Earnings miss SFC and consensus estimates; Maintain Buy
`
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 2015
1Q15 review: Earnings miss SFC and consensus estimates; Maintain Buy
Rating Summary
1Q15 net profit misses SFC/consensus estimates: Yansab reported 1Q15 preliminary
Recommendation
Buy
Target price (SAR)
57.0
Upside/ (downside)
24%
headline net profit of SAR285m (-54% qoq, -49% yoy) which is c.29%/30% lower than SFC/consensus. Operational performance was also weaker than expected with gross
Stock Details
profit/EBIT c.25%/26% lower than our forecasts. While no further details are divulged, all
Closing price*
else equal and especially when the quarter did not witness any plant shutdown, we believe the miss to have primarily originated from lower than expected realized prices of key products. During the quarter, Asian prices of Yansab’s key products such as polyethylene/
SAR
46.0
SAR mn
25,875
Mn
563
52-Week High
SAR
77.5
52-Week Low
SAR
40.2
%
12.9
Market capitalization Shares outstanding
polypropylene/MEG decreased at least c.17%/22%/5% qoq.
Price chg. (3 months)
Reward vs. risk seems favourable; attractive dividend yield of c.6.5%; maintain Buy: In
EPS 2015E
the previous 3 months, Yansab (c.13%) outperformed Tadawul Petchem (c.5%) and Tadawul
Ticker (Reuters/ Bloomberg)
(c.7%). While we expect depressed earnings in 2015 from plant shutdowns (already announced in Dec 2014) and from lower product prices, we believe potential negatives are largely priced in and reward vs. risk seems to be favourable. On our 2015 numbers, while
SAR
2.39
2290.SE
YANSAB AB
*Price as of April 13, 2015 Key Shareholding (%)
Yansab is trading at 19.2x P/E (Tadawul Petchem 16.3x, EM 15.7x, global 15.9x) due to
Public
37.1%
depressed earnings from plant shutdown, we consider 2016E earnings to be reflective of a
SABIC
51.0%
normalized environment and believe 2016E multiple to be a more relevant metric for
GOSI
11.9%
comparison. On our 2016E estimates, Yansab trades at an undemanding 12.5x P/E
Source: Tadawul
(Tadawul Petchem 12.3x, EM c.12.9x, Global 13.3x). Furthermore, a key positive for Yansab is the attractive dividend yield. Even if we assume Yansab to maintain DPS of SAR3.0 in
Key Ratios
nd
2015E
2016E
P/E (x)
19.2
12.5
EV/EBITDA (x)
10.3
8.1
6.5
7.6
2015, it translates into an attractive yield of c.6.5%, 2 highest in the sector after Advanced. Current low level of oil price seems unsustainable for high cost producers: Brent crude price has fallen c.50% from peak and KSA petchem index has corrected by c.35%. While oil price could continue to remain volatile in the near term leading to volatility in petchem stocks,
Dividend yield (%)
Source: Company, Saudi Fransi Capital analysis
in the mid-term, such low level of oil price seems unsustainable for high cost producers (e.g.
1,953
Na
1,840
Na
2,290
Na
2,318
Na
7,184
8,302
413
550
-25%
Na
Na
773
-47%
708
-42%
1,814
2,552
EBITDA (est)**
Na
780
Na
Na
Na
966
Na
969
Na
2,734
3,472
EBITDA Margin
Na
40%
38%
42%
EBIT
364
490
-26%
Na
Na
712
-49%
645
-44%
1,574
2,312
Net Profit
285
400
-29%
407
-30%
618
-54%
556
-49%
1,346
2,074
Gross Profit
Na
42%
42%
Source: Company, Saudi Fransi Capital, * Bloomberg consensus, **estimated from available disclosure
Yansab
Jan-15
Na
Revenues
Mar-15
2016E
Oct-14
2015E
Dec-14
% yoy
Jul-14
1Q14
Sep-14
% qoq
Jun-14
4Q14
Apr-14
% dev
Jan-14
Cons*
Feb-14
% diff
Oct-13
1Q15E
Nov-13
1Q15A
SAR mn
Jul-13
meaning the sector could rerate once oil price volatility subsides.
Aug-13
value coupled with attractive dividend yields (2015E c.5.4% for our Buy rated stocks)
170 160 150 140 130 120 110 100 90 80 70
Apr-13
this backdrop, correction in petchem stocks seems overdone and they seem to offer good
May-13
Bloomberg New Energy Finance) and a rebound in oil price to a higher level seems likely. In
Stock price movement vs. TASI
Jan-13
USD65/bbl and 38 out of 39 are unprofitable at crude price less than USD50/ bbl, Source:
Feb-13
30 out of 39 key US shale basins are potentially unprofitable at crude price less than
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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 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 c ompany 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 stat ements 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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 2015
1Q15 review: Earnings miss SFC and consensus estimates; Maintain Buy
Rating Summary
1Q15 net profit misses SFC/consensus estimates: Yansab reported 1Q15 preliminary
Recommendation
Buy
Target price (SAR)
57.0
Upside/ (downside)
24%
headline net profit of SAR285m (-54% qoq, -49% yoy) which is c.29%/30% lower than SFC/consensus. Operational performance was also weaker than expected with gross
Stock Details
profit/EBIT c.25%/26% lower than our forecasts. While no further details are divulged, all
Closing price*
else equal and especially when the quarter did not witness any plant shutdown, we believe the miss to have primarily originated from lower than expected realized prices of key products. During the quarter, Asian prices of Yansab’s key products such as polyethylene/
SAR
46.0
SAR mn
25,875
Mn
563
52-Week High
SAR
77.5
52-Week Low
SAR
40.2
%
12.9
Market capitalization Shares outstanding
polypropylene/MEG decreased at least c.17%/22%/5% qoq.
Price chg. (3 months)
Reward vs. risk seems favourable; attractive dividend yield of c.6.5%; maintain Buy: In
EPS 2015E
the previous 3 months, Yansab (c.13%) outperformed Tadawul Petchem (c.5%) and Tadawul
Ticker (Reuters/ Bloomberg)
(c.7%). While we expect depressed earnings in 2015 from plant shutdowns (already announced in Dec 2014) and from lower product prices, we believe potential negatives are largely priced in and reward vs. risk seems to be favourable. On our 2015 numbers, while
SAR
2.39
2290.SE
YANSAB AB
*Price as of April 13, 2015 Key Shareholding (%)
Yansab is trading at 19.2x P/E (Tadawul Petchem 16.3x, EM 15.7x, global 15.9x) due to
Public
37.1%
depressed earnings from plant shutdown, we consider 2016E earnings to be reflective of a
SABIC
51.0%
normalized environment and believe 2016E multiple to be a more relevant metric for
GOSI
11.9%
comparison. On our 2016E estimates, Yansab trades at an undemanding 12.5x P/E
Source: Tadawul
(Tadawul Petchem 12.3x, EM c.12.9x, Global 13.3x). Furthermore, a key positive for Yansab is the attractive dividend yield. Even if we assume Yansab to maintain DPS of SAR3.0 in
Key Ratios
nd
2015E
2016E
P/E (x)
19.2
12.5
EV/EBITDA (x)
10.3
8.1
6.5
7.6
2015, it translates into an attractive yield of c.6.5%, 2 highest in the sector after Advanced. Current low level of oil price seems unsustainable for high cost producers: Brent crude price has fallen c.50% from peak and KSA petchem index has corrected by c.35%. While oil price could continue to remain volatile in the near term leading to volatility in petchem stocks,
Dividend yield (%)
Source: Company, Saudi Fransi Capital analysis
in the mid-term, such low level of oil price seems unsustainable for high cost producers (e.g.
1,953
Na
1,840
Na
2,290
Na
2,318
Na
7,184
8,302
413
550
-25%
Na
Na
773
-47%
708
-42%
1,814
2,552
EBITDA (est)**
Na
780
Na
Na
Na
966
Na
969
Na
2,734
3,472
EBITDA Margin
Na
40%
38%
42%
EBIT
364
490
-26%
Na
Na
712
-49%
645
-44%
1,574
2,312
Net Profit
285
400
-29%
407
-30%
618
-54%
556
-49%
1,346
2,074
Gross Profit
Na
42%
42%
Source: Company, Saudi Fransi Capital, * Bloomberg consensus, **estimated from available disclosure
Yansab
Jan-15
Na
Revenues
Mar-15
2016E
Oct-14
2015E
Dec-14
% yoy
Jul-14
1Q14
Sep-14
% qoq
Jun-14
4Q14
Apr-14
% dev
Jan-14
Cons*
Feb-14
% diff
Oct-13
1Q15E
Nov-13
1Q15A
SAR mn
Jul-13
meaning the sector could rerate once oil price volatility subsides.
Aug-13
value coupled with attractive dividend yields (2015E c.5.4% for our Buy rated stocks)
170 160 150 140 130 120 110 100 90 80 70
Apr-13
this backdrop, correction in petchem stocks seems overdone and they seem to offer good
May-13
Bloomberg New Energy Finance) and a rebound in oil price to a higher level seems likely. In
Stock price movement vs. TASI
Jan-13
USD65/bbl and 38 out of 39 are unprofitable at crude price less than USD50/ bbl, Source:
Feb-13
30 out of 39 key US shale basins are potentially unprofitable at crude price less than
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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 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)
Yanbu National Petrochemical Co. (YANSAB) KSA Petrochemical Sector | 1Q 2015 Preliminary Results | April 14, 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 c ompany 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 stat ements 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)
