB Combined Ratio % - - - Price perform (%) 1M 3M 12M Net Mgn % - - - Absolute (%) (12) 17 (3) ROE % (15.7) - - Market (%) 6 32 (39) ROA % (15.1) - - Sector (%) (2) 48 (26) Div Payout % -- Website: NA EPS SR (1.3) - -
BVPS SR 8.5 - - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA NM P/B (x) NA NA 1.5 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.05 MSCI Saudi (domestic – mid cap) Source: Company, NCBC Research
• Business brief: AICC is engaged in insurance and reinsurance activities and Free float (%) Free float 40.00 services across Saudi Arabia. The company offers several insurance products including motor insurance, property insurance, marine insurance, medical insurance Relative share price perf. and general accidents insurance. AICC intends to take advantage of growth 11, 0 0 0 40 opportunities provided by the mandatory health and motor insurance laws in the 9,000 30 7,000 20 Kingdom. The company also plans to expand the market for Takaful life policies and 5,000 10 investment products. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: The company recorded net loss of SR26.8mn in 2008, driven by high TASI AICC (RHS) general and administrative expenses. Total asset base as on 2008 was SR177.0mn,
while the shareholder’s equity stood at SR170.8mn. Top 5 shareholders (%) Arab Holding Co. 19.2 • Recent developments: AICC reported its 1Q-09 results on April 21, 2009. The Jordanian Insurance Co. 12.2 company recorded a net loss of SR2.9mn in 1Q-09. Corresponding figures for the Arab Supply and Trading (ASTRA) 5.0 year-ago period are not available. In January 2009, Mr.Mohammad Saad Sobhi Khabbaz was appointed the company's general manager, replacing Mr. Samir
Faddoul Faddoul. The company received Saudi Arabian Monetary Agency's approval Source: NCBC Research on this appointment in March 2009.
JUNE 2009 ARABIA INSURANCE COOPERATIVE COMPANY 198
INSURANCE United Coop. Assurance
United Cooperative Assurance Company (UCA) is engaged in insurance business Price SR28.2 within KSA. In 2007, the company was established in Jeddah as a separate entity of Pricing / Valuation as on May 27, 2009 UCA Insurance Co. of Bahrain. UCA provides all forms of Insurance and Mkt cap SR0.6bn ($150.6mn) Reinsurance except Protection and Savings Insurance. Sh. outstanding 20.0mn
Key statistics Company financials
52 week range H/L (SR) 38.5/16.2 YoY CAGR(%) 2008* (%) (05-07) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - - - 36.09 9.64 3m Total Revenues SRmn - - - 29.22 7.80 9m Net Income SRmn (10) - - Raw Beta 6m 9m Assets SRmn 207 - - 0.92 0.99 Equity SRmn 190 - - Investments SRmn 206 - - Reuters 8190.SE Technical Reserves SRmn 0.0 - - Bloomberg UCA AB Combined Ratio % NM - - Price perform (%) 1M 3M 9M Net Mgn % NM - - Absolute (%) 0 40 20 ROE % (5.4) - - Market (%) 6 32 (34) ROA % (4.9) - - Sector (%) (2) 48 (21) Div Payout % - - - Website: www uca.com.sa EPS SR (0.5) - -
BVPS SR 9.5 - - Valuation multiples Source: Company, NCBC Research * 2008 figures are for 7 months period ending December 31, 2008
2006 2007 2008 P/E (x) NA NA NM Segment-wise business analysis P/B (x) NA NA 3.7 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA Div yield (%) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%)
TASI (free float weight) 0.05
MSCI Saudi (domestic – small cap) NA Source: Company, NCBC Research
Free float (%) • Product profile: UCA offers a wide range of insurance products such as engineering Free float 40.00 (contractor’s risks, machinery and plant & equipment used for construction), medical,
Relative share price perf. personal accident and protection, motor insurance and marine cargo.
11, 0 0 0 40 • Financials: The Company recorded net loss of SR10.2mn in 2008, driven by high 9,000 30 general and administrative expenses. Total asset base as on 2008 was SR206.8mn, 7,000 20 5,000 10 while the shareholder’s equity stood at SR189.8mn 3,000 - Jun-08 Oct-08 Jan-09 M ay-09 • Recent developments: UCA reported its 1Q-09 results on April 21, 2009. The
TASI U C A (RHS) company recorded a net profit of SR0.4mn in 1Q-09. Corresponding figures for the
year-ago period are not available. In March 2008, the company offered 8mn shares to Top 5 shareholders (%) the public, representing 40.0% of the total capital. The issue was oversubscribed by UCA Insurance Company 32.5 eight times. Faisaliah Holding Group 5.0 Civil Works Company 5.0
Source: NCBC Research
JUNE 2009 UNITED COOPERATIVE ASSURANCE CO 199
INSURANCE
Also known as Saudi Indian Co. SIICO, SAUDI INDIAN Price SR55.5 Saudi Indian Company for Co-operative Insurance (Saudi Indian) was established in Pricing / Valuation as on May 27, 2009 2007 by New India Assurance Company, Life Insurance Corporation of India (Intl)
Mkt cap SR0.6bn ($148.2mn) and Fawaz Abdulaziz Al Hokair and Company. It is headquartered in Riyadh and Sh. outstanding 10.0mn provides financial security to individuals, commercial establishments and others.
Key statistics Company financials
52 week range H/L (SR) 117.8/19.3 YoY CAGR(%) 2007* 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - 1 - - 3m 52.17 13.93 Total Revenues SRmn - 1 - - 12m 42.41 11.33 Net Income SRmn (12) (7) - Raw Beta 6m 2yr Assets SRmn 96 104 8.4 - 2.49 1.29 Equity SRmn 88 79 (9.8) - Investments SRmn 93 68 (26.4) - Reuters 8110.SE Technical Reserves SRmn - 13 - - Bloomberg SIICO AB Combined Ratio % - - - - Price perform (%) 1M 3M 12M Net Mgn % - - - - Absolute (%) 9 60 1 ROE % (14.0) (8.8) - - Market (%) 6 32 (39) ROA % (12.8) (7.3) - - Sector (%) (2) 48 (26) Div Payout % - - Website: www saudi-indianinsurance com sa EPS SR (1.2) (0.7) - -
BVPS SR 8.8 7.9 (9.8) - Valuation multiples Source: Company, NCBC Research * figures for FY2007 are from September 2006- December 2007.
2006 2007 2008 P/E (x) NA NM NM Segment-wise business analysis P/B (x) NA 12.2 5.3 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA Div yield (%) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc
Weightage (%)
TASI (free float weight) 0.05 Source: Company, NCBC Research MSCI Saudi (domestic – small cap)
• Business brief: Saudi Indian’s product profile is segregated into two broad Free float (%) categories: life insurance and non-life insurance. Under its life insurance segment, Free float 40.00 the company offers various plans related to protection and savings, such as Takaful Relative share price perf. Insurance Plan, Participating Endowment Plan, Cash Back Plan, and Money Back &
11, 0 0 0 15 0 Protect Lifelong. Under the non-life insurance segment, Saudi Indian provides fire 9,000 10 0 insurance, motor insurance, engineering insurance, health insurance and other 7,000 50 miscellaneous products including personal accident, burglary and fidelity guarantee. 5,000 3,000 - • Financials: The Company incurred a net loss of SR7.3mn in 2008 as compared to M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 SR12.3mn in 2007 (from September 2006- December 2007). Saudi Indian’s total TASI Saudi Indian (RHS) assets aggregated to SR103.8mn, while shareholder’s equity totaled SR79.1mn at
Top 5 shareholders (%) the end of 2008. New India Assurance Company 10.6 • Recent developments: Saudi Indian reported its 1Q-09 results on April 21, 2009. Life Insurance Corporation of India 10.2 The company’s net loss surged to SR5.0mn in 1Q-09 compared to a net loss of Life Insurance Co. (Global) 10.2 Ahmad Mohammed Abdulrahman Al 5.0 SR0.7mn in 1Q-08. The company has received approval from The Council of Sheikh Establishment Cooperative Health Insurance to implement health insurance plans in KSA, as per the Khalid Abdul Aziz Bin Selmah Trading 5.0 company’s announcement in April 2009. In July 2008, Saudi Indian received license Establishment Source: NCBC Research from the Saudi Arabian Monetary Agency to start operations.
JUNE 2009 SAUDI INDIAN 200
INSURANCE
Also known as Arabian Shield Co-op Arabian Shield
Price SR27.0 Arabian Shield Cooperative Insurance Company (Arabian Shield) was established in Pricing / Valuation as on May 27, 2009 2007 with headquarters at Riyadh and commenced operations in January 2008.
Mkt cap SR0.5bn ($144.2mn) Arabian Shield is engaged in cooperative insurance and reinsurance activities. The Sh. outstanding 20.0mn company is a subsidiary of Arabian Shield Insurance Company, based in Bahrain.
Key statistics Company financials
52 week range H/L (SR) 35.3/10.6 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA NA - - 32.35 8.64 3m Total Revenues SRmn NA NA - - 15.62 4.17 12m Net Income SRmn (5) 2 - - Raw Beta 6m 2yr Assets SRmn 204 202 (1.2) - 1.08 0.90 Equity SRmn 195 196 0.8 - Investments SRmn 204 202 (1.0) - Reuters 8070.SE Technical Reserves SRmn NA NA -- Bloomberg SHIELD AB Combined Ratio % NA NA - - Price perform (%) 1M 3M 12M Net Mgn % NA NA - - Absolute (%) (12) 46 (8) ROE % (2.7) 0.8 - - Market (%) 6 32 (39) ROA % (2.6) 0.7 - - Sector (%) (2) 48 (26) Div Payout % NA NA - - Website: www arabianshield.com EPS SR (0.3) 0.1 - -
BVPS SR 9.7 9.8 0.8 - Valuation multiples Source: Company, NCBC Research, figures for FY 2007 are from May- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM 184.0 P/B (x) NA 6.6 1.4 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.05 MSCI Saudi (domestic – small cap) 0.33 Source: NCBC Research
• Business brief: Under the Saudi Arabian Monetary Agency’s control and Free float (%) Free float 40.00 supervision, Arabian Shield provides a variety of insurance products and services. These are general insurance (including property, motor, marine, engineering, liability, Relative share price perf. accident, and airplane), medical insurance (for individuals, companies and 11, 0 0 0 40 establishments), and energy insurance. 9,000 30 7,000 20 • Financials: Arabian Shield recorded net earnings of SR1.5mn in 2008 as compared 5,000 10 3,000 - to net loss of SR5.2mn in 2007 (from May- December 2007). The company’s total M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 asset base at the end of 2008 was SR201.8mn while the shareholder’s equity stood TASI Arabian Shield (RHS) at SR196.3mn.
• Recent developments: Arabian Shield reported its 1Q-09 results on April 21, 2009. Top 5 shareholders (%) Arabian Shield Insurance Company 30.0 The company’s net profit slumped 77.4% to SR0.4mn in 1Q-09. In May 2008, the Bahrain National Holding Company 15.0 Company announced the appointment of Mr. Joseph Reso to replace Mr. Nizar Yamama Saudi Cement Company 5.0 Mohammed Al-Sa'ai in the Board of Directors. On June 26, 2007, Arabian Shield’s Al Oba kan Group for Investment 5.0 shares were listed on the Saudi Stock Exchange with an opening price of SR62.0,
which represented a 520% increase over its issue price of SR10.0. Source: NCBC Research
JUNE 2009 ARABIAN SHIELD 201
INSURANCE
Also known as Saudi Arabian Co-op SAICO Saudi
Price SR57.0 Saudi Arabian Cooperative Insurance Company (SAICO), established in 2007, offers Pricing / Valuation as on May 27, 2009 Shariah compliant insurance services across Saudi Arabia. SAICO is a subsidiary of
Mkt cap SR0.6bn ($152.2mn) Bahrain based Saudi Arabian Cooperative Insurance Company, which has a 30% Sh. outstanding 10.0mn stake in the former.
Key statistics Company financials
52 week range H/L (SR) 89.5/14.9 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn NA NA - - 53.29 14.23 3m Total Revenues SRmn NA NA - - 30.65 8.18 12m Net Income SRmn (6) (4) - - Raw Beta 6m 1yr Assets SRmn 105 94 (10.4) - 1.28 1.42 Equity SRmn 94 90 (3.9) - Investments SRmn 102 91 (10.9) - Reuters 8100.SE Technical Reserves SRmn NA - - - Bloomberg SAICO AB Combined Ratio % NA - - - Price perform (%) 1M 3M 12M Net Mgn % NA - - - Absolute (%) 10 65 (15) ROE % (6.8) (4.0) - - Market (%) 6 32 (39) ROA % (6.1) (3.7) - - Sector (%) (2) 48 (26) Div Payout % NA - - - Website: www.saicoins com sa EPS SR (0.6) (0.4) - -
BVPS SR 9.4 9.0 (3.9) - Valuation multiples Source: Company, NCBC Research, figures for FY207 ate from August- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 15.0 2.5 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.05 MSCI Saudi (domestic – small cap) Source: Company, NCBC Research
• Business brief: SAICO, catering to the insurance needs of the Saudi Arabian Free float (%) Free float 40.00 population, aims to carry out insurance activities in all related fields excluding protection and saving insurance. Relative share price perf.
11, 0 0 0 10 0 • Financials: SAICO’s total assets aggregated SR94.1mn, while shareholder’s equity 9,000 80 totaled SR89.9mn at the end of 2008. The company incurred a net loss of SR3.7mn 60 7,000 40 in the same period as compared to SR6.4mn from August- December 2007. 5,000 20 3,000 - • Recent developments: SAICO reported its 1Q-09 results on April 19, 2009. The M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 company’s net loss surged to SR2.2mn in 1Q-09 compared to a net loss of SR0.8mn TASI SAICO (RHS) in 1Q-08. In May 2009, Saudi Arabian Monetary Agency granted an approval to SAICO to launch five new insurance products. In March 2009, Dr. George Chahine Top 5 shareholders (%) Saudi Arab Insurance Co - Bahrain 30.0 has been appointed as a member on the board, and is awaiting the AGM’s approval. Al Wa'lan Car Co. 5.0 In November 2008, SAICO appointed Dr. Saud Abdullah Al Ammary on the Board of Erad Holding 5.0 Directors (BOD) to replace Mr. Saleh Khalaf Al-Khalaf who resigned in June 2008. On September 3, 2007, SAICO’s shares were listed on the Saudi Stock Exchange at
SR109.75 per share, an increase of more than 1000% over its issue price of SR10.00 Source: NCBC Research per share.
JUNE 2009 SAUDI ARABIAN CO-OPERATIVE INSURANCE COMPANY 202
INSURANCE
Al-Ahlia Insurance Co Price SR56.5 Al-Ahlia Insurance Company (Al-Ahlia) was established in 2007 by the National Pricing / Valuation as on May 27, 2009 Insurance Company of Egypt and several Saudi investors. Al-Ahlia is headquartered
Mkt cap SR0.6bn ($150.9mn) in Riyadh and offers Islamic Sharia-compliant cooperative insurance and Sh. outstanding 10.0mn reinsurance services in the Kingdom.
Key statistics Company financials
52 week range H/L (SR) 104.0/14.1 YoY CAGR(%) 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance premium SRmn - - - - 3m 45.64 12.19 Total Revenues SRmn - 2 - - 12m 38.51 10.28 Net Income SRmn - (15) - - Raw Beta 6m 1yr Assets SRmn 113 107 (5.2) - 1.54 1.47 Equity SRmn 100 83 (17.0) - 8140.SE Investments SRmn 100 101 - - Reuters Technical Reserves SRmn - 0 - - Bloomberg Alahlia Ab Combined Rtaio % - - - - Price perform (%) 1M 3M 12M Net profit margin % - - - - Absolute (%) 9 65 5 ROE % - (16.7) - - Market (%) 6 32 (39) ROA % - (13.9) - - Sector (%) (2) 48 (26) Div Payout % - 0.0 - - Website: www.alahlia.com sa EPS SR - (1.5) - -
BVPS SR 10.0 8.3 (17.0) - Valuation multiples Source: Company, NCBC Research, figures for 2007 are from July- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA NM P/B (x) NA 11.9 2.9 Product segment 2008 Geographic 2008 P/Sales (x) NA NA 149.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.05 Source: Company, NCBC Research
MSCI Saudi (domestic) N/A • Business brief: Al-Ahlia offers a range of general insurance products, which include
Free float (%) fire insurance, property insurance, marine insurance, motor insurance, money Free float 40.00 insurance, engineering insurance, medical insurance, medical malpractice insurance, fidelity insurance and liability insurance. Relative share price perf.
11, 0 0 0 15 0 • Financials: Al-Ahlia’s total revenues were SR1.6mn in 2008; however, the company 9,000 10 0 incurred a net loss of SR15.3mn because of high general and administrative 7,000 50 expenses. The company’s assets aggregated SR106.9mn, while shareholder’s equity 5,000 3,000 - stood at SR83.0mn as of 31 December 2008. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Recent developments: Al-Ahlia reported its 1Q-09 results on April 21, 2009. The TASI Al-Ahlia (RHS) company’s net loss rose to SR4.1mn in 1Q-09 compared to a net loss of SR0.5mn in
Top 5 shareholders (%) 1Q-08. In May 2009, the company announced that Saudi Arabian Monetary Agency Al Ahlia Insurance Co. - Egypt 18.0 (SAMA) has granted it a temporary approval for ten products including marine, property, fire, transportation, and glass insurance. Previously in April 2009, the SAMA approved some of Al-Ahlia’s products, including car and medical insurance while
general and health insurance product portfolio was approved in March 2009. On
October 06, 2007, Al-Ahlia was listed on the Saudi Stock Exchange at SR82.2 per Source: NCBC Research share as against the issue price of SR10.0. The public issue was oversubscribed 7.9 times.
JUNE 2009 AL-AHLIA INSURANCE CO 203
INSURANCE
Also known as Allied Co-operative ACIG, Saudi ACIG
Price SR63.8 Allied Cooperative Insurance Group (ACIG) was incorporated in 2007 through the Pricing / Valuation as on May 27, 2009 acquisition of the Saudi assets and client portfolio of its parent company, ACIG
Mkt cap SR0.6bn ($170.2mn) Bahrain. ACIG, based in Jeddah, offers Islamic Shariah-compliant insurance and Sh. outstanding 10.0mn reinsurance products in Saudi Arabia.
Key statistics Company financials
52 week range H/L (SR) 117.0/15.0 YoY CAGR(%) 2007* 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Insurance Premium SRmn - - - - 3m 58.50 15.62 Total Revenues SRmn - - - - 12m 45.41 12.13 Net Income SRmn (5) (20) - - Raw Beta 6m 1yr Assets SRmn 94 78 (17.2) - 1.00 1.40 Equity SRmn 92 71 (23.5) - Investments SRmn 91 74 (19.1) - Reuters 8150.SE Technical Reserves SRmn - - - - Bloomberg ACIG AB Combined Ratio % - - - - Price perform (%) 1M 3M 12M Net Mgn % - - - - Absolute (%) (35) 60 19 ROE % (5.1) (24.8) - - Market (%) 6 32 (39) ROA % (5.0) (23.4) - - Sector (%) (2) 48 (26) Div Payout % - - - - Website: www acig.com sa EPS SR (0.5) (2.0) - -
BVPS SR 9.2 7.0 (23.5) - Valuation multiples Source: Company, NCBC Research; * figures for FY2007 are from July- December 2007.
2006 2007 2008 Segment-wise business analysis P/E (x) NA NM NM P/B (x) NA 10.9 3.2 Product segment 2008 Geographic 2008 P/Sales (x) NA NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA
Weightage (%) TASI (free float weight) 0.06 MSCI Saudi (domestic – mid cap) 0.29 Source: Company, NCBC Research
• Business brief: ACIG offers a range of insurance products. Under its marine Free float (%) Free float 40.00 insurance segment, it offers marine cargo insurance and inland transit insurance. The Medical Insurance segment offers four product lines for all types of clients, from the Relative share price perf. office to the factory floor. The Motor Insurance segment provides third-party liability 11, 0 0 0 15 0 protection, personal accident cover (for drivers and passengers) and comprehensive 9,000 10 0 7,000 ’own damage’ options. The General Insurance segment provides money insurance, 50 5,000 fidelity insurance, personal accident insurance, public liability insurance, workmen’s 3,000 - compensation insurance, and medical malpractice insurance. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 TASI A CIG (RHS) • Financials: During 2008, the company reported a net loss of SR20.2mn. The
company’s assets also decreased to SR78.2mn at the end of 2008; while Top 5 shareholders (%) shareholders equity aggregated to SR70.5mn. Islamic Development Bank 20.0 Allied Coop Ins. Group Bahrain 20.0 • Recent developments: ACIG reported its 1Q-09 results on April 20, 2009. The company’s net loss widened to SR5.6mn in 1Q-09 compared to a net loss of SR0.6mn in 1Q-08. In May 2009, ACIG entered into a contract with Netways to link
the company's point of sales through a network. Source: NCBC Research
JUNE 2009 ALLIED COOPERATIVE INSURANCE GROUP 204
Company Page No. Banking and Financials Kingdom Holding 206 Petrochemicals
Asser Trading 207 Cement
Saudi Arabia Refineries 208 Retail
Saudi Industrial Services 209 Energy and Utilities
Saudi Advanced Industries 210 Agriculture and Food
Al-Ahsa Development 211 Telecom and IT
Al Baha Investment 212 Insurance
Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transport
Media and Publishing
Hotels and Tourism
MULTI-INVESTMENT
Also known as Kingdom Holding Co KHC
Price SR5.2 Kingdom Holding Company (Kingdom) was established in 1996. Kingdom primarily Pricing / Valuation as on May 27, 2009 focuses on banking and financial services, real estate, hotels & hotel management sectors. Headquartered in Riyadh it has holdings in retail, food & entertainment, Mkt cap SR32.4bn ($8,663.6mn) Sh. outstanding 6,300.0mn healthcare, technology, media & telecommunications, automotive, and other sectors.
Key statistics Company financials
52 week range H/L (SR) 10.8/3.5 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,167 4,650 5,001 4,771 (4.6) 59.9 3m 37.13 9.91 EBITDA SRmn 217 998 888 (2,023) (13.7) 52.4 12m 22.26 5.94 Net Income SRmn 1,382 968 1,210 (29,911) NM NM Raw Beta 6m 1yr Assets SRmn 68,191 92,440 78,508 50,715 (36.8) (10.1) 0.48 0.91 Equity SRmn 61,365 65,660 51,221 21,615 (57.8) (29.4) Total Debt SRmn 4,280 17,628 18,131 17,614 (2.9) 60.2 Reuters 4280.SE Cash & Equiv SRmn 1,072 2,478 2,329 1,893 (18.7) 20.9 Bloomberg KINGDOM AB EBITDA Mgn % 18.6 21.5 17.8 (42.4) - - Price perform (%) 1M 3M 12M Net Mgn % 118.4 20.8 24.2 (627.0) - - Absolute (%) 3 29 (50) ROE % 2.4 1.5 2.1 (138.4) - - Market (%) 6 32 (39) ROA % 2.2 1.2 1.4 (59.0) - - Sector (%) 11 28 (45) Div Payout % 0.0 0.0 0.0 0.0 - - Website: www.kingdom.com.sa EPS SR 0.2 0.2 0.2 (4.8) NM NM BVPS SR 9.7 10.4 8.1 3.4 (57.8) (29.4) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A 65.1 NM P/B (x) N/A 1.5 1.4 Product segment 2007 Geographic 2007 P/Sales (x) N/A 15.7 6.2 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA Equity 27.3 69.8 Saudi Arabia 100 100 Hotels 65.3 30.1 Weightage (%) Real Estate & Domestic 7.4 0.1 TASI (free float weight) 0.44 Source: Company, NCBC Research
MSCI Saudi (domestic –small cap) 0.96 • Business brief: Kingdom, with initial activities in the construction, housing Free float (%) development, and educational projects, enhanced its stake across sectors in a Free float 6.00 number of Saudi Arabian, Middle Eastern and international companies. The company’s portfolio consists of premium brands such as Apple, Time Warner, Relative share price perf. Samba, Citigroup, Pepsi, Walt Disney and Hewlett-Packard. Kingdom has made 11, 0 0 0 15 9,000 investments in the domestic health, education and social services sectors. The 10 7,000 5 company is also a private equity player in Saudi Arabia and in developing markets in 5,000 3,000 - the Middle East, Africa and Asia. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: Kingdom’s revenues declined 4.6% year-on-year y-o-y to SR4,770.8 mn TASI Kingdom (RHS) in 2008. The company recorded a negative EBITDA in 2008 and recorded a net loss
Top 5 shareholders (%) of SR29,911 mn in 2008 mainly due to decline in the investment income. HH Prince AlWaleed Talal Abdul Aziz 95.0 Al Saud • Recent developments: Kingdom’s 1Q 09 net profit declined 83.4% year on year to SR50.2 mn due to smaller dividend payments from its portfolio companies as well as a slump in its hotel business. In April 2009, Fairmont Raffles Hotels International, in which KHC has a controlling stake, was put up for sale for up to USD450 mn. In March 2009,
the company reduced its stake in Savola Group Co. to less than 5%, acquired a 30% Source: NCBC Research stake worth USD20 mn in Buildworks through its subsidiary, Zephyr Africa Management
Company and sold its 50% holding in Four Season Hotel in Geneva.
JUNE 2009 KINGDOM HOLDING COMPANY 206
MULTI-INVESTMENT
Also known as Aseer Trading Aseer
Price SR14.5 Aseer Trading, Tourism and Manufacturing Company (Aseer), established in 1975 Pricing / Valuation as on May 27, 2009 and headquartered in Abha (Southwest of Saudi), is an investment holding company with interests in five sectors – food, petrochemicals, real estate, building Mkt cap SR1.8bn ($489.4mn) Sh. outstanding 126.4mn materials and construction, and financial services.
Key statistics Company financials
52 week range H/L (SR) 37.3/8.6 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,217 1,378 1,482 1,742 17.5 12.7 3m 32.90 8.78 EBITDA SRmn 131 132 134 155 16.0 5.7 12m 34.98 9.34 Net Income SRmn 247 281 261 (431) NM NM Raw Beta 6m 3yr Assets SRmn 2,547 2,766 4,073 3,276 (19.6) 8.8 1.11 1.24 Equity SRmn 1,967 1,699 3,356 2,316 (31.0) 5.6 Total Debt SRmn 115 551 158 246 55.5 28.7 Reuters 4080.SE Cash & Equiv SRmn 53 81 132 251 89.8 68.5 Bloomberg ATTMCO AB EBITDA Mgn % 10.8 9.5 9.0 8.9 - - Price perform (%) 1M 3M 12M Net Mgn % 20.3 20.4 17.6 (24.8) - - Absolute (%) 6 31 (58) ROE % 12.6 16.5 10.3 (18.2) - - Market (%) 6 32 (39) ROA % 9.7.6 10.6 8.6 (13.2) - - Sector (%) 11 28 (45) Div Payout % 48.5 N/M - - Website: www aseercorp.com.sa EPS SR 19.8 3.5 2.1 (3.4) NM NM
BVPS SR 157.4 20.1 26.5 18.3 (31.0) 5.6 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 14.6 20.5 NM P/B (x) 2.4 1.6 0.5 Product segment 2007 Geographic 2007 P/Sales (x) 3.0 3.6 0.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.3 5.1 Agriculture 8.2 Saudi Arabia 100 100
Manufacturing 71.8 Weightage (%) Investment 20.0 TASI (free float weight) 0.21 Source: Company, NCBC Research
MSCI Saudi (domestic –mid cap) 2.52 • Business brief: Aseer operates in a wide range of businesses and holds
Free float (%) investments in diverse projects including agricultural, cement, printing & publishing, Free float 50.08 and energy-related projects. The company operates in the travel and tourism industry and owns stakes in resorts and hotels. The company holds investments in Dallah Relative share price perf. Industrial Investment Company, Al Ustool Arabia Real Estate Development Co. Ltd, 11, 0 0 0 40 9,000 30 Al Khawatem Trading & Contracting Co. Ltd., Al Nasrah International Real Estate 7,000 20 Development Co. Ltd. and Al Mawajed International Real Estate Development Co. 5,000 10 Aseer has a network of six branches, which are located in Al Madinah, Riyadh, Wadi 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 Dawaser, Jeddah, Hail and Al Jaouf. The company owns 95% stake in Dallah TASI Aseer (RHS) Industrial Investment Company and 50.4% stake in National Packaging Products
Company. Top 5 shareholders (%) Dalat Al Baraka Holding Co. 49.9 • Financials: Aseer’s revenues and profits have shown relatively stable growth over the years. On a y-o-y basis, revenues grew 17.5% to SR1,741.8mn. However, the company incurred a net loss of SR431.2mn during 2008 due to loss on investments.
• Recent developments: In April 2009, Aseer reported 1Q 09 net profit of SR12.9 mn Source: NCBC Research compared to a net loss of SR77.2 mn in 1Q 08.
JUNE 2009 ASEER TRADING 207
MULTI-INVESTMENT
Also known as Saudi Arabia Refin. SARCO Price SR57.5 The Saudi Arabia Refineries Company (SARCO), established in Jeddah in 1959, Pricing / Valuation as on May 27, 2009 invests in commercial and industrial projects in and outside Saudi Arabia. The company principally invests in petroleum refining, transportation services, and Mkt cap SR0.9bn ($230.3mn) hydraulic projects. Sh. outstanding 15.0mn
Key statistics Company financials
52 week range H/L (SR) 80.8/37.3 YoY* CAGR(%) 2006 2007 2008 8M-08 (%) (06-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 7 14 1 9 - NM 3m 38.75 10.35 EBITDA SRmn 5 11 (2) 7 - NM 12m 41.84 11.17 Net Income SRmn 4 11 99 8 - 426.4 Raw Beta 6m 3yr Assets SRmn 498 351 609 229 - 10.6 1.32 1.05 Equity SRmn 483 331 597 212 - 11.1 Total Debt SRmn - 8 0 0 - NA Reuters 2030.SE Cash & Equiv SRmn 6 1 43 47 - 159.7 Bloomberg SARCO AB EBITDA Mgn % 69.7 84.4 (251.5) 81.4 - - Price perform (%) 1M 3M 12M Net Mgn % 54.1 79.3 15465.1 90.5 - - Absolute (%) 30 34 (18) ROE % 0.6 2.6 21.3 3.7 - - Market (%) 6 32 (39) ROA % 0.6 2.5 20.6 3.4 - - Sector (%) 11 28 (45) Div Payout % NA 55.9 15.2 94.3 - - Website: www almasafi com.sa EPS SR 0.9 1.8 16.7 0.5 - NM BVPS SR 120.8 55.1 99.5 14.1 - (9.3) Valuation multiples Source: Company, NCBC Research * The comparable 8M figure for FY2008 are not available
2007 2008 TTM Segment-wise business analysis P/E (x) 133.2 8.8 NM P/B (x) 4.3 1.5 NM Product segment H109 Geographic H109 P/Sales (x) 105.6 NM NM %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.4 1.4 NM
Weightage (%) TASI (free float weight) 0.19 MSCI Saudi (domestic –small cap) 1.10 Source: Company, NCBC Research
Free float (%) • Business brief: Currently, SARCO owns stakes in Arabian Salfonates Company Free float 100.00 (34%), Arabian Tankers Company (27%), Saudi Industrial Investment Group (3.33%), Tabuk Cement and Riyad Bank. SARCO generates income from: (i) its stakes in the Relative share price perf. earnings of other companies; and (ii) capital gains on the sale of its investments. 11, 0 0 0 10 0 9,000 80 60 • Financials: SARCO reported revenues of SR8.7mn and net profit of SR7.9mn during 7,000 40 8M-08. The company also recorded impressive net margin of 90.5% while EBITDA 5,000 20 3,000 - margin was 81.4%. The company paid a dividend of SR0.5 per share, with a dividend M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 payout of 94.3%. EPS for 8M-08 was SR0.5. TASI SARCO (RHS)
• Recent developments: In April 2009, SARCO reported net profit of SR0.08 mn for Top 5 shareholders (%) 1Q 09 compared to a net profit of SR98.6 mn in 1Q 08. In December 2008, the HH Mete'eb Bin Abdul Aziz Al Saud 7.3 company increased its capital from SR60mn to SR150mn, through an issue of 2.5 HH Prince Khalid Turki Abdul Aziz 5.0 Turki Al Saud bonus shares for every share held.
Source: NCBC Research
JUNE 2009 SAUDI ARABIA REFINERIES CO 208
MULTI-INVESTMENT
Also known as Saudi Indl Services SISCO Price SR12.4 Saudi Industrial Services Company (SISCO) established in 1988, undertakes large- Pricing / Valuation as on May 27, 2009 scale investments in KSA’s infrastructure sector on a built-operate-transfer and built- operate-own model. SISCO has business interests in water desalination and Mkt cap SR0.8bn ($224.2mn) distribution, development of industrial estates, free zone ports and support services. Sh. outstanding 68.0mn
Key statistics Company financials
52 week range H/L (SR) 24.0/7.8 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 74 74 108 135 25.5 22.2 3m 36.84 9.84 EBITDA SRmn 7 15 37 34 (17.4) 71.1 12m 32.65 8.72 Net Income SRmn 13 5 (5) (24) NM NM Raw Beta 6m 3yr Assets SRmn 635 619 703 1,893 155.0 44.2 1.11 1.17 Equity SRmn 454 430 426 722 59.7 16.6 Total Debt SRmn 99 97 181 855 372.8 105.5 Reuters 2190.SE Cash & Equiv SRmn 198 68 54 718 1,234.8 53.8 Bloomberg SISCO AB EBITDA Mgn % 8.7 19.5 36.4 24.0 - - Price perform (%) 1M 3M 12M Net Mgn % 17.4 6.9 (4.9) (17.9) - - Absolute (%) 14 33 (44) ROE % 3.0 1.2 (1.2) (3.4) - - Market (%) 6 32 (39) ROA % 2.4 0.8 (0.8) (1.8) - - Sector (%) 11 28 (45) Div Payout % N/A N/A N/A N/A - - Website: www.sisco com sa EPS SR 0.3 0.1 (0.7) (0.4) NM NM BVPS SR 11.4 10.8 11.3 10.6 NM NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 258.8 NM NM P/B (x) 3.1 3.3 0.9 Product segment 2008 Geographic 2008 P/Sales (x) 17.8 12.9 4.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA NA Gas Stations and Maintenance 27 Saudi Arabia 100 100 Restaurants and Housing Services 0 Weightage (%) Water Distillation 52 TASI (free float weight) 0.15 Sea Front Project 0 MSCI Saudi (domestic –small cap) NA Re-Export Projects 21
Headquarter 0 Free float (%) Source: Company, NCBC Research
Free float 79.42 • Business brief: The company’s affiliate, Support Services Operations Co. (97% Relative share price perf. owned) provides ancillary services such as building and car maintenance, catering, 11, 0 0 0 25 gas stations in Industrial estates. Saudi Trade & Export Development Co. (76% 9,000 20 15 owned), operates a Free Zone at Jeddah Islamic Sea port on a BOT basis. Kindasa 7,000 10 5,000 5 Water Services (60% owned) operates a 14,000 cubic meter/day (m3/d) desalination 3,000 - plant and water distribution network. International Water Distribution Co. (50% M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI SISCO (RHS) owned) is engaged in building & operating water distribution networks within the KSA.
• Financials: In 2008, SISCO registered a 25.5% y-o-y increase in sales to Top 5 shareholders (%) SR135.3mn due to increase in demand for the company's products. However, net Xenel Industrial Co 20.5 loss increased from SR5.2mn in 2007 to SR24.2mn mainly due to increase in
operating expenses.
• Recent developments: In April 2009, SISCO reported a 1Q 09 net profit of SR0.7
mn compared to a net loss of SR0.3 mn in 1Q 08. September 2008, SISCO’s affiliate Source: NCBC Research Aljabr Talke signed a SR100mn deal with National Industrialization Co. for providing logistics services.
JUNE 2009 SAUDI INDUSTRIAL SERVICES 209
MULTI-INVESTMENT
Also known as Saudi Advanced Inds SAIO Price SR13.6 Saudi Advanced Industries Co. (SAIC) is involved in participation, development and Pricing / Valuation as on May 27, 2009 promotion of industrial projects under The Economic Offset Program organized by the Ministry of Defense and Aviation. SAIC encourages U.S, U.K and French firms to Mkt cap SR0.6bn ($156.3mn) collaborate with Saudi companies to establish high-tech plants in diversified industries. Sh. outstanding 43.2mn
Key statistics Company financials
52 week range H/L (SR) 24.3/8.2 YoY CAGR (%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 5 2 22 25 14.9 71.3 3m 41.46 11.07 EBITDA SRmn 5 2 20 22 10.9 58.6 12m 22.93 6.12 Net Income SRmn 3 0 16 20 27.6 79.7 Raw Beta 6m 3yr Assets SRmn 103 168 822 894 8.7 105.7 1.12 1.16 Equity SRmn 100 124 820 704 (14.2) 91.9 Total Debt SRmn - - - - Reuters 2120.SE Cash & Equiv SRmn 2 1 401 1 (99.7) (11.6) Bloomberg SAIC AB EBITDA Mgn % 106.9 100.4 87.9 84.8 (3.5) (7.4) Price perform (%) 1M 3M 12M Net Mgn % 67.6 17.7 70.2 78.0 11.0 4.9 Absolute (%) 3 23 (42) ROE % 3.5 0.4 1.9 2.6 - (9.3) Market (%) 6 32 (39) ROA % 3.4 0.3 1.9 2.3 - (12.0) Sector (%) 11 28 (45) Div Payout % N/A N/A N/A 1.1 - - Website: www.saic com.sa EPS SR 0.1 0.0 0.4 0.5 27.6 79.7 BVPS SR 2.3 2.9 19.0 16.3 (14.2) 91.9 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/M 91.4 21.8 P/B (x) 6.2 1.7 0.6 Product segment 2008 Geographic 2008 P/Sales (x) N/M 64.2 17.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A 5.0
Weightage (%) TASI (free float weight) 0.13 MSCI Saudi (domestic –small cap) 1.05 Source: Company, NCBC Research
Free float (%) • Business brief: SAIC has investments in Al Salam Aircraft Co. (10% stake), Gulf Free float 100.00 Salt Co. (4.6% stake), Industrialization & Energy Services Co. (3.4%), Arabian Industrial Fibers Co. (1.5% stake), and Yanbu National Petrochemicals Co. Moreover, Relative share price perf. the company enters into contracts with other firms to develop new technology- 11, 0 0 0 30 9,000 oriented companies. 20 7,000 10 • Financials: SAIC’s total revenue increased 14.9% on y-o-y basis to SR25.5mn in 5,000 3,000 - 2008 primarily due to increase in income from investment in Islamic Murabaha. Net M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 income in 2008 increased 27.6% y-o-y to SR19.9mn due to significant decrease in TASI Saudi Advanced (RHS) finance charges. This helped a 7.8 percentage points improvement in net margins
Top 5 shareholders (%) form 70.2% in 2007 to 78.0% in 2008
Khalid Saleh Abdul Rahman Al Shethry 9.6 • Recent developments: In April 2009, SAIC reported a 40.7% increase in 1Q 09
net profit to SR6.2 mn. In October 2008, SAIC acquired a 20% stake in NPS Bahrain
for Oil & Gas Wells Services WLL, an oil and gas exploration and production
company, for SR 375mn. Source: NCBC Research
JUNE 2009 SAUDI ADVANCED INDUSTRIES 210
MULTI-INVESTMENT
Also known as Al-Ahsa Development ADC
Price SR12.6 Al-Ahsa Development Company (AADC) was established in 1993 by Royal decree, Pricing / Valuation as on May 27, 2009 to undertake investment activities in the industrial and service sectors of Saudi Arabia, particularly in the region of Al-Ahsa. AADC has business interests in foods, Mkt cap SR0.6bn ($164.9mn) Sh. outstanding 49.0mn textiles, and medical services sectors.
Key statistics Company financials YoY 52 week range H/L (SR) 23.6/7.8 CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 31 18 18 0 (100.0) (100.0) 3m 46.14 12.32 EBITDA SRmn 2 (3) (1) (6) (100.0) 100.0) 12m 30.27 8.08 Net Income SRmn 96 71 35 (56) (100.0) (100.0) Raw Beta 6m 3yr Assets SRmn 726 792 727 558 (23.2) (8.4)
0.50 1.19 Equity SRmn 451 456 521 397 (22.7) (3.7) Reuters 2140.SE Total Debt SRmn 257 313 168 131 (28.1) (22.2) Bloomberg AADC AB Cash & Equiv SRmn 2 6 3 6 (55.6) (2.4) EBITDA Mgn % 6.4 (15.2) (6.6) NM - - Price perform (%) 1M 3M 12M Net Mgn % 304.1 397.7 194.3 NM - - Absolute (%) 14 1 (42) ROE % 21.2 15.6 6.6 (14.1) - - Market (%) 6 32 (39) ROA % 13.2 9.4 4.5 (10.1) - - Sector (%) 11 28 (45) Div Payout % N/A N/A N/A N/A - - Website: www.ahsa-dev com.sa EPS SR 13.9 1.7 0.8 (1.2) NM NM BVPS SR 10.5 10.6 12.1 8.2 (32.3) (7.9) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 P/E (x) 20.4 41.6 NM Segment-wise business analysis P/B (x) 3.2 2.8 1.1 Product segment 2008 Geographic 2008 P/Sales (x) 81.3 81.1 NM %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A N/A
Weightage (%)
TASI (free float weight) 0.14 Source: Company, NCBC Research MSCI Saudi (domestic –small cap) 1.44
• Business brief: AADC’s affiliate - Al-Ahsa Medical Services Co. (30% Stake), Free float (%) manages a modern 220 bed hospital in the Al-Ahsa region, Al-Ahsa Food Services Free float 100.00 Co. (50% Stake) a JV with Eastern Agriculture Development Co. with a capacity of Relative share price perf. 5,000 tons of data processing, is engaged in production of date molasses vinegar,
11, 0 0 0 25 dates pest and compressed dates. The company’s affiliate, Saudi Japanese Textile 9,000 20 15 Co. (82% Stake, produces synthetic fiber used in the production of dress material. 7,000 10 Currently, AADC is in the process of setting up an aluminum foil factory, a cement 5,000 5 3,000 - plant, and a National University in Al-Ahsa. M ay-08 Aug-08 Nov-08 Feb-09
TASI Al Ahsa for Dev. (RHS) • Financials: AADC’s did not record any revenue in 2008. The company recorded a
negative EBITDA of SR5.9mn in 2008 as compared to negative SR1.7mn in 2007 Top 5 shareholders (%) owing to decline in revenues coupled with increase in SG&A expenses. AADC
incurred a net loss of SR56.2mn as compared to net income of SR34.5mn in 2007
mainly due to decline in revenues and investment income.
• Recent developments: In March 2009, the company announced that it signed a
memorandum of understanding with a Chinese company, to make it a partner in the Source: NCBC Research ADC’s aluminum and gypsum plants. In December 2008, the Board of AADC
approved a one-for-seven bonus share issue, which increased the company’s capital by 14% to SR490 mn with 49mn outstanding shares.
JUNE 2009 AL-AHSA DEVELOPMENT CO 211
MULTI-INVESTMENT
Also known as Al-Baha Investment Al-baha Price SR21.6 Al-Baha Investment & Development Co (Al-baha) was established in 1992 to develop Pricing / Valuation as on May 27, 2009 and operate projects in the Al-Baha province. It is engaged in a wide range of industrial, commercial, agricultural activities and has plans to expand beyond the region. Al-baha’s Mkt cap SR0.3bn ($86.3mn) investments include a 95% stake in the Al-Baha Marble & Granite Company. Sh. outstanding 15.0mn
Key statistics Company financials YoY 52 week range H/L (SR) 24.2/7.5 CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 3 3 2 - (87.3) (59.4) 3m 71.72 19.15 EBITDA SRmn 2 2 (3) (5) NM NM 12m 30.06 8.03 Net Income SRmn (4) (4) (13) (15) NM NM Raw Beta 6m 3yr Assets SRmn 102 141 147 119 (10.8) 8.9
1.57 1.27 Equity SRmn 63 102 123 105 (4.5) 23.3 Reuters 4130.SE Total Debt SRmn 5 7 9 - NM NM Bloomberg ABDICO AB Cash & Equiv SRmn 5 4 41 28 (31.2) 83.4 EBITDA Mgn % 69.3 62.4 NM NM - - Price perform (%) 1M 3M 12M Net Mgn % NM NM NM NM - - Absolute (%) 35 78 6 ROE % (6.3) (4.8) (11.9) (14.3) - - Market (%) 6 32 (39) ROA % (4.3) (3.3) (9.3) (21.6) - - Sector (%) 11 28 (45) Div Payout % ------Website: NA EPS SR (0.3) (0.3) (0.9) (0.4) NM NM BVPS SR 27.8 9.1 8.2 6.9 (4.5) 23.3 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 P/E (x) NM NM NM Segment-wise business analysis P/B (x) 4.8 4.3 1.3 Product segment 2007 Geographic 2007 P/Sales (x) 148.9 295.8 742.5 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0 0 0 Main Center 0 52
Weightage (%) Poultry Farms 74 30 Leather Factory 2 11 TASI (free float weight) 0.07 Telfrik Project 25 7 MSCI Saudi (domestic –small cap) NA Source: Company, NCBC Research
Free float (%) • Business brief: Al-baha is involved in wholesale & retail trading and industrial Free float 100.00 projects including construction. The company also operates refrigeration stores as
Relative share price perf. well as repairs and maintenance workshops; and develops animal and agricultural
11, 0 0 0 25 products. In addition, Al-baha owns and reclaims agricultural land for use in new 9,000 20 projects. It also constructs, maintains, and operates public utilities including tramways 15 7,000 10 and develops recreational and tourist facilities including parks and tourist villages. 5,000 5 3,000 - • Financials: In FY08, Al-Baha’s total revenue decreased 87.3% on y-o-y basis to M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Al Baha (RHS) SR0.226mn primarily due to decrease in demand for the company's core products and services. Net loss decreased to SR6.6mn from SR13.3mn in 2007 because of Top 5 shareholders (%) decrease in operating income and the increase in provisions.
• Recent developments: In April 2009, Al-Baha reported a 1Q 09 net loss of SR1.2
mn. In January 2008, Al-baha entered into an alliance with Al-Khabeer Financial Advisors to enhance the performance of its investments. Moreover, Al-baha’s Board of Directors approved to increase the share capital to SR1bn from SR150mn. Source: NCBC Research
JUNE 2009 AL-BAHA INVESTMENT 212
Company Page No. Banking and Financials Saudi Arabian Mining 214 Petrochemicals
Saudi Chemical 215 Cement
Saudi Pharmaceutical 216 Retail
Al Abdullatif Industrial 217 Energy and Utilities
Saudi Paper Manufacturing 218 Agriculture and Food
National Company for Glass 219 Telecom and IT
Astra Industrial Group 220 Insurance
Basic Chemical Industries 221 Multi Investment
Saudi Industrial Export 222 Industrial Investment
National Metal 223 Building and Construction
Filing and Packaging Materials 224 Real Estate
Transport
Media and Publishing
Hotels and Tourism
INDUSTRIAL INVESTMENT
Also known as Saudi Arabian Mining MAADEN
Price SR14.8 Saudi Arabian Mining Company (Ma'aden), established in 1997, is engaged in Pricing / Valuation as on May 27, 2009 exploration and production of metal and non-metal ores. The company has five operating gold mines in KSA and a number of new projects. In 2008, Maaden went Mkt cap SR13.7bn ($3,655.5mn) public and raised SR10.5 bn reducing the government’s holding from 100% to 55%. Sh. outstanding 925.0mn
Key statistics Company financials
52 week range H/L (SR) 32.0/9.9 CAGR(%) 2005 2006 2007 2008 YoY (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 278 350 244 460 88.5 18.3 216.58 57.83 3m EBITDA SRmn 74 98 (13) 1 NM NM 223.38 59.65 9m Net Income SRmn 216 318 199 203 2.16 -1.9 Raw Beta 6m 9m Assets SRmn 5,659 6,038 5,848 21,358 268.9 56.2 1.18 0.89 Equity SRmn 5,413 5,731 5,484 16,188 198.7 44.6 Total Debt SRmn - - - 820 NM NM Reuters 1211.SE Cash & Equiv SRmn 2,626 182 596 4,145 595.6 16.0 Bloomberg MAADEN AB EBITDA Mgn % 26.5 28.0 (5.4) 0.27 - - Price perform (%) 1M 3M 12M Net Mgn % 77.6 90.9 81.6 43.2 - - Absolute (%) 17 30 NA ROE % 4.0 5.7 3.6 1.2 - - Market (%) 6 32 (39) ROA % 3.8 5.4 3.3 0.95 - - Sector (%) 11 29 (33) Div Payout % ------Website: www maaden.com.sa EPS SR 5.4 8.0 5.0 0.2 - -
BVPS SR 135.3 143.3 137.1 17.7 - - Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA 48.4 Product segment 2008 Geographic 2008 P/B (x) NA NA 0.6 P/Sales (x) NA NA 21.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA 0.0 Gold 93.3 47.8 Phosphate 0.0 (2.07) Weightage (%) Others (mainly investment income) 6.7 54.3 Source: Company, NCBC Research TASI (free float weight) 1.22 MSCI Saudi (domestic – small cap) NA • Product profile: Ma'aden’s Mahd Ad Dahab mine produced 58,256 ounces of gold in 2007. Its Sukhaybarat plant has a rated capacity of 600,000 tonnes per annum (tpa). Free float (%) Further, the Co. is jointly developing its SR13.0bn worth Phosphate Project with Free float 39.83 SABIC and SR20.9bn worth Aluminum Project. The Co.’s phosphate project, planned Relative share price perf. to complete in 2010, is likely to yield 3mn metric tons of diammonia phosphate 11,000 40 whereas the aluminum project is scheduled to complete by 2015. 9,000 30
7,000 20 • Financials: Company‘s revenue increased 88.5% y-o-y to SR460.2mn despite the
5,000 10 decline in sales volume as the average selling price doubled in 2008 compared with
3,000 - 2007. Net income, however, did not increase proportionally with revenue due to Jul-08 Nov-08 Feb-09 M ay-09 higher mining costs as well as non-recurring expenses related to the IPO in 2008. TASI MA'ADEN (RHS) • Recent developments: In May 2009 Ma’aden announced that it would proceed with
Top 5 shareholders (%) the construction of a new aluminium smelter after the cost of the project fell to Public Investment Fund 50.0 USD8Bn from USD10bn whiel Dubai Aluminium Co. also expressed an interest in General Organization for Social 5.7 joining the project. Ma’aden’s net profit for 1Q-09 reported a fall of 47% y-o-y to Insurance (GOSI) SR18mn. The decline in net profit was due to provisions taken to pay zakat (Islamic Public Pension Authority 5.0 taxes). Furthermore, Ma'aden also signed a technology transfer agreement with Aluminium Pechiney and an agreement with Rio Tinto Alcan. In February 2009, Source: NCBC Research Ma'aden Infrastructure signed a deal of USD48 mn with Azmeel Contracting and Construction Corp. for the construction of 500 residential units.
JUNE 2009 SAUDI ARABIAN MINING COMPANY 214
INDUSTRIAL INVESTMENT
Also known as Saudi Chemical Co. SCC Price SR29.5 Saudi Chemical Company (SCC) is engaged in blasting services, production and sale of
Pricing / Valuation as on May 27, 2009 explosives and detonators for civil and military use. In 2004, SCC entered the seismic explosives market serving the oil and gas exploration sector. Its subsidiary Sitcopharma Mkt cap SR1.9bn ($498.2mn) Sh. outstanding 63.2mn supplies medical and surgical equipment to hospitals and medical centers.
Key statistics Company financials
52 week range H/L (SR) 53.3/17.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 954 1,015 1,230 1,537 24.9 17.2 3m 51.06 13.63 EBITDA SRmn 159 180 171 226 32.1 12.5 12m 56.16 15.00 Net Income SRmn 110 148 112 201 79.9 22.3 Raw Beta 6m 3yr Assets SRmn 1,347 1,447 1,658 2,024 22.1 14.6 0.98 1.12 Equity SRmn 699 847 896 1,096 22.4 16.2 Total Debt SRmn 100 25 138 119 (13.8) 6.0 Reuters 2230.SE Cash & Equiv SRmn 51 86 166 166 (0.1) 48.6 Bloomberg SCCO AB EBITDA Mgn % 16.6 17.8 13.9 14.7 - - Price perform (%) 1M 3M 12M Net Mgn % 11.5 14.6 9.1 13.1 - - Absolute (%) 0 34 (30) ROE % 17.1 19.1 12.8 20.2 - - Market (%) 6 32 (39) ROA % 8.4 10.6 7.2 10.9 - - Sector (%) 11 29 (33) Div Payout % 42.7 0.0 0.0 - - Website: www saudichemical com EPS SR 10.4 2.3 1.8 3.2 77.8 NM BVPS SR 11.1 13.4 14.2 17.3 21.8 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 12.9 20.5 6.6 P/B (x) 2.3 2.6 1.2 Product segment 2008 Geographic 2008 1.9 1.9 0.9 P/Sales (x) %Rev % Net Inc/loss Breakup %Rev % Net Inc Div yield (%) 3.3 0.0 0.0 Pharmaceutical 84.2 51.2 Explosives 15.8 49.5 Weightage (%) Ammonium Nitrate 0.0 (0.3) TASI (free float weight) 0.40 MSCI Saudi (domestic – small cap) 1.21 Source: Company, NCBC Research
Free float (%) • Business Brief: SCC's products include Prilex, a blasting agent mainly used for Free float 96.97 fissured sedimentary rocks and underground applications; Kemulex, an emulsion explosive suitable for worksites with wet holes and underwater blasting; Sanel, a non- Relative share price perf. electric shock tube designed for bench and trench blasting; explosives packing; 11, 0 0 0 60 50 electric detonators; detonating cords and blasting machines. 9,000 40 7,000 30 • Financials: SCC’s revenue has increased consistently over the past three years. 20 5,000 Top-line increased 24.9% y-o-y to SR1,537.0mn in 2008. Net income grew almost 10 3,000 - 79.9% y-o-y in 2008 mainly due to decline in other expenses and higher other M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 revenues. Consequently, net margin improved to 13.1% in 2008 from 9.1% in 2007. TASI SCC (RHS) • Recent developments: In April 2009, SCC announced a 97% y-o-y increase in its
Top 5 shareholders (%) Q109 net profits to SR67mn. On March 10, 2009, GlaxoSmithKline terminated its Panadol distribution agreement with SITCO, a 99%-owned subsidiary of SCC. Sitcopharma was awarded SR352mn contract to supply pharmaceutical products for hospitals in KSA, as per the company’s announcement in November 2008. In June
2008, SCC acquired 15% stake in Mawarid Trading Co. and 50% stake in Al Dawaa
Medical Services Co. through its subsidiary, Saudi International Trading Co. Source: NCBC Research
JUNE 2009 SAUDI CHEMICAL COMPANY 215
INDUSTRIAL INVESTMENT
Also known as Saudi Pharma. SPIMACO
Price SR35.0 Saudi Pharmaceutical Industries & Medical Appliances Corporation (SPIMACO) Pricing / Valuation as on May 27, 2009 manufactures medicines and medical appliances for local and international markets. The company’s annual production capacity includes 3mn liters of liquid medicines, Mkt cap SR2.1bn ($560.7mn) 550mn tablets, 12mn tubes of cream and ointment, aseptic drops, and penicillin. Sh. outstanding 60.0mn
Key statistics Company financials
52 week range H/L (SR) 62.0/19.4 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 649 728 798 872 9.3 10.3 11.07 2.95 3m EBITDA SRmn 124 129 129 142 10.3 4.8 24.82 6.63 12m Net Income SRmn 96 105 122 132 8.5 11.2 Raw Beta 6m 3yr Assets SRmn 2,466 2,402 3,357 1,937 (42.3) (7.7) 1.14 1.28 Equity SRmn 2,048 1,995 2,884 1,406 (51.2) (11.8) Total Debt SRmn - - - 40 - - Reuters 2070.SE Cash & Equiv SRmn 120 131 170 63 (63.2) NM Bloomberg SPIMACO AB EBITDA Mgn % 19.0 17.7 16.2 16.3 - - Price perform (%) 1M 3M 12M Net Mgn % 14.8 14.4 15.3 15.2 - - Absolute (%) 6 41 (38) ROE % 5.3 5.2 5.0 6.2 - - Market (%) 6 32 (39) ROA % 4.4 4.3 4.2 5.0 - - Sector (%) 11 29 (33) Div Payout % 62.4 57.1 73.9 68.4 - - Website: www.spimaco.com.sa EPS SR 8.0 1.8 2.0 2.2 8.0 (35.1)
BVPS SR 170.6 33.2 48.0 23.3 (51.4) (48.5) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 29.4 30.0 11.2 P/B (x) 1.5 1.3 1.1 Product segment 2008 Geographic 2008 P/Sales (x) 4.2 4.6 1.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 1.9 2.5 6.1 Pharmaceutical and Medical Mnfg. 97.1 Investments 2.9 Weightage (%) TASI (free float weight) 0.31 Source: Company, NCBC Research
MSCI Saudi (domestic) NA • Product profile: SPIMACO commenced production in 1990 with six products. The
Free float (%) company’s products include Zimax, Formit, Proton, Famocid 10, Cortimax, Sapoffen Free float 65.03 Plus and Glaze. Through its state-of-the-art facility, the Al-Qassim Plant, the company’s portfolio increased to 768 registered products marketed in over 14 Relative share price perf. countries in 2006. SPIMCO offers oral solids, oral liquids, dry powders, injectables, 11,000 80 ointments, creams and suppositories. 9,000 60 7,000 40 • Financials: SPIMACO’s revenues have grown consistently in the last few years due 5,000 20 to expansion of the sales force and its innovative product line. On a yearly basis, 3,000 - revenues grew 9.3% and net income rose 8.5% in 2008. Company’s net margin slid M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 marginally to 15.2% in 2008 mainly due to rise in interest expenses. TASI SP M ACO (RHS)
• Recent developments: SPIMACO’s net profit for 1Q-09 increased 4.4% y-o-y to Top 5 shareholders (%) SR42.70mn. In February 2009, Dr. Hussein Al Kahtani, VP Marketing and Sales, Arab Company for Drug Industries and 20.0 was appointed as the CEO of the company. In November 2008, the company won a Medical Appliances contract from Ministry of Health for SR102.1mn for the supply of medicines to the Public Pension Authority (PPA) 13.0 Gulf Cooperation Council. The company announced to liquidate its fully owned unit Saudi Dawa'akoum Co. during the same month. In June 2008, Spimaco acquired Source: NCBC Research 5.83 million new shares of National Industrialization Co. or Tasnee for SR104.94mn; thereby increasing its total stake to 5.25%.
JUNE 2009 SAUDI PHARMACEUTICALS & MEDICAL APPLIANCES 216
INDUSTRIAL INVESTMENT
Also known as Al Abdullatif Indl. AIIC Price SR41.0 Al-Abdullatif Industrial Investment Company (Al Abdullatif), established in 1981, Pricing / Valuation as on May 27, 2009 ranks among the largest carpet manufacturers in the world. The company’s fully integrated operations—from fiber extrusion to finishing—gives it a comparative Mkt cap SR3.3bn ($889.5mn) advantage in the timely and cost-effective execution of orders. Sh. outstanding 81.3mn
Key statistics Company financials YoY CAGR(%) 52 week range H/L (SR) 80.0/35.5 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 748 861 1,066 1,139 6.8 15.1 3m 36.30 9.69 EBITDA SRmn 237 265 288 282 (2.1) 6.1 12m 39.68 10.59 Net Income SRmn 173 192 200 201 0.6 5.1
Raw Beta 6m 2yr Assets SRmn 1,087 1,172 1,312 1,534 17.0 12.2 Equity SRmn 719 911 1,111 1,215 9.3 19.1 0.44 0.59 Total Debt SRmn 257 152 63 218 245.2 (5.5) Reuters 2340.SE Cash & Equiv SRmn 149 116 75 35 (53.7) (38.3) Bloomberg ALABDUL AB EBITDA Mgn % 31.6 30.8 27.0 24.8 - - Price perform (%) 1M 3M 12M Net Mgn % 23.2 22.3 18.8 17.7 - - Absolute (%) 2 (0) (20) ROE % 21.1 23.5 19.8 17.3 - - Market (%) 6 32 (39) ROA % 16.2 17.0 16.1 14.1 - - Sector (%) 11 29 (33) Div Payout % 48.7 0.0 - - Website: www carpets.com EPS SR 3.1 3.0 3.1 2.5 (19.5) (7.7)
BVPS SR 13.1 14.0 17.1 15.0 (12.5) 4.6 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA 22.3 18.0 P/B (x) NA 4.0 3.0 Product segment 2008 Geographic 2008 P/Sales (x) NA 4.2 3.2 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA 2.2 0.0
Weightage (%) TASI (free float weight) 0.24 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 1.61 • Product profile: Al Abdullatif’s manufactures three kinds of carpets — tufted, woven,
Free float (%) and non-woven; primarily made from synthetic fibers. The company exports these Free float 32.00 carpets to more than 25 countries. The color pigment division provides various shades of color for the production of carpets and blankets. The paper tube division Relative share price perf. provides paper tubes of different sizes and thicknesses for the winding of carpets and 11,000 0 0 yarn. The company’s five fully owned affiliates provide backward integration support 9,000 80 60 to the company. 7,000 40 • Financials: In 2008, Al Abdullatif’s sales grew 6.8% year-on-year (y-o-y) to 5,000 20 3,000 - SR1,138.9mn. However, net income remained nearly flat at SR201.3mn in 2008 as M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 compared to SR200.1mn in 2007. This was largely due to higher cost of sales and TASI AlAbdullatif (RHS) administrative expenses in 2008. There was also a significant decline in cash balance
as the company invested heavily in fixed assets. Top 5 shareholders (%) Al Abdul Latif Holding Group 60.0 • Recent developments: Al Abdullatif’s net profit for the 1Q-09 decreased 49.53% y-o- Amr Sulaiman Saleh Al Abdul Latif 5.8 y to SR 26.01mn. In September 2008, Al Abdullatif announced the acquisition of 27% stake in Red Sea Cables Co.; which is under establishment and has a capital of SR370mn. In March 2008, the company increased its capital to SR812.5mn through
issuance of bonus shares. Source: NCBC Research
JUNE 2009 ALABDULLATIF INDUSTRIAL 217
INDUSTRIAL INVESTMENT
Also known as SPM, Saudi Paper Mnfg Saudi Paper Group
Price SR57.0 Saudi Paper Manufacturing Company (SPM) is one of the few integrated paper Pricing / Valuation as on May 27, 2009 companies in the MENA region. SPM engages in recycling of waste paper,
Mkt cap SR1.7bn ($456.6mn) production of tissue rolls from recycled paper and conversion of rolls into Sh. outstanding 30.0mn consumer products such as paper napkins, towels, facial and toilet paper.
Key statistics Company financials
52 week range H/L (SR) 75.5/43.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 331 366 444 505 13.9 15.2 3m 16.10 4.30 EBITDA SRmn 104 101 117 125 6.2 6.2 12m 21.37 5.71 Net Income SRmn 68 69 83 85 2.6 7.4 Raw Beta 6m 3yr Assets SRmn 456 526 628 1,138 81.2 35.6 0.50 1.07 Equity SRmn 240 309 382 448 17.4 23.1 Total Debt SRmn 158 176 192 589 206.3 55.0 Reuters 2300.SE Cash & Equiv SRmn 19 39 27 38 38.4 26.0 Bloomberg SPM AB EBITDA Mgn % 31.5 27.5 26.5 24.7 - - Price perform (%) 1M 3M 12M Net Mgn % 20.7 18.8 18.6 16.8 - - 3 10 (15) Absolute (%) ROE % 30.2 25.0 23.9 20.4 - - 6 32 (39) Market (%) ROA % 15.4 14.0 14.3 9.6 - - 11 29 (33) Sector (%) Div Payout % - 17.5 21.8 35.4 - - Website: www.saudipaper.com EPS SR 68.4 2.9 3.4 2.8 (17.9) (65.4) BVPS SR 240.2 12.9 15.9 14.9 (6.0) (60.4) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 P/E (x) 19.5 22.1 26.3 Segment-wise business analysis P/B (x) 4.3 4.8 5.0 Product segment 2008 Geographic 2008 P/Sales (x) 3.7 4.1 4.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.9 1.0 1.3
Weightage (%)
TASI (free float weight) 0.19 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 0.78 • Product profile: SPM has three tissue paper processing plants with an aggregate Free float (%) capacity of 70,000 tons/year. The company’s wholly owned subsidiary Saudi Paper Free float 49.90 Converting Co. (SPCC) converts tissue rolls into branded consumables, which are
Relative share price perf. then distributed through wholesale and retail channels. Saudi Recycling Co. (SRC) collects waste paper, which serves as feed for SPM’s downstream de-inking plants. 11,000 80 9,000 60 Al-Madar Trading Co. was set up in the UAE to collect waste paper from international 7,000 40 sources. SPM is currently expanding its tissue production and conversion facilities. 5,000 20 3,000 - • Financials: In 2008, SPM registered net profit of SR84.8mn on total revenues of M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 SR505.3mn, representing year-on-year (y-o-y) increase of 2.6% and 13.9% TASI SPM (RHS) respectively. The lower growth in the net profit is mainly attributable to higher input
costs, and higher other expenses. Top 5 shareholders (%) HH Prince Abdullah Bin Musaed Bin 50.0 • Recent developments: In April 2009, SPM announced its results for 1Q-09 and Abdul Aziz Al Saud registered a net profit increase of 0.5% y-o-y to SR22.62mn. In March 2009, SPM Ra’ed Bin Abdul Rahman Bin Abdul 8.4 undertook a production expansion at its Dammam plant through an investment of Aziz Al Mesha’al Falcom Financial Services Co. 7.7 SR300mn thereby increasing production by 79% to 125,000 tons annually. In April 2008, the company hiked its capital by 25% to SR300mn through the issuance of bonus shares. In 2008, the company undertook initiatives to expand its business in Source: NCBC Research Bahrain, Morocco, Algeria, and Jordan.
JUNE 2009 SAUDI PAPER MANUFACTURING 218
INDUSTRIAL INVESTMENT
Also known as National Co for Glass ZOUJAJ Price SR33.9 National Company for Glass Industries (Zoujaj) owns two glass container factories, Pricing / Valuation as on May 27, 2009 one each in Riyadh and Dammam. Zoujaj has stakes (45% each) in Saudi Guardian
Mkt cap SR0.8bn ($226.3mn) International Float Glass and Guardian RAK; a joint venture with Guardian Industries. Sh. outstanding 25.0mn These facilities manufacture float glass for automotive and construction applications.
Key statistics Company financials
52 week range H/L (SR) 85.0/22.3 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 88 77 106 109 2.1 7.3 20.96 5.60 3m EBITDA SRmn 36 31 46 44 (5.0) 7.2 20.77 5.55 12m Net Income SRmn 130 48 80 68 (15.8) (19.5) Raw Beta 6m 3yr Assets SRmn 418 458 501 488 (2.6) 5.3 0.93 1.13 Equity SRmn 387 367 443 428 (3.3) 3.4 Total Debt SRmn 4 53 25 25 1.2 89.4 Reuters 2150.SE Cash & Equiv SRmn 7 16 3 17 525.0 36.2 Bloomberg ZOUJAJ AB EBITDA Mgn % 40.7 40.8 43.6 40.6 - - Price perform (%) 1M 3M 12M Net Mgn % 148.0 62.9 75.6 62.4 - - Absolute (%) 2 20 (57) ROE % 39.0 12.8 19.9 15.5 - - Market (%) 6 32 (39) ROA % 35.8 11.0 16.8 13.7 - - Sector (%) 11 29 (33) Div Payout % 15.4 41.3 31.1 55.6 - - Website: www.zoujaj-glass com EPS SR 32.5 2.4 3.2 2.7 (16.1) (56.3)
BVPS SR 96.8 18.4 17.7 17.1 (3.6) (43.9) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 22.9 20.1 10.7 P/B (x) 3.0 3.6 1.7 Product segment 2007 Geographic 2007 P/Sales (x) 14.4 15.2 6.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 1.8 1.6 5.2 Glass Container Manufacturing 100 Saudi Arabia 84.0 Rest of the World 16.0 Weightage (%) TASI (free float weight) 0.16 MSCI Saudi (domestic – small cap) 1.25 Source: Company, NCBC Research
• Product profile: Zoujaj’s plants in Riyadh and Dammam, which have a production Free float (%) Free float 83.76 capacity of 92,000 metric tons per year, manufacture glass containers for the food and beverage industry. Saudi Guardian International Float Glass Co has a float glass Relative share price perf. production capacity of 220,000 tons per year, while Guardian RAK has a capacity of 11, 0 0 0 10 0 700 tons per day. In addition, Guardian RAK is planning to implement a hi-tech glass 9,000 80 60 coating technology to expand its float glass offerings to regional customers. 7,000 40 • Financials: Revenues grew 2.1% year-on-year (y-o-y) to SR108.5mn in 2008. Due to 5,000 20 3,000 - higher other expenses and sluggish growth in revenues, the company’s net income in M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 2008 declined 15.8% y-o-y to SR67.7mn. Zoujaj’s net profit margin declined to 62.4% TASI Zoujaj (RHS) in 2008 as compared to 75.6%, a year ago.
Top 5 shareholders (%) • Recent developments: In April 2009, Zoujaj announced a 19% y-o-y decline in Q109 Riyadh Mohammed Abdullah Al 14.4 net profits to SR20.6mn. In September 2007, Zoujaj commenced the production of Humaidan float glass at Guardian RAK.
Source: NCBC Research
JUNE 2009 NATIONAL CO. FOR GLASS 219
INDUSTRIAL INVESTMENT
Also known as Astra Indl Group Astra
Price SR30.2 Astra Industrial Group (Astra), operates in healthcare, chemical, engineering, Pricing / Valuation as on May 27, 2009 agricultural and home furnishing industries. Its subsidiaries are Tabuk Pharmaceutical Manufacturing Co., Astra Polymer Compounding, Astra Industrial Complex Co, Mkt cap SR2.2bn ($597.7mn) Sh. outstanding 74.1mn International Building Systems Factory Co and Arabian Co. for Comforts and Pillows.
Key statistics Company financials
52 week range H/L (SR) 48.5/18.3 CAGR(%) 20052006 2007 2008 YoY (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 558 704 850 991 16.5 21.1 3m 21.12 5.64 EBITDA SRmn 128 181 216 199 (8.1) 15.8 6m 35.55 9.49 Net Income SRmn 99 156 197 185 (6.3) 23.2 Raw Beta 6m 9m Assets SRmn 829 920 1,120 1,743 55.6 28.1 1.49 1.21 Equity SRmn 500 649 828 1,438 73.7 42.2 Total Debt SRmn 142 84 44 2 (96.1) (77.1) Reuters 1212.SE Cash & Equiv SRmn 97 66 43 525 1,131.3 75.8 Bloomberg ASTRA AB EBITDA Mgn % 22.9 25.8 25.4 20.0 - - Price perform (%) 1M 3M 12M Net Mgn % 17.7 22.2 23.2 18.6 - - Absolute (%) 6 38 NA ROE % 19.7 27.2 26.7 16.3 - - Market (%) 6 32 (39) ROA % 12.0 17.8 19.3 12.9 - - Sector (%) 11 29 (33) Div Payout % - - - 20.1 - - Website: www astraindustrial com sa EPS SR 1.3 2.1 2.7 2.5 (6.3) 23.2 BVPS SR 6.7 8.8 11.2 19.4 73.7 42.2 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA 9.8 P/B (x) NA NA 1.3 Product segment 2007 Geographic 2007 1.8 P/Sales (x) NA NA %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA 2.0 Medicines 48.9 Chemicals 29.9 Weightage (%) Engineering & Construction 16.9 TASI (free float weight) 0.16 Other 4.3 MSCI Saudi (domestic – small cap) NA Source: Company, NCBC Research
Free float (%) • Product profile: Astra’s broad product portfolio include a range of generic and Free float 31.11 under-licensed pharmaceutical products; additives and compounds used in the production of plastic products, fertilizers, agricultural pesticides, insecticides and Relative share price perf. fungicides; pillows, bed sheets, and mattress pads. The group also constructs metal- 11,000 50 based pre-engineered industrial buildings and steel structures. 9,000 40 30 7,000 • Financials: The company‘s revenues increased 16.5% y-o-y to SR990.7 mn in 2008. 20 5,000 10 However, net income decreased 6.3% y-o-y to SR184.5 mn. This could be attributed 3,000 - to higher input costs in 2008. Net margin stood at 18.6% in 2008 as compared to Aug-08 Nov-08 Feb-09 M ay-09 23.2% in 2007. TASI Astra Indust (RHS) • Recent developments: In April 2009, Astra announced its results for 1Q-09 and Top 5 shareholders (%) registered a net profit decline of 17% y-o-y to SR49.2mn. In August 2008, Astra Arab Supply and Trading Corporation 43.8 offered 22.24mn shares (30% of the capital) to the public. In the same month, Astra Mohammed Nejir Saqer Al Utaibi 8.0 Polymer entered into a joint venture agreement with a Swiss chemical company, Ciba
Holding AG, to produce and sell antioxidant blends in the Middle East.
Source: NCBC Research
JUNE 2009 ASTRA INDUSTRIAL GROUP 220
INDUSTRIAL INVESTMENT
Also known as Basic Chemical Inds. BCI Price SR34.6 Basic Chemical Industries (BCI) incorporated in 1973, is the largest privately owned Pricing / Valuation as on May 27, 2009 chemical company in KSA. Activities of the company include production and sale of
Mkt cap SR0.8bn ($203.3mn) chemicals through its subsidiaries including Saudi Water Treatment, Arabian Polyol, Sh. outstanding 22.0mn National Adhesive, Basic Chemicals National, Chemical Marketing and Distribution.
Key statistics Company financials
52 week range H/L (SR) 120.0/18.1 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 322 352 424 494 16.5 15.4 3m 36.89 9.85 EBITDA SRmn 66 76 92 95 4.2 12.9 9m 36.27 9.68 Net Income SRmn 36 37 48 40 (18.1) 3.5 Raw Beta 6M 1yr Assets SRmn 467 485 516 531 3.0 4.4 1.28 1.15 Equity SRmn 224 261 285 305 6.9 10.8 Total Debt SRmn 142 125 108 93 (13.9) (13.3) Reuters 1210.SE Cash & Equiv SRmn 19 47 38 35 (6.1) 23.3 Bloomberg BCI AB EBITDA Mgn % 20.6 21.5 21.6 19.3 - - Price perform (%) 1M 3M 12M Net Mgn % 11.1 10.4 11.4 8.0 - - Absolute (%) 13 48 NA ROE % 16.0 15.1 17.8 13.4 - - Market (%) 6 32 (39) ROA % 7.7 7.7 9.7 7.6 - - Sector (%) 11 29 (33) Div Payout % 0.0 0.0 0.0 27.8 - - Website: www bci.com.sa EPS SR 3.6 3.7 2.2 1.8 (18.1) (20.4)
BVPS SR 22.4 26.1 13.0 13.8 6.9 (14.8) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA NA 13.2 P/B (x) NA NA 1.7 Product segment 2008 Geographic 2008 P/Sales (x) NA NA 1.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA NA 2.1 Chlorine Alkalies Chemicals 19.1 Saudi Arabia 69.3
Maintenance and Washing Chemicals 15.3 Other Countries 30.7 Weightage (%) Polyurethane Chemicals 20.5 TASI (free float weight) 0.13 Adhesive Chemicals 39.2 MSCI Saudi (domestic – small cap) NA Other Chemicals 5.9
Source: Company, NCBC Research
Free float (%) • Product profile: BCI produces variety of chemicals such as liquefied chlorine gas, Free float 78.64 hydrochloric acid, caustic soda, Polyurethane (Polyol), adhesives, calcium chloride, Relative share price perf. water treatment chemicals, laundry and janitorial products. The company’s plant is 11, 0 0 0 15 0 located in the First Industrial Zone in Dammam city, which has an annual production 9,000 10 0 7,000 capacity of 71,560 tons. 50 5,000 3,000 - • Financials: BCI’s revenues grew 16.5% year-on-year (y-o-y) to SR494.2mn in 2008. Jun-08 Sep-08 Nov-08 Feb-09 M ay-09 The company has shown consistent growth in revenues over the last three years. In TASI BCI (RHS) 2008, the company’s net income fell by 18.1% y-o-y to SR39.6mn. Consequently, net margin declined to 8.0% in 2008 from 11.4% in 2007. Top 5 shareholders (%) Ali Al Abdullah Al Tamimi Co. 21.3 • Recent developments: In May 2009, BCI increased its capital by 25% from Abdul Aziz Muhana Abdul Aziz 9.1 SR220mn to SR275mn, through issue of five bonus shares for four shares held. In Almoaibed Abdullah Muhana Abdul Aziz 9.1 April 2009, BCI announced its results for 1Q-09 with a net profit increase of 87% y-o- Almoaibed y to SR12.9mn. In June 2008, BCI came out with an IPO of 6.6mn shares Mohammed & Abdul Rahman Al Saad 7.0 representing 30% of its total capital. The IPO valued at SR198mn, was over- Al Buwardi Co. Nour Mehanna Abdulaziz Almaibd 5.0 subscribed by more than nine times. Source: NCBC Research
JUNE 2009 BASIC CHEMICAL INDUSTRIES 221
INDUSTRIAL INVESTMENT
Also known as Saudi Indl Export Co SIEC
Price SR48.9 Saudi Industrial Export Co (SIECO) is a trading company engaged in the export, import Pricing / Valuation as on May 27, 2009 and distribution of agro goods, industrial products and bulk commodities. The company was established in 1990. SIECO is represented by its associates across the globe and Mkt cap SR0.5bn ($141.0mn) Sh. outstanding 10.8mn has exported over 10 million tons of domestic products to more than 40 markets.
Key statistics Company financials
52 week range H/L (SR) 56.0/15.7 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 229 220 220 709 222.6 45.9 47.27 12.62 3m EBITDA SRmn 7 2 5 22 379.5 48.9 26.43 7.06 12m Net Income SRmn 32 12 7 14 92.6 -23.3 Raw Beta 6m 3yr Assets SRmn 150 163 164 147 (10.3) (0.5) 1.48 1.38 Equity SRmn 130 118 121 119 (1.3) (3.0) Total Debt SRmn 12 27 16 0 (100.0) (100.0) Reuters 4140.SE Cash & Equiv SRmn 10 82 80 98 23.7 113.6 Bloomberg SIECO AB EBITDA Mgn % 2.8 0.7 2.0 3.0 - - Price perform (%) 1M 3M 12M Net Mgn % 13.8 5.4 3.4 2.0 - - Absolute (%) 51 50 23 ROE % 28.0 9.6 6.2 11.9 - - Market (%) 6 32 (39) ROA % 22.8 7.6 4.5 9.2 - - Sector (%) 11 29 (33) Div Payout % 0.0 60.4 0.0 76.9 - - Website: www siec.com.sa EPS SR 22.0 1.7 0.7 1.3 92.6 (60.8)
BVPS SR 90.6 16.4 11.2 11.0 (1.3) (50.5) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 83.2 136.5 20.7 P/B (x) 8.4 8.4 2.5 Product segment 2008 Geographic 2008 P/Sales (x) 4.5 4.6 0.4 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.7 0.0 3.7
Source: Company, NCBC Research
Weightage (%) • Product profile: SIECO trades bulk food products including rice, maize, sugar and TASI (free float weight) 0.12 MSCI Saudi (domestic – small cap) 0.51 edible oils; fertilizers, minerals, chemicals and petrochemicals; iron, steel and other
metals; air conditioners, trucks and cables. The company also provides a number of Free float (%) services to its suppliers and customers including guaranteed payments, arm-length Free float 100.00 marketing, financing, and logistics for land and sea transport. SIECO is investing in Relative share price perf. distribution channels and warehousing facilities to reach more manufacturers and
11, 0 0 0 60 customers. 50 9,000 40 • Financials: In 2008, the company’s revenues more than tripled to SR709.1mn as 7,000 30 compared to SR219.8mn in 2007. EBITDA margin increased almost 100 basis points 20 5,000 10 (bps) to 3.0% in 2008. Despite 92.6% yearly growth in the net income, company’s net 3,000 - margin fell to 2.0% in FY08, a 136 bps decline over the same period last year. This M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 could be attributable to input cost pressures, provisions and absence of investment TASI S ECO (RHS) income in 2008. SIECO incurred losses of SR6.8mn in 4Q-08 alone due to massive
Top 5 shareholders (%) dip in the top-line.
Ibrahim Oudah Abdullah Al Oudah 5.9 • Recent developments: In April 2009, SIECO announced that it posted a net loss of
SR1.4mn during Q109 as compared to a net profit of SR3.1mn, a year earlier. In
August 2008, the company bought 3.85% stake in Warehousing And Auxiliary
Services Co. for SR11.0mn. In January 2008, the company signed a memorandum of Source: NCBC Research understanding (with 6-month maturity) to buy 80% stake (SR40.0mn) in Private Laboratories Company through a share swap.
JUNE 2009 SAUDI INDUSTRIAL EXPORT CO 222
INDUSTRIAL INVESTMENT
Also known as NATMETAL, National Metal MAADANIYAH Price SR27.8 National Metal Mfg & Casting (Maadaniyah) is a manufacturer of steel wire and other Pricing / Valuation as on May 27, 2009 wire products. The company’s plants are equipped with modern machinery for wire drawing, stranding, galvanizing, and fastener manufacturing. The plant has testing Mkt cap SR0.7bn ($189.7mn) facilities for chemical, mechanical, and spectrometric analyses. Sh. outstanding 25.6mn
Key statistics Company financials
52 week range H/L (SR) 66.3/16.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 203 285 369 500 35.4 35.0 3m 62.49 16.69 EBITDA SRmn 31 37 58 64 11.1 26.8 12m 67.38 17.99 Net Income SRmn 19 18 26 44 69.9 31.4 Raw Beta 6m 3yr Assets SRmn 230 439 452 544 20.4 33.3 1.08 1.11 Equity SRmn 148 296 317 340 7.4 32.1 Total Debt SRmn 50 84 66 80 21.8 17.2 Reuters 2220.SE Cash & Equiv SRmn 10 29 12 14 12.4 11.7 Bloomberg NMMCC AB EBITDA Mgn % 15.4 12.9 15.6 12.8 - - Price perform (%) 1M 3M 12M Net Mgn % 9.6 6.3 7.0 8.8 - - Absolute (%) 16 15 (53) ROE % 14.1 8.1 8.5 13.4 - - Market (%) 6 32 (39) ROA % 8.6 5.4 5.8 8.8 - - Sector (%) 11 29 (33) Div Payout % 79.4 23.2 - - Website: www.natmetalco com EPS SR 7.8 1.1 1.3 2.2 71.0 NM BVPS SR 59.0 18.2 15.4 16.6 8.1 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 50.7 42.6 12.6 P/B (x) 3.1 3.5 1.6 Product segment 2008 Geographic 2008 3.2 3.0 1.1 P/Sales (x) %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0.0 1.9 1.8
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.10 • Product profile: Maadaniyah has an annual production capacity of 10,000 tonnes MSCI Saudi (domestic – small cap) 1.01 (castings), 6,000 units (axles), and 75,000 tonnes (wire). The company specializes in Free float (%) the manufacture of low relaxation PC strands, high/low- galvanized steel, carbon Free float 64.53 wires & strands, mattress spring wires, fasteners, welding wires, and steel nails.
Relative share price perf. These products are utilized by various sectors including construction, appliances,
11, 0 0 0 10 0 electrical cable, building systems, and steel fabrication. 9,000 80 60 • Financials: Maadaniyah’s top-line increased 35.4% y-o-y to SR500.3mn in 2008. 7,000 40 This is attributable to the continuous expansion of the production capacity of Al-Jubeil 5,000 20 3,000 - wires plant and the additional sales resulting from the company’s merger in 2006 with M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 Arabian Axles Foundries and Spare Parts Co. Company’s net profit grew 69.9% y-o-y TASI M aadaniyah (RHS) to SR44.1mn, and net margin improved to 8.8% in 2008 against 7.0% in 2007.
Top 5 shareholders (%) • Recent developments: In April 2009, Maadaniyah announced a 94% y-o-y decline in National Manufacturing Company 35.4 Q109 net profits to SR1.0mn. In February 2009, the Capital market Authority approved the company’s bonus issue of 1:4 shares for increasing its capital to SR255.6mn. In January 2009, the company announced its plan to establish a center
for upgrading the production facilities of plastics products at an initial cost of over
USD26.7mn. The company plans to raise its annual production capacity of Source: NCBC Research specialized wires at the Al Jubail wire plant to more than 110,000 tonnes from 80,000 tonnes. Maadaniyah is also closing down some of its secondary plants.
JUNE 2009 NATIONAL METAL 223
INDUSTRIAL INVESTMENT
Also known as Filing & Pkg Materials FIPCO
Price SR58.8 Filing & Packing Materials Manufacturing Company (FIPCO) is engaged in the Pricing / Valuation as on May 27, 2009 production of bags and other woven polypropylene packaging products for industrial and agricultural use. The company’s production facilities located in Riyadh cover an Mkt cap SR0.4bn ($107.9mn) Sh. outstanding 6.9mn area of 75,000 square meters. FIPCO manufactures over two mn jumbo bags annually.
Key statistics Company financials
52 week range H/L (SR) 77.5/25.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 124 132 145 178 22.6 12.7 14.00 3.74 3m EBITDA SRmn 20 22 22 25 14.6 7.3 20.57 5.49 12m Net Income SRmn 10 12 15 18 20.7 21.8 Raw Beta 6m 3yr Assets SRmn 94 120 122 139 14.3 13.8 1.28 1.08 Equity SRmn 84 79 90 96 6.9 4.9 Total Debt SRmn 0 12 6 11 107.3 - Reuters 2180.SE Cash & Equiv SRmn 5 6 3 18 590.5 50.6 Bloomberg FIPCO AB EBITDA Mgn % 16.1 16.7 14.9 13.9 - - Price perform (%) 1M 3M 12M Net Mgn % 7.8 9.3 10.0 9.9 - - Absolute (%) 20 63 (18) ROE % 12.3 15.2 17.1 18.8 - - Market (%) 6 32 (39) ROA % 10.3 11.5 12.0 13.5 - - Sector (%) 11 29 (33) Div Payout % 85.0 66.8 23.7 60.0 - - Website: www.fipco.com.sa EPS SR 7.06 1.80 2.11 2.5 20.7 NM
BVPS SR 60.7 11.5 13.1 14.0 6.9 NM Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 36.9 41.4 17.3 P/B (x) 5.7 6.7 3.1 Product segment 2008 Geographic 2008 P/Sales (x) 3.4 4.1 1.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 1.8 0.6 3.5
Weightage (%) TASI (free float weight) 0.08 MSCI Saudi (domestic – small cap) NA Source: Company, NCBC Research
• Product profile: Products include jumbo bags with capacities ranging from 500 to Free float (%) Free float 85.32 2,000 kilograms, container liners used in dry cargo shipping and sling bags in different sizes. FIPCO also produces leno bags for fresh vegetable and fruit packing, Relative share price perf. cable fillers for electrical cable manufacturers, fabrics for fire retardant, tents and 11, 0 0 0 80 lumber protection, strapping band used for boxes, agriculture and baler twines for 9,000 60 green houses and grass baling use. 7,000 40
5,000 20 • Financials: FIPCO registered 22.6% y-o-y increase in sales to SR177.8mn in 2008. 3,000 - However, company’s EBITDA margin stood at 13.9% in 2008, a 100 bps decline as M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 compared to the previous fiscal year. Net income increased 20.7% y-o-y to TASI F PCO (RHS) SR17.5mn and net margin declined marginally to 9.9% in 2008 from 10.0% in 2007.
Top 5 shareholders (%) • Recent developments: In April 2009, FIPCO announced a 64% y-o-y increase in Falcom Financial Services Co. 14.6 Q109 net profits to SR7.2mn. In February 2008, the company entered into a loan agreement worth SR11.4mn with Saudi Industrial Development Fund to set up a new
line for the production of polypropylene cement bags.
Source: NCBC Research
JUNE 2009 FILING & PACKING MATERIALS 224
Company Page No. Banking and Financials SA Amiantit 226 Petrochemicals
Zamil Industrial 227 Cement
Al-Babtain Power 228 Retail
Saudi Cable Company 229 Energy and Utilities
Saudi Ceramic Company 230 Agriculture and Food
Mohammad Al Mojil 231 Telecom and IT
Arabian Pipes 232 Insurance
National Gypsum 233 Multi Investment
ME Specialized Cable 234 Industrial Investment
Red Sea Housing 235 Building and Construction
Saudi Industrial 236 Real Estate
Saudi Vitrified Clay 237 Transport
Media and Publishing
Hotels and Tourism
BUILDING & CONSTRUCTION
Also known as Amiantit Group, SA Amiantit Co SAAC Price SR22.3 Saudi Arabian Amiantit Company (SAAC) was established in 1968 to manufacture Pricing / Valuation as on May 27, 2009 pipes for the local market. Since then, SAAC has diversified its product line to
Mkt cap SR2.6bn ($686.2mn) include rubber polymer, plastic, fiberglass materials, storage tanks, chemicals and Sh. outstanding 115.5mn various types of pipes with manufacturing facilities across the globe.
Key statistics Company financials
52 week range H/L (SR) 55.5/14.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 2,493 2,660 3,102 4,024 29.7 17.3 3m 46.80 12.50 EBITDA SRmn 170 297 498 760 52.4 64.7 12m 34.19 9.13 Net Income SRmn (9) 21 64 235 267.1 NM Raw Beta 6m 3yr Assets SRmn 3,587 3,661 4,061 4,478 10.3 7.7 1.55 1.34 Equity SRmn 1,166 1,196 1,320 1,487 12.6 8.4 Total Debt SRmn 1,306 1,279 1,527 1,559 2.1 6.1 Reuters 2160.SE Cash & Equiv SRmn 109 71 202 329 63.0 44.4 Bloomberg SAAC AB EBITDA Mgn % 6.8 11.2 16.1 18.9 - - Price perform (%) 1M 3M 12M Net Mgn % (0.3) 0.8 2.1 5.8 - - Absolute (%) 10 37 (52) ROE % (0.4) 1.8 5.1 16.8 - - Market (%) 6 32 (39) ROA % (0.4) 0.6 1.7 5.5 - - Sector (%) 8 19 (53) Div Payout % - - - 24.5 - - Website: www.amiantit.com/en/default.php EPS SR (0.1) 0.2 0.6 2.0 263.8 NM
BVPS SR 10.1 10.4 11.4 12.9 12.6 8.4 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NM 61.3 8.6 P/B (x) 2.1 3.0 1.4 Product segment 2008 Geographic 2008 P/Sales (x) 1.0 1.3 0.5 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - - 2.8 Pipes Manufacturing 89.2 100.9 Saudi Arabia 53.2 NA
Technical Pipe Development 2.3 (1.4) Europe 36.1 NA Weightage (%) Water Management 8.5 0.5 Others 10.7 NA TASI (free float weight) 0.48 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 2.45 • Business brief: SAAC’s core business activities comprise of the manufacturing and
Free float (%) sale of pipe systems, ownership and sale of pipe technologies, provision of water Free float 82.73 management, consultancy and engineering services, and manufacturing and supply of polymer products. SAAC has 30 pipe system manufacturing plants, six technology Relative share price perf. companies, four materials suppliers, and eight supply and engineering subsidiaries. 11, 0 0 0 60 9,000 40 • Financials: SAAC became profitable in 2006 after incurring losses in 2004 and 2005. 7,000 20 After registering a healthy performance in 2007, the company recorded a robust 5,000 3,000 - 29.7% y-o-y growth in revenues to SR4,024.4mn in 2008. The company’s EBITDA M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 was up 52.4% y-o-y to SR759.6 mn causing expansion in EBITDA margins to 18.9% TASI Amiantit (RHS) in 2008. The company’s net profits also witnessed a significant 267.1% y-o-y growth
on the back of a substantial increase in investment income thereby expanding net Top 5 shareholders (%) margins to 5.8% in 2008. Al Mawarid Investment Co Ltd 15.4 HH Price Khalid bin Abdullah Bin 7.4 • Recent developments: SAAC’s net income increased 5.0% y-o-y to SR48.0mn in Abdul Rahman Al Saud 1Q-09. The company’s stake in Arabian Ductile Iron Pipe Co. (SADIP) rose to 100% Abdullah Saleh Abdullah Al Bassam 5.8 after its 99% owned subsidiary acquired a 5% stake in SADIP for SR11mn in April
2009. Earlier in March 2009, the company had increased its stake in SADIP to 95% Source: NCBC Research for SR16mn. SAAC also announced its plan to set up of a fully owned unit in Bahrain worth SR230mn, for manufacture of pipes, fiberglass tubes and engineering services.
JUNE 2009 SAUDI ARABIAN AMIANTIT COMPANY 226
BUILDING & CONSTRUCTION
Also known as Zamil Industrial ZIIC Price SR53.5 Zamil Industrial Inv. Co. (ZIIC), established in 1998 and headquartered in Dammam, is an Pricing / Valuation as on May 27, 2009 international manufacturing & fabrication group as well as the market leader in the
Mkt cap SR2.4bn ($642.9mn) Middle East. ZIIC owns two steel building plants (Egypt and Vietnam) and two air Sh. outstanding 45.0mn conditioning plants (Climatech, Austria, and GeoClima, Italy).
Key statistics Company financials
52 week range H/L (SR) 125.0/36.4 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 2,370 2,868 3,681 4,550 23.6 24.3 3m 11.23 3.00 EBITDA SRmn 208 290 361 454 25.9 29.7 12m 13.65 3.64 Net Income SRmn 106 192 206 225 9.2 28.4 Raw Beta 6m 3yr Assets SRmn 2,219 2,943 3,965 5,371 36.0 34.4 1.35 1.26 Equity SRmn 588 742 892 1,028 15.2 20.5 Total Debt SRmn 169.3. 138 105 2,862 2,647.7 156.9 Reuters 2240.SE Cash & Equiv SRmn 131 162 187 201 7.9 15.3 Bloomberg ZIIC AB EBITDA Mgn % 8.8 10.1 9.8 9.9 - - Price perform (%) 1M 3M 12M Net Mgn % 4.5 6.7 5.6 4.9 - - Absolute (%) 1 25 (50) ROE % 19.7 28.8 25.2 23.4 - - Market (%) 6 32 (39) ROA % 5.2 7.4 6.0 4.8 - - Sector (%) 8 19 (53) Div Payout % - 35.2 32.7 30.0 - - Website: www ziic.com EPS SR 2.4 4.3 4.6 5.0 8.7 27.7
BVPS SR 13.1 16.5 19.8 23.0 16.1 20.8 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 16.9 20.0 11.4 Product segment 2008 Geographic 2008 P/B (x) 4.4 4.6 2.5 P/Sales (x) 1.1 1.1 0.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.1 1.6 2.6 Iron Manufacturing 62.0 Saudi Arabia 55.8 Air Conditioning Manufacturing 34.5 Asia 11.3 Weightage (%) Glass Manufacturing 3.4 Africa 9.1 TASI (free float weight) 0.41 Main Unit 0.1 Europe 1.9 MSCI Saudi (domestic – small cap) 1.28 Others 21.9 Source: Company, NCBC Research,
Free float (%) • Business brief: ZIIC exports to over 80 markets globally and has manufacturing Free float 75.61 plants and offices in 55 countries. The company offers a range of products—air
Relative share price perf. conditioning, pre-engineered steel buildings, process equipment, transmission
11, 0 0 0 14 0 towers, processed architectural glass, and other solutions—to the global construction 9,000 10 5 industry. ZIIC operates through Zamil Air Conditioners (ZAC), Zamil Steel Inds. (ZSI), 7,000 70 Zamil Glass Industries (ZGI), and Arabian Fiberglass Insulation Co. Ltd (AFICO) 5,000 35 3,000 - • Financials: ZIIC’s revenues increased 23.6% y-o-y to SR4,549.6mn in FY08. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 However, increase in minority interest and lower other income led to a lower rise in TASI ZIIC (RHS) the company’s net income. Leverage has increased substantially led by the growth in
Top 5 shareholders (%) long-term debt to SR963.2mn in 2008 from SR37.2mn in 2007.
Zamil Group Holding Company 19.9 • Recent developments: ZIIC’s net profit grew 4.2% y-o-y to SR52.5mn in 1Q-09 Al Amanah Saudi Equity Fund 5.0 benefiting from improvement in sales. In May 2009, 3Com Corporation won the
contract to provide network infrastructure to ZIIC. In Dec 2008, Armacell Zamil Middle
East Co., a joint venture (JV) between ZIIC and Armacell International Holding Source: NCBC Research started a new facility in Dammam for manufacturing rubber insulation products. ZIIC announced 51:49 JV with New Delhi Tele-Towers Pvt. Ltd. in November 2008 with a capital of SR75.0mn. The deal involves supply of telecom towers and other services.
JUNE 2009 ZAMIL INDUSTRIAL INVESTMENT COMPANY 227
BUILDING & CONSTRUCTION
Also known as Al-Babtain Power Al Babtain Price SR41.4 Al-Babtain Power & Telecommunication Company (Al-Babtain) provides outdoor Pricing / Valuation as on May 27, 2009 lighting, transmission & distribution (T&D), and testing station services to the
Mkt cap SR1.7bn ($447.7mn) power sector. In addition, it designs, manufactures, and installs steel towers for the Sh. outstanding 40.5mn telecommunications sector. Al-Babtain was established in 1955 in Riyadh.
Key statistics Company financials
52 week range H/L (SR) 85.5/33.7 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 543 672 836 1,013 21.2 23.1 3m 42.36 11.31 EBITDA SRmn 88 119 149 210 41.0 33.7 12m 26.68 7.12 Net Income SRmn 66 76 96 131 36.3 25.8 Raw Beta 6m 2yr Assets SRmn 717 850 991 1,416 43.0 25.5 0.73 1.02 Equity SRmn 314 359 423 499 17.8 16.7 Tot Debt SRmn 256 221 328 602 83.4 33.0 Reuters 2320.SE Cash & Equiv SRmn 19 17 20 68 238.1 53.7 Bloomberg ALBABTAI AB EBITDA Mgn % 16.2 17.7 17.9 20.8 - - Price perform (%) 1M 3M 12M Net Mgn % 12.1 11.2 11.5 12.9 - - Absolute (%) 5 (10) (41) ROE % 21.9 22.5 24.6 28.1 - - Market (%) 6 32 (39) ROA % 10.3 9.6 10.4 10.8 - - Sector (%) 8 19 (53) Div Payout % - 39.3 56.2 20.9 - - Website: www.al-babtain com sa EPS SR 2.4 2.8 3.6 4.8 33.3 26.0
BVPS SR 11.6 13.3 15.7 18.4 17.2 16.6 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 20.4 22.8 13.4 P/B (x) 4.3 5.2 3.5 Product segment 2008 Geographic 2008 P/Sales (x) 2.3 2.6 1.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 1.9 2.5 1.6 Lighting & Poles 45.4
Towers and Steel Structures 24.2 Weightage (%) Design, Supply & Installation 30.4 TASI (free float weight) 0.38 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 1.09 • Business brief: Al-Babtain’s T&D portfolio comprises transmission towers up to 500
Free float (%) kV, monopoles up to 230 kV, and distribution poles up to 33 kV. The company’s Free float 99.97 subsidiary Al-Babtain LeBLANC Telecommunication (51% stake) is a joint venture with LeBLANC provides turnkey solutions for implementing structural steel towers to Relative share price perf. utilities and the oil & gas, telecom, and broadcasting sectors. The steel galvanizing 11, 0 0 0 10 0 9,000 80 plant—one of the largest in the region—provides hot dip galvanizing services to make 60 7,000 steel products corrosion-resistant and protect them from early damage. Al-Babtain’s 40 5,000 20 manufacturing facilities are located in Riyadh and Cairo 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: Al-Babtain’s top-line grew 21.2% y-o-y to SR1012.7mn in 2008. An TASI AL Babtain (RHS) impressive expansion in EBITDA margin helped net margin to grow to 12.9% in 2008.
Cash and cash equivalents rose substantially mainly due to the presence of cash Top 5 shareholders (%) collateral worth SR50.0 mn.
• Recent developments: The company announced its 1Q-09 results on April 21, 2009. Net profit slumped 25.1% y-o-y to SR31.1mn in 1Q-09. On April 1, 2009, the
company issued 1:2 bonus shares. In March 2009, the company appointed eight new
members to its board of directors. In June 2008, Al-Babtain signed a contract worth Source: NCBC Research SR242.7 mn with National Contracting Co. Ltd. to supply galvanized power towers with a capacity of 380 kilovolts.
JUNE 2009 AL-BABTAIN POWER 228
BUILDING & CONSTRUCTION
Also known as Saudi Cable Co SCC Group Price SR26.6 Saudi Cable Company (SCC), established in 1976 by Xenel Industries, is engaged in Pricing / Valuation as on May 27, 2009 the manufacturing of cables and related products for applications in the energy and
Mkt cap SR2.0bn ($539.8mn) telecommunications sectors. The company serves customers in over 60 countries Sh. outstanding 76.0mn through ten manufacturing units based in three countries.
Key statistics Company financials
52 week range H/L (SR) 88.0/17.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,185 1,596 3,143 3,495 11.2 43.4 3m 89.18 23.81 EBITDA SRmn 87 175 448 490 9.5 77.8 12m 70.98 18.95 Net Income SRmn 0 101 249 249 (0.1) 1,033.4 Raw Beta 6m 3yr Assets SRmn 1,344 2,054 2,700 3,440 27.4 36.8 1.22 1.20 Equity SRmn 547 721 965 1,094 13.4 26.0 Total Debt SRmn 510 705 786 1,539 95.8 44.5 Reuters 2110.SE Cash & Equiv SRmn 32 54 69 123 77.5 56.0 Bloomberg SCACO AB EBITDA Mgn % 7.4 10.9 14.3 14.0 - - Price perform (%) 1M 3M 12M Net Mgn % 0.0 6.3 9.0 7.1 - - Absolute (%) 17 34 (66) ROE % 0.0 15.9 33.5 24.2 - - Market (%) 6 32 (39) ROA % 0.0 5.9 11.9 8.1 - - Sector (%) 8 19 (53) Div Payout % - - 20.2 22.7 - - Website: www saudicable.com EPS SR - 1.3 3.7 3.3 (11.9) NM
BVPS SR 7.2 9.5 12.7 14.4 13.4 26.0 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 25.7 17.4 8.1 P/B (x) 3.6 4.5 1.8 Product segment 1H 08 Geographic 1H 08 P/Sales (x) 1.6 1.4 0.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - 1.2 2.8 Copper Wire 100.0 100.0 Saudi Arabia 100.0 100.0
Source: Company, NCBC Research
Weightage (%) • Business brief: SCC’s products include high voltage (HV) underground cables up to TASI (free float weight) 0.37 MSCI Saudi (domestic – small cap) 6.68 400 kV, HV transmission lines and conductors up to 500 kV, and optical fiber count
duct cables. SCC’s services also include the integration and transformation of low Free float (%) pressure, oil filled HV cables to cross-linked HV cable systems. The company also Free float 81.21 offers turnkey solutions for designing, engineering, testing, and installing networks in
Relative share price perf. the energy and telecommunications sectors. SCC has a manufacturing capacity of
11, 0 0 0 90 6mn core kilometers of metallic telephone lines, 20,000 sheathed kilometers of optical 9,000 70 fiber cables, 140,000 tons of aluminum and copper rods, and 85,000 tons of power 7,000 50 cables and conductors. 5,000 30 3,000 10 • Financials: On a y-o-y basis, SCC’s revenues grew 11.2% to SR3,494.9 mn. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 However, the company’s net profit was flat at SR249.0 mn in 2008 mainly due to TASI SCC (RHS) increase in investment losses and provisions for doubtful debts. The company’s
Top 5 shareholders (%) EBITDA however was up 9.5% y-o-y growth to SR490.4 mn.
Xenel Industrial Co. 16.6 • Recent developments: SCC’s net profit plunged 45.0% y-o-y to SR46.3mn in 1Q-09.
In May 2009, SCC entered into SR250mn worth agreements with contractors to
supply cables. The company also won a SR130mn contract from the Ministry of
Electricity and Water to develop electricity grids in Bahrain. In November 2008, SCC Source: NCBC Research won a SR200 mn contract for the supply of super high voltage cables. In July 2008, SCC announced that it has acquired a 55% stake in Alemsan Aydinlatma San Tic Sti, a Turkey based manufacturer of cables.
JUNE 2009 SAUDI CABLE COMPANY 229
BUILDING & CONSTRUCTION
Also known as Saudi Ceramic Co Price SR99.0 Saudi Ceramic Company was initially set-up to manufacture sanitary ware products. Pricing / Valuation as on May 27, 2009 Currently, the company also produces and sells ceramic wall and floor tiles, electric
Mkt cap SR2.5bn ($660.9mn) water heaters and ceramic road markers as well as operate 26 showrooms in KSA. Sh. outstanding 25.0mn Saudi Ceramic, established in 1977, is headquartered in Riyadh.
Key statistics Company financials
52 week range H/L (SR) 172.0/70.8 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 425 500 615 857 39.4 26.3 3m 11.59 3.10 EBITDA SRmn 137 146 178 NA NA NA 12m 17.23 4.60 Net Income SRmn 84 93 128 178 39.5 28.6 Raw Beta 6m 3yr Assets SRmn 778 1,026 1,284 1,559 21.5 26.1 0. 90 1.05 Equity SRmn 504 546 613 724 18.1 12.8 Total Debt SRmn 158 326 499 NA NA NA Reuters 2040.SE Cash & Equiv SRmn 7 14 21 25 21.4 57.1 Bloomberg SCERCO AB EBITDA Mgn % 32.3 29.2 29.0 NA - - Price perform (%) 1M 3M 12M Net Mgn % 19.6 18.6 20.7 20.8 - - Absolute (%) 1 23 (29) ROE % 17.1 17.8 22.0 26.6 - - Market (%) 6 32 (39) ROA % 11.9 10.3 11.0 12.5 - - Sector (%) 8 19 (53) Div Payout % 59.8 67.0 49.0 35.1 - - Website: www.saudiceramics com EPS SR 3.3 3.7 5.1 7.1 39.5 28.7
BVPS SR 20.2 21.8 24.5 29.0 18.1 12.8 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 16.6 21.3 15.0 P/B (x) 2.8 4.4 3.7 Product segment 2007 Geographic 2007 P/Sales (x) 3.1 4.4 3.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 4.0 2.3 2.3 Ceramic tiles manufacturing 77.3 88.8 Saudi Arabia 100.0 100.0
Heaters/Boilers 22.7 11.2 Weightage (%) TASI (free float weight) 0.35 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 4.48 • Business brief: Saudi Ceramics has an annual production capacity of 23 mn sqm of
Free float (%) porcelain and ceramic tiles, 1.8mn pieces of sanitary ware, 950,000 pieces of electric Free float 63.62 water heaters and 1.2mn pieces of ceramic road markers. Apart from the domestic market, the company exports its products to more than 45 countries. Saudi Ceramics Relative share price perf. investment portfolio includes a 15.8% stake in Natural Gas Distribution Company. 11, 0 0 0 18 0 9,000 14 0 • Financials: Saudi Ceramics performed well over the years as booming construction 7,000 10 0 sector helped demand growth. The company’s sales increased 39.4% y-o-y in 2008. 5,000 60 3,000 20 The net income of the company also grew 39.5% y-o-y to SR177.9mn. While the M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 company’s net margins improved marginally to 20.8% in 2008, the ROE and ROA TASI Ceramic (RHS) improved to 26.6% and 12.5% respectively.
Top 5 shareholders (%) • Recent developments: The company announced its 1Q-09 results on April 11, 2009. General Organization for Social 15.9 The net income increased 7.9% y-o-y to SR41.0mn in 1Q-09. In October 2008, Saudi Insurance Ceramics announced it would proceed with its SR300mn expansion in 2009, boosting Saleh Abdul Aziz Saleh Al Rajhi 14.3 its tile production capacity to 50mn square meters. In the same month, the company Falcom Financial Services Co 6.8 received a loan of SR57mn from Saudi Industrialization Development Fund for plant Public Investment Fund 5.4 expansion for tenure of 6 years. In June 2008, the company announced it was Source: NCBC Research considering setting up of a factory along Riyadh-Alkharj Highway with a production capacity of 21mn square meters of floor tiles.
JUNE 2009 SAUDI CERAMIC COMPANY 230
BUILDING & CONSTRUCTION
Also known as Mohammad Al Mojil MMG
Price SR32.8 Mohammad Al Mojil Group Company (MMG) executes the construction projects Pricing / Valuation as on May 27, 2009 within oil, gas and petrochemical industry. The services include maintenance and
Mkt cap SR4.1bn ($1,094.8mn) turnkey contracts, industrial cleaning and pre-commission services, etc. The Sh. outstanding 125.0mn company delivers the tailor-made construction services both onshore and offshore.
Key statistics Company financials
52 week range H/L (SR) 104.3/28.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 466 894 1,955 3,345 71.1 92.9 3m 75.28 20.10 EBITDA SRmn 102 246 640 850 32.9 102.8 12m 132.11 35.28 Net Income SRmn 81 208 549 666 21.3 101.7 Raw Beta 6m 1yr Assets SRmn 552 1,293 2,225 3,669 64.9 88.0 0.97 1.25 Equity SRmn 402 881 1,295 1,901 46.9 67.9 Total Debt SRmn - - 200 500 150.0 - Reuters 1310.SE Cash & Equiv SRmn 20 106 63 86 35.7 61.7 Bloomberg MMG AB EBITDA Mgn % 21.9 27.6 32.7 25.4 - - Price perform (%) 1M 3M 12M Net Mgn % 17.4 23.3 28.1 19.9 - - Absolute (%) 24 21 (51) ROE % 20.2 32.4 50.4 41.6 - - Market (%) 6 32 (39) ROA % 14.7 22.5 31.2 22.6 - - Sector (%) 8 19 (53) Div Payout % - - - 14.9 - - Website: www almojilgroup.com EPS SR 1.2 2.6 4.7 6.7 42.2 77.5
BVPS SR 3.5 10.1 13.6 19.0 40.0 75.1 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A N/A 6.6 P/B (x) N/A N/A 2.3 Product segment 2008 Geographic 2008 P/Sales (x) N/A N/A 1.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A 2.3
Source: Company, NCBC Research
Weightage (%) TASI (free float weight) 0.26 • Business brief: MMG is involved in construction, contracting, maintenance and MSCI Saudi (domestic) N/A supplying equipments for the petrochemical, oil and gas projects, civil and
electromechanical services for refineries, power plants, cement factories and water Free float (%) desalination plants. The company has production capacity of 1400 dia inches of steel, Free float 28.35 1,600 dia inches of stainless steel and 3000 dia inches of steel pipes per day. In Relative share price perf. addition, it has the capacity to produce 2,000 tons of structural steel per month and
11, 0 0 0 10 0 owns 19 vessels. 9,000 80 7,000 60 • Financials: MMG’s revenues increased 71.1% y-o-y to SR3,345.0 mn in 2008. 5,000 40 However, its EBITDA margin contracted y-o-y to 25.4% in 2008 from 32.7% in 2007. 3,000 20 The net profit grew at a lower rate of 21.3% y-o-y to SR665.5mn. Consequently, the M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 net margin contracted to 19.9% in FY 08 compared to 28.1% in FY 07. TASI MMG (RHS)
• Recent developments: MMG’s net profit declined 96% y-o-y to SR5.4mn in 1Q-09. Top 5 shareholders (%) In May 2009, MMG signed a letter of intent (LoI) with Saudi Polymers Co. for Mohammad Hamad Abdul Karim Al 50.0 construction of the latter’s Jubail project for SR88.8mn. In May 2009, the company’s Moajil Adel Mohammed Hamad Al Moajil 5.0 general assembly approved the 1:4 bonus share issue. In March 2009, MMG entered Al Moajil Holding Co. 5.0 into a contract with Eastern Petrochemical Co. (SABIC’s subsidiary) worth SR200 Al Moajil Limited Investment Co. 5.0 mn, for the latter’s Jubail project. In February 2009, MMG signed a LoI with Arabian Mohammed Hamad Al Moajil 5.0 JGC Co. to construct the ethylene plant worth SR408.7mn. In December 2008, the Investment Co. Source: NCBC Research company appointed Fahd bin Ali al-Raqtan as its CEO.
JUNE 2009 MOHAMMAD AL MOJIL 231
BUILDING & CONSTRUCTION
Also known as AC, APC, Arabian Pipes Co Anabib
Price SR36.0 Arabian Pipes Co (APC) manufactures high frequency welded (HFW) steel pipes for oil & Pricing / Valuation as on May 27, 2009 gas, petrochemical, agricultural and construction industries. The company was
Mkt cap SR1.1bn ($302.8mn) established in 1991 and has its headquarters and manufacturing facility in Riyadh. APC Sh. outstanding 31.5mn exports its products to Sudan, Yemen, Egypt, Nigeria, Iran, and other Gulf countries.
Key statistics Company financials
52 week range H/L (SR) 129.5/26.4 YoY CAGR (%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 476 594 640 812 27.0 19.5 3m 52.48 14.01 EBITDA SRmn 89 90 158 146 (7.6) 17.9 12m 39.38 10.52 Net Income SRmn 78 75 126 117 (6.6) 14.7
Raw Beta 6m 3yr Assets SRmn 962 1,263 1,474 1,635 10.9 19.3 1.41 1.27 Equity SRmn 441 516 642 712 10.9 17.3 Tot Debt SRmn 434 673 749 883 17.9 26.8 Reuters 2200.SE Cash & Equiv SRmn 30 41 17 19 10.4 (14.2) Bloomberg APCO AB EBITDA Mgn % 18.8 15.1 24.7 18.0 - - Price perform (%) 1M 3M 12M Net Mgn % 16.3 12.7 19.6 14.4 - - Absolute (%) 23 13 (66) ROE % 19.3 15.8 21.7 17.3 - - Market (%) 6 32 (39) ROA % 10.2 6.8 9.2 7.5 - - Sector (%) 8 19 (53) Div Payout % - - 37.6 - - - Website: www arabian-pipes.com EPS SR 2.5 2.4 4.0 3.7 (6.7) 14.7
BVPS SR 14.0 16.4 20.4 22.6 10.9 17.3 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 23.7 20.1 12.0 P/B (x) 3.5 3.9 2.0 Product segment 1H 08 Geographic 1H 08 P/Sales (x) 3.0 3.9 1.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - 1.9 Pipes and Fittings 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.22 MSCI Saudi (domestic – small cap) 1.90 Source: Company, NCBC Research
• Business brief: APC’s product line includes–line-pipe applications (for long distance Free float (%) transportation of oil & gas), structural applications (for construction), general purpose Free float 85.82 applications (industrial water and irrigation), standard pressure applications Relative share price perf. (transmission of different types of fluids), and casting applications (mainly for oil, gas 11, 0 0 0 14 0 and water well casings). The company's products are coated with anti-corrosives to 9,000 10 5 improve durability. 7,000 70 5,000 35 • Financials: APC reported a revenue growth of 27.0% y-o-y to SR812.2 mn in 2008. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 However, higher input costs, administrative and marketing expenses and decline in
TASI APC (RHS) other revenues constrained the growth in the net income, which slid 6.6% y-o-y to
SR117.3 mn. Consequently, net margin slid to 14.4% in 2008 from 19.6% in 2007. Top 5 shareholders (%) • Recent developments: APC’s net profit dived 85.2% y-o-y to SR5.6mn in 1Q-09. In A Q Al Muhaidib and Sons Group 13.8 Al Wusata Financial Company 5.2 April 2009, the company appointed seven new members to its board of directors. Saudi Arabia's Human Resources Development Fund acquired 7.3% stake in APC in April 2009. In April 2008, Arabian Pipes Company won a deal worth SR21.3 mn to
supply electric resistance welded pipes to the petroleum and gas field in Egypt. Source: NCBC Research
JUNE 2009 ARABIAN PIPES COMPANY 232
BUILDING & CONSTRUCTION
Also known as National Gypsum Co Gypsum
Price SR45.4 National Gypsum Company, established in 1959, is a leading producer of high quality Pricing / Valuation as on May 27, 2009 gypsum products. The company has several plants in Riyadh, Dammam and Yanbu,
Mkt cap SR1.4bn ($383.9mn) manufacturing gypsum plaster, plaster board, spray gypsum, and agricultural Sh. outstanding 31.7mn gypsum. National Gypsum holds a 33.3% stake in Qatar Saudi Gypsum.
Key statistics Company financials
52 week range H/L (SR) 82.0/27.2 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 269 257 223 260 16.4 (1.1) 3m 7.51 2.01 EBITDA SRmn 149 148 113 133 17.6 (3.6) 12m 33.84 9.04 Net Income SRmn 131 128 95 112 18.4 (5.0) Raw Beta 6m 3yr Assets SRmn 486 548 597 602 0.8 7.4 0.97 0.98 Equity SRmn 459 489 528 539 2.0 5.5 Total Debt SRmn - 25 39 39 0.0 NM Reuters 2090.SE Cash & Equiv SRmn 3 10 8 6 (32.9) 21.8 Bloomberg NGCO AB EBITDA Mgn % 55.5 57.7 50.8 51.3 - - Price perform (%) 1M 3M 12M Net Mgn % 48.7 49.9 42.5 43.2 - - Absolute (%) 3 23 (30) ROE % 33.5 27.1 18.7 21.1 - - Market (%) 6 32 (39) ROA % 28.1 24.8 16.6 18.7 - - Sector (%) 8 19 (53) Div Payout % 72.6 55.6 83.5 70.5 - - Website: www.gypsco.com.sa EPS SR 4.1 4.1 3.0 3.5 18.2 (4.9)
BVPS SR 11.4 13.1 14.1 17.0 20.5 14.2 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 17.8 25.4 8.5 P/B (x) 4.7 4.6 1.8 Product segment 1H 08 Geographic 1H 08 P/Sales (x) 8.9 10.8 3.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.1 3.3 8.3 Gypsum products manufacturing 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.17 MSCI Saudi (domestic – small cap) 2.16 Source: NCBC Research
• Business brief: National Gypsum has an annual production capacity of 450,000 Free float (%) Free float 53.97 tonnes of gypsum plaster, 12mn square meters of plaster board, 48,000 tonnes of spray gypsum and Fixing Plaster, 0.5mn square meters of gypsum ceiling tiles and Relative share price perf. 30,000 tonnes of gypsum powder. The company’s investment portfolio includes a 11, 0 0 0 10 0 2.9% stake in Transgulf Investment Co. 9,000 80 7,000 60 • Financials: National Gypsum reported a decline in sales and profitability for both 5,000 40 3,000 20 2006 and 2007; however, it registered a 16.4% y-o-y increase in the top-line in 2008. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 The company’s margins also expanded marginally during 2008 with EBITDA margin TASI Gypsum (RHS) growing to 51.3% and net margin increasing to 43.2%. This was mainly due to lower
cost of sales during the period. Top 5 shareholders (%) Al Manafa Investment and Real 34.5 • Recent developments: The Company announced its 1Q-09 results on April 11, Estate Development Co. 2009. The net income increased 1.0% y-o-y to SR28.9mn in 1Q-09. In 2007, National Theneyan Fahd Theneyan Al 10.3 Gypsum increased its share capital to SR316.6 mn from SR237.5 mn, by granting 4- Theneyan for-3 bonus shares for every share held. As a result, the total number of shares stood at 31.66 mn compared to the earlier 23.75mn.
Source: NCBC Research
JUNE 2009 NATIONAL GYPSUM COMPANY 233
BUILDING & CONSTRUCTION
Also known as ME Specialized Cable MESC
Price SR36.6 ME Specialized Cable (MESC), manufactures system, industrial & instrumentation and Pricing / Valuation as on May 27, 2009 power & control cables. Since inception in the company has added a wide range of
Mkt cap SR1.5bn ($390.9mn) products. After the acquisition of JNC Cable in 2003 and its partnership with Fujikura Sh. outstanding 40.0mn in 2007, the company made inroads in the low and medium voltage power cables.
Key statistics Company financials
52 week range H/L (SR) 113.3/24.6 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 277 648 1,103 1,308 18.6 67.9 3m 38.93 10.40 EBITDA SRmn 50 148 235 245 4.5 70.4 12m 34.21 9.13 Net Income SRmn 38 84 150 88 (41.1) 32.5 Raw Beta 6m 1yr Assets SRmn 246 846 1,246 1,615 32.3 88.4 1.43 1.22 Equity SRmn 113 324 435 507 16.6 64.7 Total Debt SRmn 71 301 470 836 78.0 127.5 Reuters 2370.SE Cash & Equiv SRmn 2 31 91 54 (39.9) 196.8 Bloomberg MESC AB EBITDA Mgn % 18.0 22.9 21.3 18.7 - - Price perform (%) 1M 3M 12M Net Mgn % 13.8 13.0 13.6 6.8 - - Absolute (%) 12 35 (66) ROE % 40.3 38.4 39.6 16.4 - - Market (%) 6 32 (39) ROA % 16.3 19.5 14.4 5.8 - - Sector (%) 8 19 (53) Div Payout % - - 10.7 54.5 - - Website: www.mesc.com sa EPS SR 1.2 2.6 4.7 2.2 (53.2) 22.4
BVPS SR 3.5 10.1 13.6 12.7 (6.6) 53.7 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A 17.9 16.8 P/B (x) N/A 6.2 2.9 Product segment 2008 Geographic 2008 P/Sales (x) N/A 2.4 1.1 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A 0.6 3.2 Saudi Arabia 51.8 132.2 Jordan 45.7 (35.7) Weightage (%) UAE 2.4 3.5 TASI (free float weight) 0.16 Source: NCBC Research
MSCI Saudi (domestic – mid cap) N/A • Business brief: The company’s products are categorized into instrumentation and
Free float (%) process control cables. These are used in indoor, outdoor and control room Free float 47.97 applications, system cables, (data and telephone cables) and power cables (used in applications requiring greater electrical or electromagnetic protection). Additionally, Relative share price perf. MESC markets specialized cables for harsh environment applications, such as the 11, 0 0 0 15 0 9,000 hydrocarbon industry. Its production capacity is about 10,000 tons of copper/annually 10 0 7,000 50 • Financials: MESC’s total revenues increased 18.6% y-o-y to SR1.3bn. Net income 5,000 3,000 - decreased 41.1% to SR88.4mn due to rise in finance costs, losses from investments in M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 financial securities, other expenses and higher administrative and marketing expenses. TASI MESC (RHS) While other expenses rose 110.5% y-o-y to SR127.1 mn, administrative and marketing
expenses increased 26.5% YoY to SR75.5 mn In 2008, the EBITDA margin declined by Top 5 shareholders (%) about 3 percentage points to 18.7% Abdul Aziz Mohammed Sulaiman Al 26.6 Namlah • Recent developments: MESC announced its 1Q-09 results on April 21, 2009. Net Mohamad Ali Abdullah Al Suwailem 15.3 profit for the quarter plunged 47.2% y-o-y to SR26.0mn. In April 2009, MESC Lama Ismail Fawzi Abu Khadhra 10.0 Mansoor Adbul Aziz Mohamad Ka’aky 8.4 announced that it has signed a contract worth SR21.6mn to construct a factory in Ras Al Khaimah. The new factory will start operations by 2009 end. In December 2008, Source: NCBC Research MESC won a SR132 mn order from the Saudi Electricity Company (SEC). Under the agreement, MESC will supply different kinds of cables to SEC in 2009.
JUNE 2009 ME SPECIALIZED CABLE 234
BUILDING & CONSTRUCTION
Also known as Red Sea Housing Red Sea
Price SR67.3 Red Sea Housing Services Company was established in Jeddah in 1967. The Pricing / Valuation as on May 27, 2009 objective was to replicate the American manufactured housing model in Saudi
Mkt cap SR2.0 bn ($538.7mn) Arabia. The company later diversified into manufacturing and property Sh. outstanding 30.0mn management, setting up its first manufacturing facility in 1983.
Key statistics Company financials*
52 week range H/L (SR) 140.0/48.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 422 431 690 1,145 65.9 39.5 3m 25.64 6.85 EBITDA SRmn 104 131 159 285 79.6 39.9 12m 36.02 9.62 Net Income SRmn 98 125 117 217 85.8 30.4 Raw Beta 6m 2yr Assets SRmn 266 489 772 1,012 31.1 56.1 1.19 1.13 Equity SRmn 154 367 529 685 29.5 64.3 Total Debt SRmn 5 4 36 99 177.6 170.5 Reuters 4230.SE Cash & Equiv SRmn 101 193 37 123 229.2 6.8 Bloomberg REDSEA AB EBITDA Mgn % 24.7 30.3 23.0 24.9 - - Price perform (%) 1M 3M 12M Net Mgn % 23.2 29.0 16.9 19.0 - - Absolute (%) (3) 8 (33) ROE % 75.5 48.0 26.1 35.8 - - Market (%) 6 32 (39) ROA % 39.1 33.1 18.5 24.3 - - Sector (%) 8 19 (53) Div Payout % 49.7 36.0 51.3 48.4 - - Website: www rsh com sa EPS SR 3.3 4.2 3.9 7.2 48.0 30.5
BVPS SR 5.2 12.2 19.5 22.8 17.1 64.3 Valuation multiples Source: Company, NCBC Research * Financial year changed from March to December in 2007
2006 2007 2008 P/E (x) 13.7 17.6 10.3 Segment-wise business analysis P/B (x) 4.7 3.9 3.3 Product segment 2008 Geographic 2008 P/Sales (x) 4.0 3.0 2.0 Div yield (%) 2.6 2.9 4.7 %Rev % Net Inc Breakup %Rev % Net Inc Oil & Gas / Construction - NA Saudi Arabia 22.3 34.9 Weightage (%) Mining - NA UAE 38.9 13.0 TASI (free float weight) 0.14 Govt. and Multilateral Organizations - NA Africa 35.0 51.5 MSCI Saudi (domestic – small cap) 1.17 Manufacturing & Selling 84.4 67.0 Asia - - Rent 15.6 33.0 Middle East - -
Free float (%) Other Foreign 3.8 0.7 Source: NCBC Research Free float 29.96 • Business brief: With three manufacturing facilities located in Dubai, Jubail, and Relative share price perf. Accra (Ghana), Red Sea Housing has the capability to manufacture 920 square 11, 0 0 0 15 0 meters of quality housing a day - which represents an annual production capacity of 9,000 10 0 7,000 335,000 square meters. The company serves all types of housing requirements - 50 5,000 commercial and residential, temporary and permanent. Red Sea Housing offers 3,000 - special services to oil & gas, and mining companies M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Red Sea (RHS) • Financials: In 2008, Red Sea Housing’s total revenues increased 65.9% y-o-y to
SAR1,145.1 mn. Net income increased 85.8% y-o-y to SAR217.1 mn led by a decline Top 5 shareholders (%) in selling, general, and administration expenses. Further, other income rose 38.8% y- Al Dabbagh Holding Co 51.0 o-y to SR4.9 mn in 2008. Interest expense more than tripled to SR6.7 mn in 2008. Mumtaz Foods Co. 5.0 The National Scientific Company LTD 5.0 • Recent developments: MESC announced its 1Q-09 results on April 19, 2009. Net Tejariah for Marketing Services and 5.0 profit for the quarter grew 3.0% y-o-y to SR58.0mn. In August 2008, Red Sea Agencies Housing announced its formation of a new subsidiary in Libya. In July 2008, the Source: NCBC Research company won a contract worth SR76.7mn to process, deliver and install 1,100 residential units for Australia Company.
JUNE 2009 RED SEA HOUSING 235
BUILDING & CONSTRUCTION
Also known as Saudi Industrial SIDC Price SR11.1 Saudi Industrial (SIDC), established in 1992, invests in the industrial sector of KSA. Pricing / Valuation as on May 27, 2009 In 1997, the company made its first investment by setting up a ceramic plant in
Mkt cap SR0.4bn ($118.0mn) Yanbu Industrial City. Since then, SIDC has made several investments in diverse Sh. outstanding 40.0mn industries such as spring mattresses and polyester fibers.
Key statistics Company financials
52 week range H/L (SR) 19.0/6.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 438 430 232 250 8.1 (17.0) 3m 28.14 7.51 EBITDA SRmn 11 18 17 17 2.1 17.9 12m 17.01 4.54 Net Income SRmn (29) (19) 12 (5) NM NM Raw Beta 6m 3yr Assets SRmn 657 630 619 478 (22.7) (10.1) 1.34 1.16 Equity SRmn 205 214 363 235 (35.1) 4.8 Total Debt SRmn 284 213 120 112 (6.5) (26.6) Reuters 2130.SE Cash & Equiv SRmn 14 11 21 24 18.4 20.4 Bloomberg SIDC AB EBITDA Mgn % 2.4 4.2 7.4 6.9 - - Price perform (%) 1M 3M 12M Net Mgn % (6.6) (4.5) 5.1 (1.9) - - Absolute (%) 12 32 (39) ROE % (11.1) (9.2) 4.1 (1.6) - - Market (%) 6 32 (39) ROA % (4.4) (3.0) 1.9 (0.9) - - Sector (%) 8 19 (53) Div Payout % ------Website: www sidc.com.sa EPS SR (0.7) (0.5) 0.3 (0.1) NM NM
BVPS SR 5.1 5.4 9.1 5.9 (35.1) 4.7 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/M 85.6 N/M P/B (x) 4.6 2.8 1.3 Product segment 2007 Geographic 2007 P/Sales (x) 2.3 4.4 1.2 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - - - Sponge and matrices 88.9 88.5 Not available
Sanitary wares 11.2 (20.6) Weightage (%) Others 0.0 32.1 TASI (free float weight) 0.10 Source: Company, NCBC Research
MSCI Saudi (domestic) N/A • Business brief: SIDC operates through its affiliates. Saudi Ceramic Plant (100%
Free float (%) stake), located in Yanbu Industrial City, produces ceramic sanitary ware (annual Free float 100.00 capacity of 500,000 pieces) as well as acrylic bathtubs and shower trays (annual capacity of 100,000 pieces). Arabian Spring and Sponge Mattresses Mfg. Co. (50% Relative share price perf. stake), formerly known as Sleep High, is a leading manufacturer of spring mattresses. 11, 0 0 0 20 9,000 15 SIDC also has a minority stake in Arabian Industrial Fibers Co. (1.6% stake) which 7,000 10 produces aromatics (725 kilo tons annually (KTA)), terephathalic acid (350 KTA), and 5,000 5 polyester (150 KTA) 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: SIDC’s revenues increased 8.1% y-o-y to SR250.4 mn in 2008. Although TASI SIDC (RHS) SIDC recorded an EBITDA of SR17.4mn, the company incurred a loss of SR4.7mn in
2008 compared to a profit of SR11.8mn in 2007. This was mainly due to substantial Top 5 shareholders (%) reduction in other non-operating income and higher minority interest during the year.
• Recent developments: SIDC reported a net loss of SR2.8mn in 1Q-09 compared to a loss of SR1.2mn a year ago. In May 2009, the company announced that it has
defaulted on repayment of the debt it owed to Saudi Industrial Development Fund and
has received a final warning from the Ministry of Finance to settle it. In January 2009, Source: NCBC Research the company announced plans to increase financial guarantees to SME businesses to USD400,000.
JUNE 2009 SAUDI INDUSTRIAL 236
BUILDING & CONSTRUCTION
Also known as Saudi Vitrified Clay SVCP
Price SR44.0 Saudi Vitrified Clay Pipes Co. (SVCP), established in 1977, is a multinational company Pricing / Valuation as on May 27, 2009 involved in the production and wholesale trade of glazed vitrified clay pipes, fittings and
Mkt cap SR0.7bn ($176.2mn) accessories for sewage and drainage systems. The company caters not only to the local Sh. outstanding 15.0mn market but also to other Arab countries, the Far East and Europe.
Key statistics Company financials
52 week range H/L (SR) 89.8/23.7 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 186 211 215 258 20.1 11.6 3m 11.81 3.15 EBITDA SRmn 53 58 49 53 8.0 (0.2) 12m 15.41 4.11 Net Income SRmn 54 50 43 47 8.0 (5.0) Raw Beta 6m 2yr Assets SRmn 158 255 333 443 33.0 41.0 1.17 1.01 Equity SRmn 65 155 196 211 8.0 48.2 Total Debt SRmn - 27 61 153 150.6 - Reuters 2360.SE Cash & Equiv SRmn 26 74 11 13 21.0 (20.9) Bloomberg SVCP AB EBITDA Mgn % 28.7 27.5 22.8 20.5 - - Price perform (%) 1M 3M 12M Net Mgn % 29.2 23.4 20.1 18.0 - - Absolute (%) (5) 5 (48) ROE % 83.6 45.0 24.6 22.8 - - Market (%) 6 32 (39) ROA % 34.7 24.0 14.7 12.0 - - Sector (%) 8 19 (53) Div Payout % - - 69.5 72.6 - - Website: www.svcp-sa com EPS SR 3.6 3.3 2.9 3.1 7.6 (5.0)
BVPS SR 4.3 10.3 13.1 14.1 8.0 48.2 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A 37.9 10.6 P/B (x) N/A 8.4 2.3 Product segment 2007 Geographic 2007 P/Sales (x) N/A 7.6 1.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A 1.8 6.8 Clay pipes 100.0 100.0 Not available
Weightage (%) TASI (free float weight) 0.08 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 0.50 • Business brief: SVCP manufactures vitrified clay pipes (ranging from 100 mm to
Free float (%) 1200mm) and jacking pipes (150mm to 1000mm). These pipes are used for domestic Free float 55.67 and industrial sewage systems as well as for storm water disposal. The main features of these pipes are their strength, durability, and resistance to chemicals contained in Relative share price perf. sewage and drainage water. SVCP has a state-of-the-art 56,000-square-meter 11, 0 0 0 10 0 9,000 80 facility in Riyadh with an annual production capacity of 100,000 tons 60 7,000 40 • Financials: SVCP’s total revenue increased 20.1% y-o-y to SR257.9 mn in 2008. 5,000 20 3,000 - The increase in revenue was offset by a 23.4% y-o-y rise in cost of sales to SR188.9 M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 mn. During the year, the net income increased 8.0% to SR46.5 mn. The growth in net TASI SVCP (RHS) income was constrained by substantial increase in selling and distribution expenses,
and higher financial expenses. The administration and marketing expenses grew Top 5 shareholders (%) 27.1% in FY08 to SR16.1 mn. Total debt for the company saw a significant rise to Abdul Latif Al Essa Co 15.6 HH Prince Faisal Bin Abdul Aziz 15.0 SR153.3 mn. The net margin contracted to 18.0% in FY 08 from 20.1% in FY 07. Faisal Al Saud • Recent developments: The company announced its 1Q-09 results on April 20, 2009. Saad Saud Ibrahim Al Sayari 13.3 Al Riyadh Investment Co 5.5 Net profit for the quarter dived 22.2% y-o-y to SR9.2mn. In September 2008, SVCP begun experimental production at its new plant that would increase its production Source: NCBC Research capacity by 70% to 170,000 tons per annum. The company expects to start commercial production at the plant soon.
JUNE 2009 SAUDI VITRIFIED CLAY 237
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JUNE 2009 SAUDI ARABIA FACTBOOK 238
Company Page No. Banking and Financials Dar Al Arkan 240 Petrochemicals
Jabal Omar 241 Cement
Makkah Construction 242 Retail
Emaar Economic City 243 Energy and Utilities
Taiba Holding 244 Agriculture and Food
Arriyadh Development 245 Telecom and IT
Saudi Real Estate 246 Insurance
Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transport
Media and Publishing
Hotels and Tourism
REAL ESTATE DEVELOPMENT
Also known as DAAR, Dar Al Dar Al Arkan Arkan Price SR26.0 Dar Al Arkan Real Estate (Dar Al Arkan) is engaged in the purchase of real estate Pricing / Valuation as on May 27, 2009 and land as well as the construction of commercial and residential properties. Dar
Mkt cap SR18.7bn ($4,998.7mn) Al Arkan is also engaged in car sales and trading of electrical tools, paints, and Sh. outstanding 720.0mn building materials. The company, headquartered in Riyadh, was established in 1994.
Key statistics Company financials
52 week range H/L (SR) 43.7/17.2 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 4,197 4,353 4,926 5,611 13.9 10.2 3m 55.89 14.92 EBITDA SRmn 1,874 2,071 2,313 2,694 16.5 12.9 12m 74.86 19.99 Net Income SRmn 1,776 1,814 2,009 2,356 17.3 9.9 Raw Beta 6m 1yr Assets SRmn 10,824 11,682 18,374 20,164 9.7 23.0 0.75 0.87 Equity SRmn 10,418 10,612 11,000 11,737 6.7 4.1 Total Debt SRmn - 414 6,400 7,635 19.3 NA Reuters 4300.SE Cash & Equiv SRmn 526 184 3,347 717 (78.6) 10.9 Bloomberg ALARKAN AB EBITDA Mgn % 44.7 47.6 46.9 48.0 - - Price perform (%) 1M 3M 12M Net Mgn % 42.3 41.7 40.8 42.0 - - Absolute (%) 11 19 (39) ROE % 22.4 17.3 18.6 20.7 - - Market (%) 6 32 (39) ROA % 21.0 16.1 13.4 12.2 - - Sector (%) 11 19 (39) Div Payout % 91.2 89.3 80.7 - - - Website: www alarkan.com EPS SR 3.3 3.4 3.7 3.3 (12.0) (0.2)
BVPS SR 19.3 19.7 20.4 16.3 (20.0) (5.5) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) N/A 19.8 6.8 P/B (x) N/A 3.6 1.4 Product segment H108 Geographic H108 P/Sales (x) N/A 8.1 2.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A 4.1 - Real estate development 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%)
TASI (free float weight) 1.89 Source: Company, NCBC Research MSCI Saudi N/A • Product profile: Dar Al Arkan has constructed more than 2,300 residential units and Free float (%) developed 9 mn square meters of land since inception. The company is currently Free float 45.24 developing a number of residential projects such as Shams Alriyadh, Al Qasr, and Al-
Relative share price perf. Tilal. The company aims to construct 65,000 residential units by 2009. Dar Al Arkan
11, 0 0 0 50 also offers pre-sales, after-sales, and funding services to its customers. 9,000 40 30 • Financials: Dar Al Arkan’s top line and bottom line have grown over the last five 7,000 20 5,000 10 years due to the steady demand for housing from the expanding population in Saudi 3,000 - Arabia. Despite the global crisis in 2008, the company reported a revenue growth of M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Dar Al Arkan (RHS) 13.9% and a net profit growth of 17.3% y-o-y. During the same period, EBITDA and net profit margins were strong at 48.0% and 42.0% respectively; keeping in line with Top 5 shareholders (%) the trend over the past 3-4 years. Khalid Abdullah Shelash Al Shelash 9.1 • Recent developments: In May 2009, the Board of Directors recommended a 50% Al Arkan Development Co. 8.4 Manazel Development Co. 7.9 capital increase to SR10.8 bn by issuing one bonus share for every two held. The Yousef Abdullah Shelash AL Shelash 7.7 company’s revenues grew 0.3% year on year to SR1.3 bn while its net profit declined Hadhlool Saleh Mohammed Al 6.9 6.2% year on year to SR 424.5 mn in 1Q 09. In Oct 2008, the company announced its Hadhlool plans to enter a 5-year partnership with various companies to develop Khozam Source: NCBC Research Palace area (Jeddah) at a cost of SR50 bn. In Sept 2008, the company got approval for a SR1.8 bn (one-for-three share) bonus issue.
JUNE 2009 DAR AL ARKAN 240
REAL ESTATE DEVELOPMENT
Also known as Jabal Omar, Jabal Omar JODC Price SR19.1 Jabal Omar Development Company (Jabal Omar) is engaged in the real estate Pricing / Valuation as on May 27, 2009 development in the Jabal Omar Area. The company buys, builds, develops, manages, rents, leases and sells land and properties, in cooperation with local and international Mkt cap SR12.8bn ($3,415.3mn) subcontractors. The company headquartered in Mecca was established in 2006. Sh. outstanding 671.4mn
Key statistics Company financials
52 week range H/L (SR) 28.3/14.8 YoY CAGR(%) 2008* (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn - -- 3m 35.42 9.46 EBITDA SRmn (93) -- 12m 58.15 15.53 Net Income SRmn (53) -- Raw Beta 6m 1yr Assets SRmn 6,704 -- 0.43 0.68 Equity SRmn 6,661 -- Tot Debt SRmn - -- Reuters 4250.SE Cash & Equiv SRmn 946 -- Bloomberg JOMAR AB EBITDA Mgn % N/A -- Price perform (%) 1M 3M 12M Net Mgn % N/A -- Absolute (%) 3 1 (25) ROE % (0.8) -- Market (%) 6 32 (39) ROA % (0.8) -- Sector (%) 11 19 (39) Div Payout % - -- Website: www jabalomar com (0.1) EPS SR -- BVPS SR 9.9 -- Valuation multiples Source: Company, NCBC Research; * 2008 figures are for 14 months period ending December 2008
2006 2007 2008 P/E (x) N/A N/A N/M Segment-wise business analysis P/B (x) N/A N/A 2.0 Product segment H108 Geographic H108 P/Sales (x) N/A N/A N/A Div yield (%) N/A N/A N/A %Rev % Net Inc Breakup %Rev % Net Inc
Real estate development 100.0 100.0 Saudi Arabia 100.0 100.0 Weightage (%) TASI (free float weight) 0.92 Source: Company, NCBC Research MSCI Saudi N/A
• Business brief: Jabal Omar builds accommodation for pilgrims visiting Mecca, which Free float (%) includes residential towers, hotels, commercial centers, as well as roads and parking Free float 32.20 facilities. The company’s major project, the Jabal Omar project is expected to be Relative share price perf. completed in 2010. The project includes two five-star hotels, six three-star hotels, 20- 11, 0 0 0 30 storey residential buildings to accommodate 100,000 people, commercial centers, 9,000 20 shops & showrooms, roads, tunnels, a central transport station, parking facility for 7,000 10 5,000 12,000 vehicles and prayer facilities for 220,000 worshipers. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: The company has not yet started generating revenues. In 14 months TASI Jabal Omar (RHS) period ending December 2008, the company recorded SR72.4mn as investment
income. However, the company reported a net loss of SR52.6mn during the period. Top 5 shareholders (%) Jabal Omar Establishment 50.6 • Recent developments: In May 2009, Jabal Omar assigned Al Rajhi Financial Makkah Construction and 5.0 services to arrange financing for its Jabal Omar real estate project worth USD3 bn. In Development Co. April 2009, the company terminated the deal with Jadwa Investment Company signed
in July 2008. In Q1 09, Jabal Omar posted a loss of SR4.1 mn. In July 2008, the
company announced its plans to construct an SR400 mn electricity distribution station Source: NCBC Research in Makkah. The company also signed a SR12.4 bn financing agreement with Jadwa Investment for a real estate project in Makkah.
JUNE 2009 JABAL OMAR 241
REAL ESTATE DEVELOPMENT
Also known as Makkah Construction MCDC Price SR27.0 Makkah Construction & Development Co. (MCDC) established in 1989 to develop Pricing / Valuation as on May 27, 2009 areas around the Holy Mosque in Makkah. The company is engaged in the
Mkt cap SR4.5bn ($1,188.3mn) redevelopment of the Holy Haram Area. MCDC has established the residential and Sh. outstanding 164.8mn commercial complex including the Jabal Omar and Jabal Khandama Project.
Key statistics Company financials (year end- April)
52 week range H/L (SR) 44.8/18.5 YoY CAGR(%) 2006 2007 2008 9M-09 (%) (06-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 77 274 272 227 8.9 87.5 3m 12.29 3.28 EBITDA SRmn 66 210 237 193 4.2 89.1 12m 35.18 9.39 Net Income SRmn 178 173 177 185 13.2 (0.3) Raw Beta 6m 3yr Assets SRmn 2,607 3,460 4,618 4,202 21.9 33.1 0.37 0.99 Equity SRmn 2,165 3,157 4,234 4,018 28.7 39.9 Total Debt SRmn 126 - - - - - Reuters 4100.SE Cash & Equiv SRmn 36 125 114 NA NA 79.2 Bloomberg MCDCO AB EBITDA Mgn % 85.6 76.5 87.1 84.8 - - Price perform (%) 1M 3M 12M Net Mgn % 230.2 63.0 65.1 81.5 - - Absolute (%) (5) 10 (26) ROE % 8.2 6.5 4.8 5.2 - - Market (%) 6 32 (39) ROA % 6.9 5.7 4.4 4.8 - - Sector (%) 11 19 (39) Div Payout % - 119.6 111.7 - - - Website: www mcdc com.sa EPS SR 1.1 1.0 1.1 1.1 13.2 (0.3)
BVPS SR 13.1 18.8 25.7 24.4 36.4 39.9 Valuation multiples Source: Company, NCBC Research
2007 2008 TTM Segment-wise business analysis P/E (x) 41.5 34.5 22.4 P/B (x) 2.3 1.4 1.1 Product segment 2008 Geographic 2008 P/Sales (x) 26.1 22.4 15.3 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.9 3.2 0.0 Real Estate Construction Engg Services 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.83 MSCI Saudi (domestic – mid cap) 0.06 Source: Company, NCBC Research
• Business brief: MCDC is involved in real estate (investment, construction and Free float (%) Free float 83.49 development), property management, and hotel management. The company holds 100% stake in Makkah Hilton & Towers (the 1,400-room hotel) and Makkah Shopping Relative share price perf. Center (a three-story 451 unit shopping center). MCDC is the biggest stakeholder in 11, 0 0 0 50 the Jabal Omar Development Company. The Jabal Omar Project is spread across 9,000 40 30 7,000 230,000 square meters and includes hotels, commercial centers and prayer facilities 20 5,000 10 for over 200,000 people. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: In 9M-09, ending January 2009, MCDC’s net margins were 81.5% TASI Makkah (RHS) showing an improvement over 9M-08 levels of 78.4%. EBIDTA margins declined to 84.8% from 88.6% in 9M-08 due to increase in operating expenses. At SR227.0 mn, Top 5 shareholders (%) Saudi Bin Laden Group 10.9 sales in 9M-09 grew 8.9% relative to SR208.4 in 9M-08. Earnings improved 13.2% y- Mohammed Salah Hamza Sairafi 6.4 o-y to register SR185mn in the nine month period ended January 2009.
• Recent developments: In May 2009, the company announced a 16.7% y-o-y
increase in its FY 2009 net profit to SR221.0 mn. In October 2008, MCDC appointed Source: NCBC Research Mr. Abdulfattah Abdulshakour Fida as the company's general manager to replace Mr. Mamdouh Qari Abdullah Tashkindi.
JUNE 2009 MAKKAH CONSTRUCTION 242
REAL ESTATE DEVELOPMENT
Also known as EEC, Emaar Economic City Emaar EC
Price SR10.2 Emaar the Economic City (Emaar EC) was started in Sep.’06 by Emaar Properties as a Pricing / Valuation as on May 27, 2009 joint venture with Saudi investors to undertake the development of SR100bn King Abdullah Economic City. The mega project is part of the Saudi government’s plan to Mkt cap SR8.6bn ($2,303.7mn) Sh. outstanding 850.0mn attract foreign investments by providing incentives and tax breaks to investors.
Key statistics Company financials
52 week range H/L (SR) 26.5/7.6 2006 YoY CAGR(%) (14Weeks) 2007 2008 (%) (06-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn - - 102 NA NA 3m 155.87 41.62 EBITDA SRmn - (157) (375) NM NA 12m 135.08 36.07 Net Income SRmn (13) 26 (292) (1,211.1) NM Raw Beta 6m 2yr Assets SRmn 8,637 8,748 9,532 9.0 5.1 1.10 1.03 Equity SRmn 8,456 8,483 8,191 (3.4) (1.6) Tot Debt SRmn - - - NA NA Reuters 4220.SE Cash & Equiv SRmn 4,574 640 2,219 246.8 (30.4) Bloomberg EMAAR AB EBITDA Mgn % NA NA (368.9) - - Price perform (%) 1M 3M 12M Net Mgn % NA NA (287.5) - - Absolute (%) 15 26 (54) ROE % (0.2) 0.3 (3.5) - - Market (%) 6 32 (39) ROA % (0.1) 0.3 (3.2) - - Sector (%) 11 19 (39) Div Payout % -- - - - Website: www kingabdullahcity.com EPS SR (0.0) 0.0 (0.3) (1,211.1) NM
BVPS SR 9.9 10.0 9.6 (3.4) NM Valuation multiples Source: Company, NCBC Research; figures for 2006 are from September – December 2006
2006 2007 2008 Segment-wise business analysis P/E (x) N/M 735.3 NM P/B (x) 1.6 2.3 0.9 Product segment 2008 Geographic 2008 P/Sales (x) N/A N/A 74.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) N/A N/A - Property development 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.58 • Business brief: KAEC, the single largest private sector-led project (168 mn square MSCI Saudi (domestic – large cap) 1.37 meters) in the GCC region, has six key components – the sea port, industrial zone, central Free float (%) business district, resort district, educational zone and residential communities. In early Free float 30.00 January 2009, Emaar EC signed a deal worth SR120 mn with Freyssinet Saudi Arabia, to construct a school in the Esmeralda area of the King Abdullah Economic City Relative share price perf. 11, 0 0 0 30 • Financials: Emaar EC reported revenues of SR101.6 mn for the first time in 2008. 9,000 20 After a net profit of SR26.3 mn in 2007, it incurred net losses of SR292.0 mn in 2008 7,000 10 5,000 led by increase in operating expenses and decline in investment income. Moreover, 3,000 - since October 2008, work on the KAEC has slowed down led by the global crisis. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 EBITDA, ROA and ROE have all been in the red in 2008. TASI Emaar E .C (RHS)
• Recent developments: Emaar Properties recorded net loss of SR62.3 mn in 1Q 09 Top 5 shareholders (%) compared to net loss of SR19.3 mn in 1Q 08 due to an increase in operating costs Modern Daim Real Estate 20.0 and a decline in the income from deposits. In April 2009, The Saudi Arabian General ME Royal Capital Co. 9.4 Emaar Middle East 5.8 Investment Authority (Sagia) and EEC signed a memorandum of understanding ME Hollandi 5.8 (MoU) with sanofi-aventis to set up an entity in KAEC, the largest private sector ME Strategic Investments 5.8 development in Jeddah. In March 2009, the company announced that the sale of its Source: NCBC Research residential units in the Economic City achieved a return of more than SR2 bn. In
February 2009, SAMA canceled the license granted to the company's subsidiary, Emaar Financial Services.
JUNE 2009 EMAAR ECONOMIC CITY 243
REAL ESTATE DEVELOPMENT
Also known as Taiba Holding Co Taiba
Price SR17.8 Taiba Holding Co (Taiba) owns, manages, and invests in real estate, hotels, hospitals, Pricing / Valuation as on May 27, 2009 and resorts. The company also constructs, manages, and markets properties. Taiba undertakes electromechanical, agricultural, industrial, architectural, and mining Mkt cap SR2.7bn ($713.0mn) Sh. outstanding 150.0mn projects. Taiba was established in September 1988 and is headquartered in Medina.
Key statistics Company financials
52 week range H/L (SR) 34.5/13.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 153 174 504 277 (45.0) 21.9 3m 9.63 2.57 EBITDA SRmn 80 98 413 164 (60.2) 30.0 12m 13.36 3.57 Net Income SRmn 136 106 393 160 (59.3) 5.5 Raw Beta 6m 3yr Assets SRmn 1,513 3,091 3,632 3,568 (1.8) 33.1 0.67 1.13 Equity SRmn 1,287 2,848 2,980 2,899 (2.7) 31.1 Total Debt SRmn 9 7 34 5 (85.3) (16.6) Reuters 4090.SE Cash & Equiv SRmn 18 142 66 287 331.8 146.2 Bloomberg TIRECO AB EBITDA Mgn % 52.1 56.3 81.9 59.2 - - Price perform (%) 1M 3M 12M Net Mgn % 89.1 61.0 78.0 57.8 - - Absolute (%) 2 13 (47) ROE % 11.2 5.1 13.5 5.4 - - Market (%) 6 32 (39) ROA % 9.3 4.6 11.7 4.4 - - Sector (%) 11 19 (39) Div Payout % 132.1 139.2 57.3 140.5 - - Website: www taiba.com.sa EPS SR 0.9 0.7 2.6 1.1 (59.3) 5.5
BVPS SR 8.6 19.0 19.9 19.3 (2.7) 31.1 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 27.8 13.6 16.5 P/B (x) 1.0 1.8 0.9 Product segment 2007 Geographic 2007 P/Sales (x) 17.0 10.6 9.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 5.0 4.2 8.5 Real estate 91.4 NA Saudi Arabia 100.0 100.0 Tourism 5.5 NA Weightage (%) Construction and maintenance 2.9 NA TASI (free float weight) 0.41 Consulting, training and advertising 0.3 NA MSCI Saudi (domestic – mid cap) 5.24 Source: Company, NCBC Research
• Product profile: Taiba’s core focus is the real estate sector and it is a major developer in Free float (%) Free float 68.98 the central area surrounding the Holy Prophet's mosque. Taiba has subsidiaries and associate companies, which include TACOMA (involved in projects in the central area), Relative share price perf. ARAC (tourism activities), Al Aqeeq Real Estate Dev. Co (AQEEQ), TAWD (property 11, 0 0 0 40 9,000 30 management and marketing), Arabian Resort Areas and Quality Horizons. The company 7,000 20 has a 20% stake in the Knowledge Economic City, Medina. 5,000 10 3,000 - • Financials: Although Taiba’s revenues grew consistently from 2005-2007, 2008 M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 revenues witnessed a fall led by the global meltdown. In 2008, on y-o-y basis, TASI Taiba (RHS) revenues fell 45.0% and net profit fell 59.3%. EBITDA margins depleted to 59.2% from 81.9% levels in 2007. In 2008, ROA fell to 4.4% in 2008 from 11.7% in 2007, Top 5 shareholders (%) Mohammed Ibrahim Mohammed Al 16.6 while ROE fell to 5.4% from 13.5% in 2007 Essa • Recent developments: In April 2009, Taiba announced a 71.1% year on year General Organization for Social 6.9 Insurance decline in its 1Q 09 net profit to SR 13.9 mn, In December 2008, Taiba announced a 50% strategic alliance with Dallah Al-Baraka Group to develop the Ejaba area in Al-
Madina Al-Monawara. The company sold its stake of 7 mn shares in Oasis Fiberglass
Company to its subsidiary Alzira. Moreover, the company announced the Source: NCBC Research postponement of IPO’s of two of its subsidiaries in December 2008.
JUNE 2009 TAIBA HOLDING COMPANY 244
REAL ESTATE DEVELOPMENT
Also known as Arriyadh Develop ARDCO
Price SR13.0 Arriyadh Development Company (ARDCO) is engaged in the construction of Pricing / Valuation as on May 27, 2009 commercial, office and residential buildings as well as complexes for the purpose of sale, lease or management. ARDCO also develops public parks, tourist compounds and Mkt cap SR1.3bn ($347.1mn) Sh. outstanding 100.0mn parking lots. The company, headquartered in Riyadh, was established in 1994.
Key statistics Company financials YoY CAGR(%) 52 week range H/L (SR) 24.8/8.7 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 106 110 128 140 9.8 9.7 3m 21.13 5.64 EBITDA SRmn 69 71 83 94 13.4 10.9 12m 25.34 6.77 Net Income SRmn 62 63 71 80 12.8 9.0 Assets SRmn 1,551 1,536 1,577 1,565 (0.8) 0.3 Raw Beta 6m 3yr Equity SRmn 1,347 1,355 1,377 1,405 2.0 1.4 0.88 1.17 Total Debt SRmn - - - - NA NA Reuters 4150.SE Cash & Equiv SRmn 12 5 22 163 632.2 NM Bloomberg ADCO AB EBITDA Mgn % 64.9 64.5 65.0 67.1 - - Price perform (%) 1M 3M 12M Net Mgn % 58.1 57.0 55.5 57.0 - - Absolute (%) 28 35 (43) ROE % 4.7 4.7 5.2 5.7 - - Market (%) 6 32 (39) ROA % 4.1 4.1 4.5 5.1 - - Sector (%) 11 19 (39) Div Payout % - 79.6 70.7 63.3 - - Website: www.ardco.com.sa EPS SR 0.6 0.6 0.7 0.8 12.4 8.8
BVPS SR 13.5 13.6 13.8 14.0 2.0 1.4 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 30.7 34.7 12.2 P/B (x) 1.4 1.8 0.7 Product segment 2007 Geographic 2007 P/Sales (x) 17.5 19.2 6.9 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.6 2.0 5.2 Commercial & Institutional Const 95.8 97.0 Saudi Arabia 100.0 100.0
Land Subdivision 4.2 3.0 Weightage (%) TASI (free float weight) 0.29 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 2.97 • Business brief: ARDCO has been involved in residential projects such as Sunrise Cities and commercial projects such as Attameer Trading Center, Arriyadh Free float (%) Free float 99.97 Transportation Center, Technical Service City, Riyadh Hills and Riyadh Car Auction (project in used car selling). The company has also been engaged in the Relative share price perf. development of market areas such as Batha Meat & Vegetable Market, Riyadh 11, 0 0 0 30 Wholesale & Retail Market and Riyadh Vegetable & Fruits Market. 9,000 20 7,000 10 • Financials: Despite the current global crisis, on y-o-y basis, the company’s revenues 5,000 3,000 - increased 9.8% in 2008. The company’s net profit grew by 12.8% y-o-y in 2008. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 ARDCO has reported a CAGR of 9.7% in revenues since 2005 led by steady growth TASI Arriyadh Development (RHS) in sales and rising population driving demand for housing. Moreover, the net profit margin has also been maintained between 55-58% over the years. Top 5 shareholders (%) Emaar Arabian Shield Investment Co. 9.6 • Recent developments: In April 2008, ARDCO announced 18% y-o-y growth in Q1 Adyar Holding Co. 7.4 09 net profit to SR22 mn. In November 2007, ARDCO announced that Urbis-JHD
(Australia) had entered the previously signed SR6.3 mn contract to develop the Al-
Dahira project in Riyadh. The other parties to this contract include Retirement Source: NCBC Research Institution, the Public Institution for Social Security, Saudi Maakaliyeh Center, Saudi Real Estate Company, Dar Al Arkan Real Estate Development Company, FAS Saudi Holding Company, and Solidere International.
JUNE 2009 ARRIYADH DEVELOPMENT COMPANY 245
REAL ESTATE DEVELOPMENT
Also known as SRECO Saudi Real Estate Akaria Price SR24.0 Saudi Real Estate (SRECO) was established in 1976 in Riyadh. The company owns land Pricing / Valuation as on May 27, 2009 for building, developing, constructing residential and commercial buildings. SRECO
Mkt cap SR2.9bn ($767.4mn) also engages in the trading of construction materials and the sale or lease of equipment Sh. outstanding 120.0mn for the same. The total constructed area by SRECO exceeds 800,000 square meters.
Key statistics Company financials
52 week range H/L (SR) 47.3/16.8 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 179 169 243 225 (7.3) 8.0 3m 23.35 6.24 EBITDA SRmn 138 109 153 133 (12.1) NM 12m 13.17 3.52 Net Income SRmn 139 111 173 140 (19.0) 0.4 Raw Beta 6m 3yr Assets SRmn 1,551 3,110 3,269 3,235 (1.0) 27.8 1.16 1.20 Equity SRmn 1,397 3,003 3,120 3,085 (1.1) 30.2 Total Debt SRmn ------Reuters 4020.SE Cash & Equiv SRmn 18 15 2 4 109.5 (39.9) Bloomberg SRECO AB EBITDA Mgn % 77.3 64.8 63.1 59.2 - - Price perform (%) 1M 3M 12M Net Mgn % 77.6 65.8 71.2 62.2 - - Absolute (%) (7) 28 (40) ROE % 10.3 5.0 5.6 4.5 - - Market (%) 6 32 (39) ROA % 9.1 4.8 5.4 4.3 - - Sector (%) 11 19 (39) Div Payout % 34.7 81.1 69.5 85.8 - - Website: www sreco.com.sa EPS SR 1.2 0.9 1.4 1.2 (19.0) 0.5
BVPS SR 11.6 25.0 26.0 25.7 (1.1) 30.2 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 36.5 35.6 16.9 Product/ Business segment 2007 Geographic 2007 P/B (x) 1.3 2.0 0.8 %Rev % Net Inc Breakup %Rev % Net Inc P/Sales (x) 24.0 25.3 10.5 Div yield (%) 2.2 2.0 5.1 Land sales 38.5 N/A Saudi Arabia 100.0 100.0 Leases 60.4 N/A Weightage (%) Maintenance revenue 1.0 N/A TASI (free float weight) 0.20 Other real estate revenue 0.1 N/A Source: Company, NCBC Research MSCI Saudi (domestic – mid cap) 1.90
• Business brief: SRECO is one of the pioneers in shopping center construction in Free float (%) GCC. The company has constructed a number of shopping centers in Riyadh and Free float 30.64 Dammam. It has developed housing and office complexes, and executed a number of Relative share price perf. projects outside the Kingdom such as Saudi embassies in some GCC countries.
11, 0 0 0 50 SRECO owns a 15% stake in United Arab Glass Co., about 2.8% in Modern Rafiq for 9,000 40 30 Real Estate Development Co and 9.48% stake in Knowledge Economic City (KSA). 7,000 20 5,000 10 • Financials: SRECO’s sales have been on the decline in 2008 led by the global crisis. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 In 2008, sales were down 7.3% y-o-y to SR225.0 mn. EBIDTA margins were 59.2%
TASI Real Estate (RHS) in 2008, showing a substantial decline from the past trend (margins of over 77% in
2005). Net profit margins also contracted to 62.2% as compared to 71.2% in 2007, Top 5 shareholders (%) while net income fell 19.0% y-o-y to SR139.9 mn in 2008. Public Investment Fund 64.5 • Recent developments: In April 2009, SRECO announced a 9.3% year on year increase in the 1Q 09 net profit to SR31.0 bn. In December 2008, SRECO acquired a 9.48% stake in Knowledge Economic City (7,865,000 shares at a price of SR10 per share). In Nov.’08, SRECO announced a strategic alliance with UK’s Atkins Co. to construct a SR24mn Source: NCBC Research residential and commercial project in Jeddah. In the same month, the company also
announced joint ventures with PM Group Ireland and PFS Group Singapore to provide real estate consultancy and asset management services, respectively.
JUNE 2009 SAUDI REAL ESTATE 246
Company Page No. Banking and Financials National Shipping 248 Petrochemicals
Saudi Public Transportation 249 Cement
United International 250 Retail
Saudi Transport and Investment 251 Energy and Utilities
Agriculture and Food
Telecom and IT
Insurance
Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transport
Media and Publishing
Hotels and Tourism
TRANSPORT
Also known as National Shipping NSCSA
National Shipping Company of Saudi Arabia (NSCSA), established in 1979, is Price SR17.3 engaged in providing marine transport services primarily to the oil & gas and Pricing / Valuation as on May 27, 2009 chemical sectors. Additionally, NSCSA provides liner (general cargo), ship Mkt cap SR5.4bn ($1,450.9mn) management, and container storage and repair services. Sh. outstanding 315.0mn
Key statistics Company financials
52 week range H/L (SR) 36.3/13.4 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,602 1,651 1,703 2,595 52.3 17.4 3m 69.14 18.46 EBITDA SRmn 685 649 634 1,188 87.3 20.1 12m 110.38 29.47 Net Income SRmn 434 410 388 750 93.1 20.0 Raw Beta 6m 3yr Assets SRmn 4,834 5,997 7,797 9,819 25.9 26.6 0.56 1.13 Equity SRmn 2,601 3,005 4,660 5,091 9.2 25.1 Total Debt SRmn 1,665 2,372 2,432 4,007 64.7 34.0 Reuters 4030.SE Cash & Equiv SRmn 300 197 191 226 18.4 (9.1) Bloomberg NSCSA AB EBITDA Mgn % 42.7 39.3 37.2 45.8 - - Price perform (%) 1M 3M 12M Net Mgn % 27.1 24.8 22.8 28.9 - - Absolute (%) 2 5 (46) ROE % 18.4 14.6 10.1 15.4 - - Market (%) 6 32 (39) ROA % 9.3 7.6 5.6 8.5 - - Sector (%) 5 12 (43) Div Payout % - 54.9 81.1 63.0 - - Website: www nscsa.com EPS SR 10.9 1.8 1.2 2.4 93.1 (39.7)
BVPS SR 65.0 13.4 14.8 16.2 9.2 (37.1) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 12.3 20.3 6.9 Product segment 2007 Geographic 2007 P/B (x) 1.7 1.7 1.0 P/Sales (x) 3.1 4.6 2.0 %Rev % Op Inc Breakup %Rev % Op Inc Div yield (%) 4.4 4.0 9.1 Crude Oil 43.48 57.75 Saudi Arabia 100.0 100.0 General Cargo 28.67 24.12 Petrochemicals 27.85 18.13 Weightage (%) Source: Company, NCBC Research TASI (free float weight) 0.81 MSCI Saudi (domestic – mid cap) 8.37 • Business brief: In the beginning of 2008, NSCSA had a fleet of 29 ships, (11 oil
tankers, 11 chemical tankers and 4 general cargos). The company is likely to add six Free float (%) VLCCs to its existing fleet by 2009. NSCSA operates its chemical tankers through its Free float 66.76 80% subsidiary, National Chemical Carriers. The company is expected to have a total
Relative share price perf. of about 50 VLCCs and chemical tankers by 2011. Along with transportation, the
11, 0 0 0 40 company offers ship management services for its own vessels through its wholly 9,000 30 owned subsidiary, Mideast Ship Management. 7,000 20 5,000 10 • Financials: In 2008, NSCSA’s sales increased 52.3% year-on-year; while net income 3,000 - grew 93.1% during the same period. Factors such as increase in crude oil M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Shipping (RHS) transportation and general cargo freight and deployment of new fleet of oil tankers contributed to the growth in revenue. Top 5 shareholders (%) • Recent developments: In April 2009, the company reported a 12.7% year on year Public Investment Fund 28.1 decline in the 1Q 09 net profit to SR151.1 mn. In the same month, NSCSA signed a
SR1.05 bn Murabaha contact with the General Investment Fund, to finance the construction of eight oil transporters. In March 2009, NSCSA announced its plans to extend its network to the US (the port of Charleston, in South Carolina). In the same Source: NCBC Research month, NCC sold off three of its chemical tankers to a Norwegian company and
realized a profit of SR27mn. NCC also leased out three VLCCs to Old Dominion Freight Line, Inc in Norway.
JUNE 2009 THE NATIONAL SHIPPING CO 248
TRANSPORT
Also known as Saudi Public Tpt Co SAPTCO
Saudi Public Transportation Company (SAPTCO) provides bus transport services Price SR8.9 for domestic as well as international travel to neighboring countries such as Egypt, Pricing / Valuation as on May 27, 2009 Syria, Jordan, Kuwait, Qatar, UAE, Bahrain, Yeman, Sudan and Lebanon. The Mkt cap SR1.1bn ($295.4mn) company headquartered in Riyadh has about 161 local and international agents. Sh. outstanding 125.0mn
Key statistics Company financials
52 week range H/L (SR) 15.3/6.6 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 636 693 732 767 4.7 6.4 3m 34.72 9.27 EBITDA SRmn 185 218 190 154 (19.1) (6.0) 12m 27.73 7.41 Net Income SRmn 123 40 94 30 (67.9) (37.9) Raw Beta 6m 3yr Assets SRmn 1,463 1,734 1,909 1,810 (5.2) 7.4 0.49 0.98 Equity SRmn 1,107 1,433 1,489 1,414 (5.0) 8.5 Tot Debt SRmn - - 114 63 (44.6) 553.6 Reuters 4040.SE Cash & Equiv SRmn 67 229 167 410 145.5 83.3 Bloomberg SAPTCO AB EBITDA Mgn % 29.1 31.4 26.0 20.1 - - Price perform (%) 1M 3M 12M Net Mgn % 19.7 45.5 12.8 3.9 - - Absolute (%) 11 11 (38) ROE % 11.7 24.8 6.4 2.1 - - Market (%) 6 32 (39) ROA % 8.8 19.7 5.1 1.6 - - Sector (%) 5 12 (43) Div Payout % 48.9 176.3 66.7 207.6 - - Website: www saptco.com.sa EPS SR 6.1 0.4 0.7 0.2 (67.9) (66.0)
BVPS SR 55.4 14.3 11.9 11.3 (5.0) (41.1) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 54.2 23.4 29.5 P/B (x) 1.5 1.5 0.6 Product segment 2008 Geographic 2008 P/Sales (x) 3.1 3.0 1.2 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 3.3 2.9 7.0 Saudi Arabia 100 100
Weightage (%) TASI (free float weight) 0.21 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 2.01 • Business brief: SAPTCO has a fleet of 2,714 buses and its operations consist of 579
Free float (%) daily scheduled trips connecting 362 cities, towns and villages across the Kingdom. Free float 83.63 SAPTCO provides intra-city and inter-city transport services across Saudi Arabia along with international transport services to 10 neighboring countries. The company provides Relative share price perf. contract and charter transportation services to schools, colleges and other groups. 11, 0 0 0 20 9,000 15 SAPTCO also provides VIP services in select routes and special transport services to 7,000 10 Mecca and Medina during the Hajj and Umrah seasons. Additionally, the company 5,000 5 3,000 - provides advertising space on its buses; optimizing on its wide presence across cities. M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: SAPTCO has shown consistent growth in its revenues since 2003. In TASI SAPTCO (RHS) 2008, the company’s revenues increased 4.7% year-on-year (y-o-y) from SR732.4mn
Top 5 shareholders (%) in 2007 to SR766.5mn in 2008. However, the company reported net income of Public Investment Fund 15.7 SR30.1mn; registering a y-o-y decline of 67.9% in 2008.
• Recent developments: In May 2009, SAPTCO singed a MOU with Saudi Arabian
General Investment Authority to study the plan of providing regular transportation services to Saudi economic cities. In April 2009, the company recorded a net loss of Source: NCBC Research SR9.0 mn for 1Q 09 compared to a net loss of SR5.2 mn in 1Q 08. In October 2008, SAPTCO signed a 5-year contract of SR50mn with a local advertising company for providing advertisements on 300 buses owned by the company.
JUNE 2009 SAUDI PUBLIC TRANSPORT CO 249
TRANSPORT
Also known as Budget Saudi, UniTrans, UITC United International
Price SR56.5 United International Transportation Co. (Budget Saudi) is the largest car rental Pricing / Valuation as on May 27, 2009 company in the MENA region. The company is a franchisee of Budget International,
Mkt cap SR1.0bn ($276.1mn) and operates more than 14,500 vehicles comprising of luxury, 4x4, full size, Sh. outstanding 18.3mn intermediate, compact and economy cars.
Key statistics Company financials
52 week range H/L (SR) 107.0/30.0 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 340 392 397 473 19.1 11.6 3m 17.09 4.56 EBITDA SRmn 218 264 251 320 27.6 13.7 12m 20.15 5.38 Net Income SRmn 67 71 78 84 7.3 7.6 Raw Beta 6m 1yr Assets SRmn 429 547 683 729 6.7 19.3 1.04 0.91 Equity SRmn 183 254 303 356 17.4 24.8 Tot Debt SRmn 116 154 241 248 2.8 28.6 Reuters 4260.SE Cash & Equiv SRmn 11 21 16 10 (35.8) (2.8) Bloomberg BUDGET AB EBITDA Mgn % 64.1 67.3 63.2 67.7 - - Price perform (%) 1M 3M 12M Net Mgn % 19.8 18.1 19.7 17.8 - - Absolute (%) (4) 40 (46) ROE % 45.5 32.5 28.1 25.5 - - Market (%) 6 32 (39) ROA % 18.1 14.5 12.7 11.9 - - Sector (%) 5 12 (43) Div Payout % 0.0 0.0 35.1 38.2 - - Website: www budgetsaudi.com EPS SR 112.2 3.9 4.3 4.6 7.3 (65.6)
BVPS SR 305.1 13.9 16.6 19.4 17.4 (60.1) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) - 28.7 8.2 P/B (x) - 7.4 1.9 Product segment 2008 Geographic 2008 P/Sales (x) - 5.7 1.5 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - 1.2 4.6
Weightage (%) TASI (free float weight) 0.10 Source: Company, NCBC Research
MSCI Saudi (domestic – small cap) 0.87 • Business brief: ISO certified Budget Saudi provides various services such as short term
Free float (%) and long term car rentals; chauffeur driven cars; CorpRate Program (a corporate client- Free float 43.00 oriented service with preferential rates and value additions such as faster reservations and flexible billing); Budget Express (a loyalty program for members). The company also Relative share price perf. provides Hajj & Umrah services for visitors, pilgrims and locals; Lodge and Drive 11, 0 0 0 15 0 9,000 (accommodation along with car rental); Premier Limousine Service (chauffeur driven 10 0 7,000 luxury vehicles); and automotive maintenance (maintenance facilities including satellite 50 5,000 workshops). Budget Saudi is also engaged in the sales of used cars. 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 • Financials: Budget Saudi has displayed consistent performance with revenues and TASI Budget Saudi (RHS) net profit growing at a CAGR of 11.6% and 7.6%, respectively, during 2005-2008. In
Top 5 shareholders (%) 2008, revenues grew 19.1% from SR396.6mn in 2007 to SR472.5mn. Net profit Al Zahid Holding Group 39.5 margins were 17.8% showing a slight decline as compared to 2007. The company’s Abdul Elah Abdullah Mahmood Ali 14.3 cash balance also declined by 35.8% due to dividend payment in 2008. Zahid Mohammed Abdullah Mahmood Zahid 9.2 • Recent developments: In April 2009, Budget Saudi reported a 4.6% year on year
increase in its 1Q 09 net profit. In November 2008, Budget Saudi canceled a Memorandum of Understanding to buy Morocco's Groupe Finance.com due to Source: NCBC Research current global economic slowdown.
JUNE 2009 UNITED INTERNATIONAL 250
TRANSPORT
Also known as Saudi Tpt and Inv Mubarrad
Saudi Transport and Investment Company (Mubarrad) is engaged in the land Price SR24.1 transport business across Saudi Arabia and the Gulf Cooperation Council Pricing / Valuation as on May 27, 2009 countries. Mubarrad has recently forayed into the purchase and sale of land as well Mkt cap SR0.4bn ($115.8mn) as construction, management and operation of buildings. Sh. outstanding 18.0mn
Key statistics Company financials
52 week range H/L (SR) 31.5/10.2 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 44 46 47 49 4.8 3.1 3m 42.75 11.42 EBITDA SRmn 10 13 15 16 4.2 16.3 12m 21.61 5.77 Net Income SRmn 14 (8) 14 11 (18.1) (6.6) Raw Beta 6m 3yr Assets SRmn 339 196 219 225 2.8 (12.8) 1.30 1.21 Equity SRmn 288 160 188 166 (11.6) (16.7) Total Debt SRmn - - - 32 - - Reuters 4110.SE Cash & Equiv SRmn 15 6 4 6 55.4 (24.2) Bloomberg SLTCO AB EBITDA Mgn % 22.1 28.9 31.9 31.7 - - Price perform (%) 1M 3M 12M Net Mgn % 30.9 (16.5) 29.3 22.9 - - Absolute (%) 43 67 (22) ROE % 5.0 (3.4) 7.8 6.3 - - Market (%) 6 32 (39) ROA % 4.1 (2.8) 6.6 5.0 - - Sector (%) 5 12 (43) Div Payout % 105.1 0.0 0.0 0.0 - - Website: www..mubarrad.com.sa EPS SR 3.8 (0.4) 0.8 0.6 (18.1) (45.4)
BVPS SR 79.9 8.9 10.4 9.2 (11.6) (51.3) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NM 55.3 20.0 P/B (x) 4.0 4.0 1.3 Product segment 2008 Geographic 2008 P/Sales (x) 14.2 16.2 4.6 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) - - -
Weightage (%)
TASI (free float weight) 0.10 Source: Company, NCBC Research MSCI Saudi (domestic – small cap) 0.74 • Business brief: Mubarrad owns a fleet of more than 1,000 vehicles (including truck Free float (%) heads, reefer trailers, reefer trucks, flat trucks for dry transport, and trailers for bulk Free float 99.99 transport.) for carrying all types of general and industrial cargo. It also runs the
Relative share price perf. Express Parcel Services throughout Saudi Arabia. Furthermore, it constructs,
11, 0 0 0 40 manages and leases cold stores and trailers. 9,000 30 Financials: Mubarrad’s top line continued to grow in 2008 by 4.8% y-o-y to reach 7,000 20 • 5,000 10 SR48.7mn; keeping in line with the trend since 2005; registering a CAGR of 3.1%. In 3,000 - 2008, Mubarrad’s net profit fell by 18.1% from SR13.6mn in 2007 to SR11.2mn in M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI M ubarrad (RHS) 2008 mainly due to decline in investment income. Consequently, net margin stood at 22.9% in 2008 as compared to 29.3% in 2007. Top 5 shareholders (%) • Recent developments: In April 2009, the company reported 73.0% y-o-y decline in
Q1 FY09 net income to SR348.0mn. In September 2008, Mubarrad signed two
contracts worth SR33.1 mn to buy trucks and refrigeration units to boost its fleet capacity. In February 2008, the company announced the approval of EGM for the development of hotels, commercial complexes and hospitals. During the same month, Source: NCBC Research the company changed its name from Saudi Land Transport Company to Saudi
Transport and Investment Company as it started investing its surplus funds in investment portfolios.
JUNE 2009 SAUDI TRANSPORT AND INVESTMENT CO 251
THIS PAGE IS INTENTIONALLY LEFT BLANK
JUNE 2009 SAUDI ARABIA FACTBOOK 252
Company Page No. Banking and Financials Saudi Research 254 Petrochemicals
Saudi Printing 255 Cement
Tihama Advertising 256 Retail
Energy and Utilities
Agriculture and Food
Telecom and IT
Insurance
Multi Investment
Industrial Investment
Building and Construction
Real Estate
Transport
Media and Publishing
Hotels and Tourism
MEDIA AND PUBLISHING
Also known as Saudi Research SRMG Price SR33.0 Saudi Research and Marketing Group (SRMG) is a leading publishing group based Pricing / Valuation as on May 27, 2009 in Riyadh. Established in 1988, SRMG’s subsidiaries include Saudi Research and
Mkt cap SR2.6bn ($704.9mn) Publishing Company, Saudi Distribution Company, Saudi Specialized Publishing Sh. outstanding 80.0mn Company (SSPC) and Al Khaleejiah Advertising and Public Relations Company.
Key statistics Company financials
52 week range H/L (SR) 46.0/22.0 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 1,063 1,161 1,113 1,342 20.6 8.1 3m 4.11 1.10 EBITDA SRmn 254 323 285 312 9.5 7.1 12m 3.70 0.99 Net Income SRmn 181 276 393 226 (42.4) 7.8 Raw Beta 6m 3yr Assets SRmn 1,398 1,785 2,187 2,259 3.3 17.4 1.21 0.90 Equity SRmn 926 1,195 1,401 1,376 (1.8) 14.1 Total Debt SRmn 123 148 121 218 80.4 20.9 Reuters 4210.SE Cash & Equiv SRmn 117 179 461 141 (69.4) 6.3 Bloomberg RESEARCH AB EBITDA Mgn % 23.9 27.8 25.5 23.2 - - Price perform (%) 1M 3M 12M Net Mgn % 17.0 23.8 35.3 16.9 - - Absolute (%) 7 10 (25) ROE % 21.1 26.0 30.3 16.3 - - Market (%) 6 32 (39) ROA % 13.4 17.3 19.8 10.2 - - Sector (%) 12 14 (24) Div Payout % - 58.0 61.0 71.4 - - Website: www srmg com EPS SR 2.3 3.5 4.9 2.8 (42.4) 7.8
BVPS SR 11.6 14.9 17.5 17.2 (1.8) 14.1 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 21.6 12.0 10.5 Product segment 2008 Geographic 2008 P/B (x) 5.0 3.4 1.7 P/Sales (x) 5.1 4.2 1.8 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 2.7 5.1 6.8 Advertising 11.0 Saudi Arabia 100.0 100.0 Printing 24.0 Weightage (%) Publishing 50.9 TASI (free float weight) 0.36 Distr bution 13.9 MSCI Saudi (domestic – mid cap) Other 0.22 Source: NCBC Research; the product segmental break up is before excluding eliminations.
Free float (%) • Business brief: SRMG is engaged in four key activities—publishing, advertising, Free float 60.45 printing, and distribution. The publishing segment is involved in research and
Relative share price perf. marketing operations. The advertising segment mainly deals with the production and
11, 0 0 0 50 marketing of audiovisual media. The printing segment prints newspapers, magazines, 9,000 40 30 books, and journals in various languages. 7,000 20 5,000 10 • Financials: SRMG’s revenues increased 20.6% y-o-y during 2008. However, the 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 company’s EBITDA margin declined 2.3 percentage points to 23.2% in the same
TASI SRMG (RHS) period due to increased cost of sales and S&G expenses. Consequently, net income
also declined 42.4% denting the net margins. Top 5 shareholders (%) • Recent developments: SRMG announced its 1Q-09 results on April 19, 2009. Its Kingdom Holding Company 29.9 HH Prince Faisal Ahmad Bin Salman 6.8 net profit plunged 64.7% y-o-y to SR20.5mn due to lower advertising revenue on Al Saud account of slowdown in the financial and real estate sectors. In March 2009, Mr. Mohammed Hussain Ali Al Amudy 5.6 Tarek Bin Abdulkarim Al Kain was appointed SRMG's vice-chief executive officer. In General Organisation for Social 5.2 Insurance (GOSI) the same month, SRMG increased its stake in Al Maktaba Stores from 51% to 100% Source: NCBC Research for consideration of SR40mn, primarily aimed at improving specialized educational content. In December 2009, SRMG announced transformation from a specialized
limited liability company to a closed joint stock company (holding).
JUNE 2009 SAUDI RESEARCH 254
MEDIA AND PUBLISHING
Also known as Saudi Printing SPPC
Price SR17.5 Saudi Printing and Packaging Company (SPPC) (formerly Madina Printing and Pricing / Valuation as on May 27, 2009 Publishing Company) was established in 1963. A subsidiary of Saudi Research and
Mkt cap SR1.1bn ($280.4mn) Marketing Group, SPPC is engaged in a variety of commercial and package printing Sh. outstanding 60.0mn and production and has five print houses and a production area of 1.0 mn sq mts.
Key statistics Company financials
52 week range H/L (SR) 30.5/11.8 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 245 312 370 465 25.6 23.7 3m 7.53 2.01 EBITDA SRmn 83 114 118 123 4.5 14.2 12m 6.84 1.83 Net Income SRmn 68 114 137 151 9.5 30.3 Raw Beta 6m 1yr Assets SRmn 416 814 858 1,068 24.6 36.9 0.69 0.90 Equity SRmn 329 619 701 792 12.9 34.0 Total Debt SRmn 3 63 35 36 2.0 121.7 Reuters 4270.SE Cash & Equiv SRmn 14 103 22 17 (26.0) 6.9 Bloomberg SPPC AB EBITDA Mgn % 33.7 36.6 31.8 26.5 - - Price perform (%) 1M 3M 12M Net Mgn % 27.7 36.4 37.1 32.4 - - Absolute (%) 1 (11) (40) ROE % 21.5 23.9 20.8 20.2 - - Market (%) 6 32 (39) ROA % 17.8 18.4 16.4 15.6 - - Sector (%) 12 14 (24) Div Payout % - - 43.7 60.0 - - Website: www sppc.com.sa EPS SR 1.1 1.9 2.3 2.5 9.5 30.3
BVPS SR 5.5 10.3 11.7 13.2 12.9 34.0 Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NA 18.0 5.6 P/B (x) NA 3.5 1.1 Product segment 2007 Geographic 2007 P/Sales (x) NA 6.7 1.8 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) NA 2.4 10.8 Printing 68.5 Saudi Arabia 100 100 Head Office & Investments 31.5 Weightage (%) Source: Company, NCBC Research
TASI (free float weight) 0.11 MSCI Saudi (domestic – mid cap) • Business brief: SPPC offers integrated print production solutions from pre-press designing and printing to post-printing binding and packaging. The company has a Free float (%) capacity of 5,000 magazine copies/hour, 150,000 newspaper copies/hour and book Free float 47.50 printing capacity of 6.5 copies/hour and 10 carton sheet per hour. SPPC also has
Relative share price perf. exclusive printing rights for its parent company and for the Saudi Research and
11, 0 0 0 40 Publishing Company. The company’s publications include, Sayidaty, Arrajol, Al 9,000 30 Eqtisadiah, Almajalla and Arab News. 7,000 20 5,000 10 • Financials: SPPC registered a strong revenue growth of 25.6% y-o-y in 2008. Higher 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 input costs resulted in a y-o-y contraction of 5.3 percentage points in the company’s
TASI SPPC (RHS) EBITDA margin over the same period. SPPC’s net income increased 9.5% as compared to previous year. SPPC’s net margins were well above EBITDA margins in Top 5 shareholders (%) 2007 and 2008 as the company recorded significant non-operating income during Saudi Research and Marketing Group 42.0 both the periods. Alfiqriah Marketing and Advertising 10.5 Holding Company • Recent developments: SPPC announced its 1Q-09 results on April 19, 2009. The Saudi Research Marketing Group 7.0 company’s net profit dived 48.1% y-o-y to SR15.7mn during 1Q-09. In November Al Mosanafat Scientific Holding 7.0 2008, SPCC acquired Saudi Arabia-based Al Aoun Factory for Commercial Labels Source: NCBC Research and Flexible Packaging for SR90mn. In August 2008, the company sold its 40% stake
in Abu Dhabi-based United Printing and Publishing (UPP) for $31.3mn (SR117.4mn).
JUNE 2009 SAUDI PRINTING 255
MEDIA AND PUBLISHING
Also known as Tihama TAPRCO Price SR35.2 Tihama Advertising & Public Relations Co. (TAPRCO) was established in 1983. The Pricing / Valuation as on May 27, 2009 company operates Egyptian Satellite Channel, the Al-Hayat newspaper, and
Mkt cap SR0.5bn ($141.0mn) Kolness magazine. TAPRCO operates via its subsidiaries: the Tihama Distribution Sh. outstanding 15.0mn Company, United Journalists, Intermarkets Riyadh and Ad Art Medyan.
Key statistics Company financials
52 week range H/L (SR) 39.5/12.6 YoY CAGR(%) 20062007 2008 2009 (%) (06-09) Avg daily turnover (mn) SR US$ Net Revenues SRmn 117 120 137 142 3.7 6.5 3m 54.77 14.62 EBITDA SRmn 10 17 20 17 (15.7) 20.4 12m 35.93 9.59 Net Income SRmn 12 19 28 30 7.3 35.8 Raw Beta 6m 3yr Assets SRmn 275 298 338 354 4.7 8.7 1.79 1.39 Equity SRmn 194 211 226 239 5.8 7.2 Total Debt SRmn 2 3 1 2 216.5 (3.8) Reuters 4070.SE Cash & Equiv SRmn 21 36 85 99 16.5 68.9 Bloomberg TAPRCO AB EBITDA Mgn % 8.3 14.2 14.7 11.9 (2.7) 13.0 Price perform (%) 1M 3M 12M Net Mgn % 10.2 16.1 20.5 21.2 0.7 27.5 Absolute (%) 46 80 5 ROE % 6.2 9.5 12.8 12.9 0.1 27.6 Market (%) 6 32 (39) ROA % 4.6 6.7 8.8 8.7 (0.1) 24.0 Sector (%) 12 14 (24) Div Payout % - 58.4 53.5 - - - Website: www tihama com EPS SR 0.8 1.3 1.9 2.0 7.3 35.8
BVPS SR 12.9 14.1 15.0 15.9 5.8 7.2 Valuation multiples Source: Company, NCBC Research; The company’s year ending is in March
2007 2008 2009 Segment-wise business analysis P/E (x) 32.6 16.5 10.2 P/B (x) 3.0 2.0 1.3 Product segment 2008 Geographic 2008 P/Sales (x) 5.3 3.4 2.2 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 1.8 3.3 - Advertising 68.0 Saudi Arabia 100% 100%
Book Stores 32.0 Weightage (%) TASI (free float weight) 0.12 MSCI Saudi (domestic – mid cap) Source: Company, NCBC Research
• Business brief: TAPRCO’s operations can be categorized into three segments— Free float (%) Free float 100.00 media, public relations (PR), and other services. The media segment comprises of newspapers, magazines, outdoor advertising, and a satellite television channel. The Relative share price perf. PR segment includes press files and promotional information services. Other services 11, 0 0 0 50 segment involves video production and distribution of Arabic and American films in 9,000 40 30 7,000 the Middle East. TAPRCO also operates in Cairo, Dubai, London, and Paris. 20 5,000 10 • Financials: TAPRCO’s revenues increased 3.7% y-o-y in 2009. EBITDA margins 3,000 - M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 declined to 11.9% in the same period as compared to 14.7% a year ago. This is due TASI Tihama (RHS) to the higher growth in cost of sales and SG&A expenses. However, the company could record a net margin of 21.2% in 2009 (20.5% in 2008) primarily due to higher Top 5 shareholders (%) interest income arising from associate companies. Consequently, net profit surged 7.3% y-o-y to SR30.1mn during 2009.
• Recent developments: In May 2009, TAPRCO was chosen as the representative of
Promax, a public relations firm based in Netherlands, in Saudi Arabia. In February Source: NCBC Research 2009, TAPRCO opened a new library of size 700 meters in Eastern region
(Dammam) for total cost of SR4mn.
JUNE 2009 TIHAMA 256
Company Page No. Banking and Financials Saudi Hotels and Resort 258 Petrochemicals
Tourism Enterprise 259 Cement
Retail
Energy and Utilities
Agriculture and Food
Telecom and IT
Insurance
Multi Investment Industrial Investment
Building and Construction
Real Estate
Transport
Media and Publishing
Hotels and Tourism
HOTELS AND TOURISM
Also known as Saudi Hotels & Resort SHARACO Price SR30.0 Saudi Hotels & Resorts Areas Co. (SHARCO) was founded in 1979. The company Pricing / Valuation as on May 27, 2009 owns and operates many resorts, hotels, and other projects like Ajyad Makkah Hotel,
Mkt cap SR2.1bn ($552.8mn) Sahara Airport Hotel, Al-Rawda Toys City, Al-Khaleej Village, Al-Andalus luxurious Sh. outstanding 69.0mn villas, Future Homes "Diplomatic Quarter", Riyadh Marriott Hotel and few others.
Key statistics Company financials
52 week range H/L (SR) 43.5/18.5 YoY CAGR(%) 2005 2006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 181 220 264 294 11.3 17.5 3m 13.20 3.53 EBITDA SRmn 73 92 123 141 15.4 24.7 12m 16.54 4.42 Net Income SRmn 80 27 78 123 58.4 15.6 Raw Beta 6m 3yr Assets SRmn 1,496 1,434 1,535 1,953 27.2 9.3 0.85 0.99 Equity SRmn 799 771 820 1,348 64.4 19.1 Total Debt SRmn 57 61 58 53 (9.0) (2.8) Reuters 4010.SE Cash & Equiv SRmn 11 30 39 26 (33.2) 32.4 Bloomberg SHARCO AB EBITDA Mgn % 40.3 41.8 46.4 48.1 - - Price perform (%) 1M 3M 12M Net Mgn % 44.0 12.1 29.4 41.9 - - Absolute (%) 15 27 (17) ROE % 10.3 3.4 8.9 9.1 - - Market (%) 6 32 (39) ROA % 5.3 2.9 5.1 6.3 - - Sector (%) 21 26 (9) Div Payout % - 97.1 35.4 66.67 - - Website: www saudi-hotels.com.sa EPS SR 8.0 0.8 1.6 1.8 13.8 (39.3)
BVPS SR 79.8 15.4 16.4 19.5 18.9 (37.4) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) 57.6 25.6 12.8 Product segment 2007 Geographic 2007 P/B (x) 2.0 2.4 1.2 %Rev % Net Inc Breakup %Rev % Net Inc P/Sales (x) 7.0 7.5 5.4 Div yield (%) 1.7 1.4 5.2 Hotel and Resorts revenues 83.4 N/A Saudi Arabia 100.0 N/A Rental Revenue 7.1 N/A
Weightage (%) Property management 6.0 N/A Real Estate development 3.2 N/A TASI (free float weight) 0.24 Investments 0.3 N/A MSCI Saudi (domestic – small cap) 1.30 Source: Company, NCBC Research
Free float (%) • Business brief: SHARCO engages in activities such as construction, ownership, Free float 52.68 investment and management of hotels, real estate, resorts and entertainment
Relative share price perf. centers. The company reports its revenues under the following business heads—
11, 0 0 0 50 hospitality, real estate, resorts, and entertainment. Saudi Hotels & Resorts also 9,000 40 develops, divides, and rents land owned by the company. 30 7,000 20 5,000 10 • Financials: The company has registered a CAGR of 17.5% for the period 2005-08 3,000 - and reported 11.3% y-o-y revenue growth to SR293.9mn in 2008. Furthermore, the M ay-08 Aug-08 Nov-08 Feb-09 M ay-09
TASI Hotels (RHS) company’s net profit increased by a significant 58.4% y-o-y to SR123.0mn in 2008 due to the expansion in gross and operating margins as well a substantial decrease Top 5 shareholders (%) in minority interests. Mohammed Ibrahim Mohammed Al 22.4 Essa • Recent developments: The company‘s net profit has increased 5.6% to SR28.2mn Public Investment fund 16.6 in 1Q-09. In April 2009, SHARCO announced that it has received a license to General Organization for Social 6.5 manage and operate a hotel in Mekkah, which is expected to be completed in two Insurance years. In June 2008, the company signed an agreement for the sale of plots of lands
and buildings owned in the village of East Gulf region for SR485.8mn. In the same Source: NCBC Research month, Jenan Real Estate Co. and Al Rashid Co. bought SHARCO’s Al Khaleej Village project in Dammam for SR500mn.
JUNE 2009 SAUDI HOTELS AND RESORTS 258
HOTELS AND TOURISM
Also known as Tourism Enterprise Co Shams Price SR36.4 Tourism Enterprises Co. (TECO) was established in 1991 to construct and manage Pricing / Valuation as on May 27, 2009 tourist projects. Headquartered in Dammam Saudi Arabia, TECO has sole
Mkt cap SR0.4bn ($98.7mn) ownership of the Palm Beach Resort® since its establishment in 1995. TECO offers Sh. outstanding 10.2mn visitors sports and recreational facilities, conference facilities, cabanas and suites.
Key statistics Company financials
52 week range H/L (SR) 39.1/9.5 YoY CAGR(%) 20052006 2007 2008 (%) (05-08) Avg daily turnover (mn) SR US$ Net Revenues SRmn 10 10 13 15 11.1 15.5 3m 95.20 25.42 EBITDA SRmn 4 3 5 3 (29.9) (5.2) 12m 35.55 9.49 Net Income SRmn (1) (8) 2 (0) NM (32.7) Raw Beta 6m 3yr Assets SRmn 97 90 79 79 (1.1) (6.8) -0.48 1.26 Equity SRmn 81 73 73 73 (0.1) (3.3) Total Debt SRmn 5 2 - 0 - (100.0) Reuters 4170.SE Cash & Equiv SRmn 18 19 3 4 17.5 (41.9) Bloomberg TECO AB EBITDA Mgn % 41.1 27.6 36.0 22.7 - - Price perform (%) 1M 3M 12M Net Mgn % (10.9) (80.5) 16.0 1.7 - - Absolute (%) 39 23 23 ROE % (1.3) (11.6) 2.9 .34 - - Market (%) 6 32 (39) ROA % (1.1) (9.4) 2.7 .31 - - Sector (%) 21 26 (9) Div Payout % ------Website: www palmbeach-resort.com EPS SR (0.5) (0.8) 0.2 (0.03) (114.8) (60.6)
BVPS SR 39.7 7.1 7.2 7.2 (0.1) (43.5) Valuation multiples Source: Company, NCBC Research
2006 2007 2008 Segment-wise business analysis P/E (x) NM NM NM P/B (x) 6.0 6.8 2.2 Product segment 2007 Geographic 2007 P/Sales (x) 41.5 37.3 10.7 %Rev % Net Inc Breakup %Rev % Net Inc Div yield (%) 0 0 0 Hotels and Resort 100.0 100.0 Saudi Arabia 100.0 100.0
Weightage (%) TASI (free float weight) 0.08 MSCI Saudi (domestic) N/A Source: Company, NCBC Research
• Business brief: The Palm Beach Resort stretches up to 1,300 meters with 165 first- Free float (%) Free float 100.00 class Chalets, more than 100 Suites and Cabanas overlooking the Arabian Gulf. The sports and the recreational facilities includes a ladies sports club with swimming pool, Relative share price perf. men's sports and fitness center, football, tennis, basketball and squash courts, a 11, 0 0 0 40 sauna and steam bath, a swimming pool for children, gardens for families and a 24- 9,000 30 7,000 20 hour security service. 5,000 10 3,000 - • Financials: In 2008, the company’s total revenues increased 11.1% y-o-y. However, M ay-08 Aug-08 Nov-08 Feb-09 M ay-09 it reported a net loss of SR0.3 million in 2008 mainly due to a decline in gross profit TASI Shams (RHS) coupled with lower income from other sources.
Top 5 shareholders (%) • Recent developments: The company announced its 1Q-09 results on April 19, 2009. TECO recorded a gain of SR0.1mn in 1Q-09 compared to a loss of SR0.2mn in the
year ago period. On February 03, 2008, the company announced the failure of a
previously signed agreement of the merger of Tourism Enterprises Co. with Arabian
Commercial Projects for Travel Company, Al Qafila for Toursim and Travel, and Source: NCBC Research Plage Remal Resort.
JUNE 2009 TOURISM ENTERPRISE CO 259
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Brokerage sales Roger Yeoman +966 2646 5724 [email protected] +966 565 076 302 (mobile)
Brokerage website www.alahlitadawul.com / www.alahlibrokerage.com
Corporate website www.ncbc.com
IMPORTANT INFORMATION
The authors of this document hereby certify that the views expressed in this document accurately reflect their personal views regarding the securities and companies that are the subject of this document. The authors also certify that neither they nor their respective spouses or dependants (if relevant) hold a beneficial interest in the securities that are the subject of this document. Funds managed by NCB Capital and its subsidiaries for third parties may own the securities that are the subject of this document. NCB Capital or its subsidiaries may own securities in one or more of the aforementioned companies, or funds or in funds managed by third parties The authors of this document may own securities in funds open to the public that invest in the securities mentioned in this document as part of a diversified portfolio over which they have no discretion. The Investment Banking division of NCB Capital may be in the process of soliciting or executing fee earning mandates for companies that are either the subject of this document or are mentioned in this document.
This document is issued to the person to whom NCB Capital has issued it. This document is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This document is not intended as an offer or solicitation with respect to the purchase or sale of any security. This document is not intended to take into account any investment suitability needs of the recipient. In particular, this document is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this document. NCB Capital strongly advises every potential investor to seek professional legal, accounting and financial guidance when determining whether an investment in a security is appropriate to his or her needs. Any investment recommendations contained in this document take into account both risk and expected return. Information and opinions contained in this document have been compiled or arrived at by NCB Capital from sources believed to be reliable, but NCB Capital has not independently verified the contents of this document and such information may be condensed or incomplete. Accordingly, no representation or warranty, express or implied, is made as to, and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document. To the maximum extent permitted by applicable law and regulation, NCB Capital shall not be liable for any loss that may arise from the use of this document or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this document may not be realized. All opinions and estimates included in this document constitute NCB Capital’s judgment as of the date of production of this document, and are subject to change without notice. Past performance of any investment is not indicative of future results. The value of securities, the income from them, the prices and currencies of securities, can go down as well as up. An investor may get back less than he or she originally invested. Additionally, fees may apply on investments in securities. Changes in currency rates may have an adverse effect on the value, price or income of a security. No part of this document may be reproduced without the written permission of NCB Capital. Neither this document nor any copy hereof may be distributed in any jurisdiction outside the Kingdom of Saudi Arabia where its distribution may be restricted by law. Persons who receive this document should make themselves aware, of and adhere to, any such restrictions. By accepting this document, the recipient agrees to be bound by the foregoing limitations.
NCB Capital is authorised by the Capital Market Authority of the Kingdom of Saudi Arabia to carry out dealing, as principal and agent, and underwriting, managing, arranging, advising and custody, with respect to securities under licence number 37-06046. NCB Capital’s registered office is at 25th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 22216, Riyadh 11495, Kingdom of Saudi Arabia.
JUNE 2009 SAUDI ARABIA FACTBOOK