A big miss vs. SFC and consensus; Maintain Hold - Amazon Web ...
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National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
1Q15 review: A big miss vs. SFC and consensus; Maintain Hold
Rating Summary
A big miss vs. SFC and consensus: Tasnee reported 1Q15 net loss of SAR333m which
Recommendation
Hold
Target price (SAR)
25.0
Upside/ (downside)
-1%
was a big miss vs. SFC (SAR150m net profit) and consensus (SAR136m) estimates. Operational performance was also much weaker than expected with EBIT c.41%/42% lower
Stock Details
than SFC/consensus expectation. While impact of weak petrochemical product prices
Closing price*
(polyethylene/polypropylene -17%/-22% qoq tracking decline in crude prices) were already factored in our estimates, such a big miss seems to have come from higher than expected losses at its new projects (SAMCO/SAPCO, Sahara also recorded surprise losses in 1Q15),
SAR
25.2
SAR mn
16,857
Mn
669
52-Week High
SAR
40.1
52-Week Low
SAR
21.6
Market capitalization Shares outstanding
weaker than expected performance in its titanium dioxide business and losses from foreign
Price chg. (3 months)
exchange hedges and derivative contracts.
EPS 2015E
Profits from new projects could be elusive in 2015: In the petrochemical segment,
Ticker (Reuters/ Bloomberg)
Tasnee has 5 key assets: Saudi Polyolefin (c.75% stake), SEPC (c.45% stake), SAMCO/SAPCO (c.39% stake) and Saudi Butanol (c.17% stake). Of these, while Saudi Polyolefin and SEPC are old and mature (produce ethylene, polyethylene, propylene, and
%
-1.3
SAR
1.64
2060.SE
NIC AB
*Price as of April 20, 2015 Key Shareholding (%)
polypropylene), bulk of the volume growth is likely to originate from new projects such as
Public+Others
SAMCO, SAPCO and Saudi Butanol which are already operational (except Saudi Butanol)
Kingdom Holding Co.
6.2
since July 2014. While we are reasonably confident of volume growth from new projects,
GOSI
8.7
Sahara’s management commentary (SAMCO/SAPCO are J/Vs with Sahara) following 1Q15
GIC Investment Co.
6.5
earnings suggests new projects could take 1-2 years to reach a steady state meaning in the
Source: Tadawul
78.6
current depressed pricing environment, they are likely generate losses in 2015.. We see downside risks to earnings estimates; Maintain Hold: Ytd, Tasnee (c.-9%)
Key Ratios 2015E
2016E
P/E (x)
15.4
11.7
trades at 2015E P/E of 15.4x (Tadawul Petchem 17.6x, EM 15.1x, global 16.2x) and 2016E
EV/EBITDA (x)
10.4
9.0
P/E of 11.7x (Tadawul Petchem 13.0x, EM c.12.6x, Global 13.0x) on our current estimates.
Dividend yield (%)
4.0
5.0
While we await full financials to update our earnings forecasts, in an environment of potential
Source: Company, Saudi Fransi Capital analysis
underperformed Tadawul Petchem (c.+10%) and Tadawul (c.+14%) and the stock currently
losses from new projects coupled with weaker than earlier expected performance in titanium dioxide business, we see considerable downside risks to our and consensus earnings
Stock price movement vs. TASI
estimates meaning the valuation discount vs. peers is only optically appealing. All in all, post
Na
Gross Profit
707
780
-9%
Na
Na
765
-8%
1,300
-46%
EBIT
233
397
-41%
399
-42%
390
-40%
830
-72%
-333
151
-321%
136
-344%
98
Nm
321
-204%
Tasnee
Net Profit
Source: Company, Saudi Fransi Capital analysis, * Bloomberg consensus
Jan-15
4,414
Mar-15
Na
Oct-14
3,676
Dec-14
Na
Jul-14
3,637
Sep-14
Na
Jun-14
3,828
Apr-14
Na
Revenues
Jan-14
%yoy
Feb-14
1Q14
Oct-13
%qoq
Nov-13
4Q14
Jul-13
%dev
Aug-13
Cons*
Apr-13
%diff
May-13
1Q15E
Jan-13
1Q15A
SAR mn
170 160 150 140 130 120 110 100 90 80 70
Feb-13
publication of 1Q15 results we maintain our Hold rating on the stock.
Tadawul Petrochem
Source: Tadawul
Sector Coverage Dipanjan Ray [email protected] +966-11-2826861 AbdulAziz Jawdat [email protected] +966-11-2826856 CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price.
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
Contacts RESEARCH & ADVISORY DEPARTMENT [email protected]
SAUDI FRANSI CAPITAL Call Centre 800-125-9999 Website www.sfc.sa
SAUDI FRANSI CAPITAL LLC C.R. 1010231217, PO Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh
Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
Disclaimer This report is prepared by Saudi Fransi Capital (“SFC”), a fully-fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or compl ete, and it should not be relied on as such. 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 report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC 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 report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, 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 what 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 report may be reproduced without the written permission of SFC. Neither this report 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 report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.
Saudi Fransi Capital LLC; C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office – Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
1Q15 review: A big miss vs. SFC and consensus; Maintain Hold
Rating Summary
A big miss vs. SFC and consensus: Tasnee reported 1Q15 net loss of SAR333m which
Recommendation
Hold
Target price (SAR)
25.0
Upside/ (downside)
-1%
was a big miss vs. SFC (SAR150m net profit) and consensus (SAR136m) estimates. Operational performance was also much weaker than expected with EBIT c.41%/42% lower
Stock Details
than SFC/consensus expectation. While impact of weak petrochemical product prices
Closing price*
(polyethylene/polypropylene -17%/-22% qoq tracking decline in crude prices) were already factored in our estimates, such a big miss seems to have come from higher than expected losses at its new projects (SAMCO/SAPCO, Sahara also recorded surprise losses in 1Q15),
SAR
25.2
SAR mn
16,857
Mn
669
52-Week High
SAR
40.1
52-Week Low
SAR
21.6
Market capitalization Shares outstanding
weaker than expected performance in its titanium dioxide business and losses from foreign
Price chg. (3 months)
exchange hedges and derivative contracts.
EPS 2015E
Profits from new projects could be elusive in 2015: In the petrochemical segment,
Ticker (Reuters/ Bloomberg)
Tasnee has 5 key assets: Saudi Polyolefin (c.75% stake), SEPC (c.45% stake), SAMCO/SAPCO (c.39% stake) and Saudi Butanol (c.17% stake). Of these, while Saudi Polyolefin and SEPC are old and mature (produce ethylene, polyethylene, propylene, and
%
-1.3
SAR
1.64
2060.SE
NIC AB
*Price as of April 20, 2015 Key Shareholding (%)
polypropylene), bulk of the volume growth is likely to originate from new projects such as
Public+Others
SAMCO, SAPCO and Saudi Butanol which are already operational (except Saudi Butanol)
Kingdom Holding Co.
6.2
since July 2014. While we are reasonably confident of volume growth from new projects,
GOSI
8.7
Sahara’s management commentary (SAMCO/SAPCO are J/Vs with Sahara) following 1Q15
GIC Investment Co.
6.5
earnings suggests new projects could take 1-2 years to reach a steady state meaning in the
Source: Tadawul
78.6
current depressed pricing environment, they are likely generate losses in 2015.. We see downside risks to earnings estimates; Maintain Hold: Ytd, Tasnee (c.-9%)
Key Ratios 2015E
2016E
P/E (x)
15.4
11.7
trades at 2015E P/E of 15.4x (Tadawul Petchem 17.6x, EM 15.1x, global 16.2x) and 2016E
EV/EBITDA (x)
10.4
9.0
P/E of 11.7x (Tadawul Petchem 13.0x, EM c.12.6x, Global 13.0x) on our current estimates.
Dividend yield (%)
4.0
5.0
While we await full financials to update our earnings forecasts, in an environment of potential
Source: Company, Saudi Fransi Capital analysis
underperformed Tadawul Petchem (c.+10%) and Tadawul (c.+14%) and the stock currently
losses from new projects coupled with weaker than earlier expected performance in titanium dioxide business, we see considerable downside risks to our and consensus earnings
Stock price movement vs. TASI
estimates meaning the valuation discount vs. peers is only optically appealing. All in all, post
Na
Gross Profit
707
780
-9%
Na
Na
765
-8%
1,300
-46%
EBIT
233
397
-41%
399
-42%
390
-40%
830
-72%
-333
151
-321%
136
-344%
98
Nm
321
-204%
Tasnee
Net Profit
Source: Company, Saudi Fransi Capital analysis, * Bloomberg consensus
Jan-15
4,414
Mar-15
Na
Oct-14
3,676
Dec-14
Na
Jul-14
3,637
Sep-14
Na
Jun-14
3,828
Apr-14
Na
Revenues
Jan-14
%yoy
Feb-14
1Q14
Oct-13
%qoq
Nov-13
4Q14
Jul-13
%dev
Aug-13
Cons*
Apr-13
%diff
May-13
1Q15E
Jan-13
1Q15A
SAR mn
170 160 150 140 130 120 110 100 90 80 70
Feb-13
publication of 1Q15 results we maintain our Hold rating on the stock.
Tadawul Petrochem
Source: Tadawul
Sector Coverage Dipanjan Ray [email protected] +966-11-2826861 AbdulAziz Jawdat [email protected] +966-11-2826856 CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
Recommendation Framework BUY: The analyst recommends a BUY when our fair value estimate is at least 10% higher than the current share price. HOLD: The analyst recommends a HOLD when our fair value estimate ranges within ±10% of the current share price. SELL: The analyst recommends a SELL when our fair value estimate is lower by more than 10% from the current share price.
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
Contacts RESEARCH & ADVISORY DEPARTMENT [email protected]
SAUDI FRANSI CAPITAL Call Centre 800-125-9999 Website www.sfc.sa
SAUDI FRANSI CAPITAL LLC C.R. 1010231217, PO Box 23454, Riyadh 11426, Saudi Arabia, Head Office Riyadh
Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
National Industrialization Co. (Tasnee) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 20, 2015
Disclaimer This report is prepared by Saudi Fransi Capital (“SFC”), a fully-fledged investment firm providing investment banking, asset management, securities brokerage, research, and custody services. SFC, and its affiliate, might conduct business relationships with the company that is subject of this report and/ or own its security. This report is based on current public information that we consider reliable, but we do not represent it is accurate or compl ete, and it should not be relied on as such. 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 report. This report is intended for general information purposes only, and may not be reproduced or redistributed to any other person. This report is not intended as an offer or solicitation with respect to the purchase or sale of any security. This report is not intended to take into account any investment suitability needs of the recipient. In particular, this report is not customized to the specific investment objectives, financial situation, risk appetite or other needs of any person who may receive this report. SFC 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 report take into account both risk and expected return. To the maximum extent permitted by applicable law and regulation, SFC shall not be liable for any loss that may arise from the use of this report or its contents or otherwise arising in connection therewith. Any financial projections, fair value estimates and statements regarding future prospects contained in this report may not be realized. All opinions and estimates included in this report constitute SFC’s judgment as of the date of production of this report, 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 what 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 report may be reproduced without the written permission of SFC. Neither this report 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 report should make themselves aware of, and adhere to, any such restrictions. By accepting this report, the recipient agrees to be bound by the foregoing limitations.
Saudi Fransi Capital LLC; C.R. 1010231217, P.O Box 23454, Riyadh 11426, Saudi Arabia, Head Office – Riyadh. Authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
CONFIDENTIAL
Refer to important terms of use, disclaimers and disclosures on back page
Saudi Fransi Capital is authorized and regulated by the Capital Market Authority (CMA) License No. (11153-37)
