Forecasts Update Report - Aljazira Capital
Forecasts Update Report Petrochemical sector - Q3 2015 forecasts
September 2015
Please read Disclaimer on the back
Negative outlook in the near term; Q3-2015 earnings to remain under pressure We believe the sector’s profitability will remain under pressure; mainly due to fall in crude prices that already impacted Petchem prices, with prices for all petrochemicals expected to decline on YoY basis, except DAP-Fertilizers, which is expected to witness a marginal 1.3% YoY rise in prices. We expect Naphtha to be the biggest loser, with prices declining 49.1% YoY, followed by Benzene (down 48.3% YoY) and Propylene (down 41.1% YoY). However, on QoQ basis, Naphtha is expected to decline 17.2%. Ethylene is anticipated to be the biggest loser in 3Q2015, declining 28.9% QoQ. Lower feedstock prices (Naphtha) has already affected prices of petrochemical intermediates and final products. However, decline in Polymer prices is expected to be lower than that in feedstock prices, which is expected to quietly benefit Polymer margins. Sequentially, fertilizer feedstock and product prices remained resilient without any material change. Styrene prices are expected to decline 19.2% QoQ; however, polystyrene prices are expected to decline only 11.5% QoQ, thus benefitting margins. Overall, margin expansion across petrochemicals is expected to benefit some Petchem manufacturers during 3Q2015. Petrochemical price performance Q3-2015 Crude prices (Brent) have remained at about USD 50/bbl in 2015 (until date) and there appears to be no near-term catalyst for the prices to rise. Furthermore, due to sustained production of shale oil in the US, crude prices are expected to remain under pressure in the near term, except for any sudden OPEC decision or shutdown in US oil shale production. Led by favorable oil prices over 2010 to mid-2014, oil production from shale assets surged significantly. However, fall in oil prices led to the overall US rig count declining from 1,609 in October 2014 to 848 on September 11, 2015. In addition to demand dynamics for oil, owing to the increase in OPEC production and shale oil production in the US, we further lower our expectation for average oil price from USD 65.0/bbl and USD 72.0/bbl for FY2015 and FY2016 to USD 54.2/bbl and USD 62.1/ bbl, respectively.
Naphtha Ethylene Propylene MTBE Benzene Styrene Methanol-China HDPE-Aisa LDPE-Asia LLDPE-Aisa PP-Asia PP - Gulf MEG (SABIC) MEG (Asia) PTA-Asia Ammonia-Gulf Urea-Gulf DAP-Fertilizer Acetic Acid-AA Vinyl Acetate Monomer-VAM TiO2 Polystyrene-Asia
USD Per Tonne
QoQ
YoY
465.3 964.7 782.4 706.8 674.1 1,067.0 262.8 1,212.3 1,233.4 1,183.4 1,075.9 1,051.3 1,005.3 775.1 606.7 398.5 280.1 480.0 432.4 931.8 2,660.5 1254.58
-17.2% -28.9% -19.7% -8.8% -16.2% -19.2% -17.7% -9.7% -11.7% -10.3% -15.2% -14.9% -4.5% -17.4% -14.3% -0.3% -2.1% 0.0% -6.6% -6.6% -3.0% -11.5%
-49.08% -34.10% -41.08% -32.23% -48.30% -31.41% -24.81% -24.61% -23.08% -24.35% -30.15% -29.47% -11.86% -20.51% -38.45% -20.39% -15.91% 1.34% -27.00% -31.98% -16.86% -25.74%
Source: ICIS, AlJazira Capital Research
Slowing Chinese economy to reduce the speed of petrochemicals prices recovery
Lower oil prices and feedstock prices have pulled down the petrochemical products prices in the last one year, adding to the negative sentiment in the market. The spot prices dropped immediately after the decline in oil prices in 2H2014 and then in August 2015. The decline in August was primarily due to concerns over economic growth in China and devaluation of Yuan. The Chinese authorities allowed the Yuan to depreciate twice in August 2015, thereby rendering the imports costlier for China and dragging the petrochemicals prices down. Although data shows that China is importing higher quantities of crude oil to take strategic advantage of the lower oil prices, China’s industrial production is increasing at a slower rate than its historical growth rates. Furthermore, the Manufacturing Purchasing Managers’ Index (PMI) dropped below 50.0 to 49.7 in August 2015, indicating a contraction. Hence, we believe that the imports of petrochemicals by China may also decline. This is reassured by the fact that China’s Polyethylene imports declined 12.3% YoY in July 2015, while Polypropylene, PVC, Urea, and Styrene imports declined 23.6% YoY, 14.7% YoY, 3.9% YoY, and 38.2% YoY, respectively. Analyst
Jassim Al-Jubran +966 11 2256248 [email protected]
1
© All rights reserved
Forecasts Update Report Petrochemical sector - Q3 2015 forecasts
September 2015
Please read Disclaimer on the back
Petrochemical price trends
Ethylene-Asia
1,620
1,550
1,420
1,350
1,220
1,150
1,020
950
820
750
620 Aug-13
550 Aug-13
Aug-14
Aug-15
Ammonia-Gulf
650
410 390 370 350 330 310 290
600 550 500 450 400
270 250 230 Aug-13
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
350
3,600
DAP-Gulf
510 490
3,400
470 450
Propylene-Asia
Aug-14
Aug-15
Urea-Gulf
Aug-14
Aug-15
Weighted average TiO2 prices
3,200
430 3,000
410 390
2,800 Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
370 2,600 Aug-13
Aug-14
Aug-15
Source: ICIS, AlJazira Capital Research
With concerns about the Chinese growth story and global economic scenario, we expect the petrochemical products prices to decline further this quarter. The Olefins, Ethylene and Propylene, are expected to decline 29.2% QoQ and 18.7% QoQ, respectively, by the end of 3Q2015. The fertilizers will witness a marginal decline, with Ammonia-Gulf and Urea-Gulf prices declining 0.3% QoQ and 1.3% QoQ, respectively, and DAP prices remaining stable.
2
© All rights reserved
Forecasts Update Report Petrochemical sector - Q3 2015 forecasts
September 2015
Please read Disclaimer on the back
Key valuation methodology (After adjustments): 12-month price targets of all petrochemical companies under our coverage are adjusted with our amended valuation methodology. Our adjustment is to reduce the sensitivity of our valuation to terminal value. The key amendments in our valuation methodology are given below; • Upward revision in the company’s risk free rate to 3.32% from 2.84% (due to increase in US 10-year bond yield to 2.175%); where, the impact of such revision on valuation is minimal due to CAPM equation. • Terminal growth rate is taken at 2.8% from 3.0%. • KSA total market risk premium is taken at 13.8% (Bloomberg) from 12.09%.
Q3-2015 earnings estimates - Petrochemical Sector Company code
Company name
New12Forecasted Forecasted – Forecasted – Forecasted – Forecasted Prospective month – Net profits EPS Q3-2015 QoQ growth YoY growth EPS – 2015 PE – 2015 price target Q3-2015(mn)
Rating*
2010
SABIC
3,952.8
1.32
-35.9%
-36.0%
6.33
12.4x
100.3
Overweight
2020
YANSAB
333.4
0.59
46.6%
-51.8%
2.27
19.1x
48.3
Overweight
2290
SAFCO
667.8
1.60
12.1%
-26.9%
6.32
15.2x
108.5
Overweight
2310
Sipchem
137.9
0.38
25.3%
-14.1%
1.28
15.7x
25.4
Overweight
2330
Advanced
183.9
1.12
-24.3%
-19.5%
4.21
10.7x
57.5
Overweight
2060
TASNEE
38.8
0.06
-
-84.1%
(0.29)
NM
20.8
Overweight
2350
KAYAN
(58.4)
(0.04)
-335.1%
-
(0.45)
NM
12.8
Overweight
2260
SAHARA
42.0
0.10
268.0%
145.5%
0.11
108.1x
15.2
Overweight
2002
Petrochem
188.7
0.39
-38.2%
-22.7%
1.63
12.2x
24.5
Overweight
.Source: Aljazira Capital * Our ratings are based on the closing prices of 14/9/2015 NM: not meaningful
Risk of ethylene oversupply The global ethylene market is currently under pressure due to lower demand. Moreover, the US shale gas production has now provided competitive advantage to the US ethylene producers. US announced 14 new projects during the last few years, which would add 10.1mn tons per year of ethylene supply over the next 3–4 years. With this addition and expansions, the capacity of the petrochemicals sector in the US is expected to double over the next decade. This may lead to oversupply of ethylene, weighing down its selling prices. With increased production of ethylene, US chemical companies may take over the market to which conventionally GCC players catered. Chinese chemical companies are also engineering a transformation, with companies considering coal-based liquid production. To counter this threat, Saudi Arabia is considering capacity and product portfolio expansion. Currently, about 26 petrochemical projects worth USD 15bn are under construction in Saudi Arabia and projects worth USD 46bn are in the planning stage.
3
© All rights reserved
RESEARCH DIVISION
AGM - Head of Research
Abdullah Alawi +966 11 2256250 [email protected]
Analyst
Sultan Al Kadi
+966 11 2256115 [email protected]
+966 11 2256374 [email protected]
General manager - brokerage services and sales
AGM-Head of international and institutional
AGM- Head of Western and Southern Region Investment Centers & ADC
Ala’a Al-Yousef
brokerage
Brokerage
+966 11 2256000 [email protected]
Luay Jawad Al-Motawa
Abdullah Q. Al-Misbani
+966 11 2256277 [email protected]
+966 12 6618400 [email protected]
AGM-Head of Sales And Investment Centers
AGM-Head of Qassim & Eastern Province
AGM - Head of Institutional Brokerage
Central Region
Abdullah Al-Rahit
Samer Al- Joauni
Sultan Ibrahim AL-Mutawa
+966 16 3617547 [email protected]
+966 1 225 6352 [email protected]
Jassim Al-Jubran +966 11 2256248 [email protected]
BROKERAGE AND INVESTMENT CENTERS DIVISION RESEARCH DIVISION
Talha Nazar
Analyst
+966 11 2256364 [email protected]
AlJazira Capital, the investment arm of Bank AlJazira, is a Shariaa Compliant Saudi Closed Joint Stock company and operating under the regulatory supervision of the Capital Market Authority. AlJazira Capital is licensed to conduct securities business in all securities business as authorized by CMA, including dealing, managing, arranging, advisory, and custody. AlJazira Capital is the continuation of a long success story in the Saudi Tadawul market, having occupied the market leadership position for several years. With an objective to maintain its market leadership position, AlJazira Capital is expanding its brokerage capabilities to offer further value-added services, brokerage across MENA and International markets, as well as offering a full suite of securities business. 1.
RATING TERMINOLOGY
Senior Analyst
2. 3. 4.
Overweight: This rating implies that the stock is currently trading at a discount to its 12 months price target. Stocks rated “Overweight” will typically provide an upside potential of over 10% from the current price levels over next twelve months. Underweight: This rating implies that the stock is currently trading at a premium to its 12 months price target. Stocks rated “Underweight” would typically decline by over 10% from the current price levels over next twelve months. Neutral: The rating implies that the stock is trading in the proximate range of its 12 months price target. Stocks rated “Neutral” is expected to stagnate within +/- 10% range from the current price levels over next twelve months. Suspension of rating or rating on hold (SR/RH): This basically implies suspension of a rating pending further analysis of a material change in the fundamentals of the company.
Disclaimer The purpose of producing this report is to present a general view on the company/economic sector/economic subject under research, and not to recommend a buy/sell/hold for any security or any other assets. Based on that, this report does not take into consideration the specific financial position of every investor and/or his/her risk appetite in relation to investing in the security or any other assets, and hence, may not be suitable for all clients depending on their financial position and their ability and willingness to undertake risks. It is advised that every potential investor seek professional advice from several sources concerning investment decision and should study the impact of such decisions on his/her financial/legal/tax position and other concerns before getting into such investments or liquidate them partially or fully. The market of stocks, bonds, macroeconomic or microeconomic variables are of a volatile nature and could witness sudden changes without any prior warning, therefore, the investor in securities or other assets might face some unexpected risks and fluctuations. All the information, views and expectations and fair values or target prices contained in this report have been compiled or arrived at by Aljazira Capital from sources believed to be reliable, but Aljazira Capital has not independently verified the contents obtained from these sources 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 report. Aljazira Capital shall not be liable for any loss as that may arise from the use of this report or its contents or otherwise arising in connection therewith. The past performance of any investment is not an indicator of future performance. Any financial projections, fair value estimates or price targets and statements regarding future prospects contained in this document may not be realized. The value of the security or any other assets or the return from them might increase or decrease. Any change in currency rates may have a positive or negative impact on the value/return on the stock or securities mentioned in the report. The investor might get an amount less than the amount invested in some cases. Some stocks or securities maybe, by nature, of low volume/trades or may become like that unexpectedly in special circumstances and this might increase the risk on the investor. Some fees might be levied on some investments in securities. This report has been written by professional employees in Aljazira Capital, and they undertake that neither them, nor their wives or children hold positions directly in any listed shares or securities contained in this report during the time of publication of this report, however, The authors and/or their wives/children 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. This report has been produced independently and separately by the Research Division at Aljazira Capital and no party (in-house or outside) who might have interest whether direct or indirect have seen the contents of this report before its publishing, except for those whom corporate positions allow them to do so, and/or third-party persons/institutions who signed a non-disclosure agreement with Aljazira Capital. Funds managed by Aljazira Capital and its subsidiaries for third parties may own the securities that are the subject of this document. Aljazira Capital or its subsidiaries may own securities in one or more of the aforementioned companies, and/or indirectly through funds managed by third parties. The Investment Banking division of Aljazira Capital maybe in the process of soliciting or executing fee earning mandates for companies that is either the subject of this document or is mentioned in this document. One or more of Aljazira Capital board members or executive managers could be also a board member or member of the executive management at the company or companies mentioned in this report, or their associated companies. No part of this report may be reproduced whether inside or outside the Kingdom of Saudi Arabia without the written permission of Aljazira Capital. 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.
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Aljazira Capital is a Saudi Investment Company licensed by the Capital Market Authority (CMA), license No. 07076-37
September 2015
Please read Disclaimer on the back
Negative outlook in the near term; Q3-2015 earnings to remain under pressure We believe the sector’s profitability will remain under pressure; mainly due to fall in crude prices that already impacted Petchem prices, with prices for all petrochemicals expected to decline on YoY basis, except DAP-Fertilizers, which is expected to witness a marginal 1.3% YoY rise in prices. We expect Naphtha to be the biggest loser, with prices declining 49.1% YoY, followed by Benzene (down 48.3% YoY) and Propylene (down 41.1% YoY). However, on QoQ basis, Naphtha is expected to decline 17.2%. Ethylene is anticipated to be the biggest loser in 3Q2015, declining 28.9% QoQ. Lower feedstock prices (Naphtha) has already affected prices of petrochemical intermediates and final products. However, decline in Polymer prices is expected to be lower than that in feedstock prices, which is expected to quietly benefit Polymer margins. Sequentially, fertilizer feedstock and product prices remained resilient without any material change. Styrene prices are expected to decline 19.2% QoQ; however, polystyrene prices are expected to decline only 11.5% QoQ, thus benefitting margins. Overall, margin expansion across petrochemicals is expected to benefit some Petchem manufacturers during 3Q2015. Petrochemical price performance Q3-2015 Crude prices (Brent) have remained at about USD 50/bbl in 2015 (until date) and there appears to be no near-term catalyst for the prices to rise. Furthermore, due to sustained production of shale oil in the US, crude prices are expected to remain under pressure in the near term, except for any sudden OPEC decision or shutdown in US oil shale production. Led by favorable oil prices over 2010 to mid-2014, oil production from shale assets surged significantly. However, fall in oil prices led to the overall US rig count declining from 1,609 in October 2014 to 848 on September 11, 2015. In addition to demand dynamics for oil, owing to the increase in OPEC production and shale oil production in the US, we further lower our expectation for average oil price from USD 65.0/bbl and USD 72.0/bbl for FY2015 and FY2016 to USD 54.2/bbl and USD 62.1/ bbl, respectively.
Naphtha Ethylene Propylene MTBE Benzene Styrene Methanol-China HDPE-Aisa LDPE-Asia LLDPE-Aisa PP-Asia PP - Gulf MEG (SABIC) MEG (Asia) PTA-Asia Ammonia-Gulf Urea-Gulf DAP-Fertilizer Acetic Acid-AA Vinyl Acetate Monomer-VAM TiO2 Polystyrene-Asia
USD Per Tonne
QoQ
YoY
465.3 964.7 782.4 706.8 674.1 1,067.0 262.8 1,212.3 1,233.4 1,183.4 1,075.9 1,051.3 1,005.3 775.1 606.7 398.5 280.1 480.0 432.4 931.8 2,660.5 1254.58
-17.2% -28.9% -19.7% -8.8% -16.2% -19.2% -17.7% -9.7% -11.7% -10.3% -15.2% -14.9% -4.5% -17.4% -14.3% -0.3% -2.1% 0.0% -6.6% -6.6% -3.0% -11.5%
-49.08% -34.10% -41.08% -32.23% -48.30% -31.41% -24.81% -24.61% -23.08% -24.35% -30.15% -29.47% -11.86% -20.51% -38.45% -20.39% -15.91% 1.34% -27.00% -31.98% -16.86% -25.74%
Source: ICIS, AlJazira Capital Research
Slowing Chinese economy to reduce the speed of petrochemicals prices recovery
Lower oil prices and feedstock prices have pulled down the petrochemical products prices in the last one year, adding to the negative sentiment in the market. The spot prices dropped immediately after the decline in oil prices in 2H2014 and then in August 2015. The decline in August was primarily due to concerns over economic growth in China and devaluation of Yuan. The Chinese authorities allowed the Yuan to depreciate twice in August 2015, thereby rendering the imports costlier for China and dragging the petrochemicals prices down. Although data shows that China is importing higher quantities of crude oil to take strategic advantage of the lower oil prices, China’s industrial production is increasing at a slower rate than its historical growth rates. Furthermore, the Manufacturing Purchasing Managers’ Index (PMI) dropped below 50.0 to 49.7 in August 2015, indicating a contraction. Hence, we believe that the imports of petrochemicals by China may also decline. This is reassured by the fact that China’s Polyethylene imports declined 12.3% YoY in July 2015, while Polypropylene, PVC, Urea, and Styrene imports declined 23.6% YoY, 14.7% YoY, 3.9% YoY, and 38.2% YoY, respectively. Analyst
Jassim Al-Jubran +966 11 2256248 [email protected]
1
© All rights reserved
Forecasts Update Report Petrochemical sector - Q3 2015 forecasts
September 2015
Please read Disclaimer on the back
Petrochemical price trends
Ethylene-Asia
1,620
1,550
1,420
1,350
1,220
1,150
1,020
950
820
750
620 Aug-13
550 Aug-13
Aug-14
Aug-15
Ammonia-Gulf
650
410 390 370 350 330 310 290
600 550 500 450 400
270 250 230 Aug-13
Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
350
3,600
DAP-Gulf
510 490
3,400
470 450
Propylene-Asia
Aug-14
Aug-15
Urea-Gulf
Aug-14
Aug-15
Weighted average TiO2 prices
3,200
430 3,000
410 390
2,800 Aug-15
May-15
Feb-15
Nov-14
Aug-14
May-14
Feb-14
Nov-13
Aug-13
370 2,600 Aug-13
Aug-14
Aug-15
Source: ICIS, AlJazira Capital Research
With concerns about the Chinese growth story and global economic scenario, we expect the petrochemical products prices to decline further this quarter. The Olefins, Ethylene and Propylene, are expected to decline 29.2% QoQ and 18.7% QoQ, respectively, by the end of 3Q2015. The fertilizers will witness a marginal decline, with Ammonia-Gulf and Urea-Gulf prices declining 0.3% QoQ and 1.3% QoQ, respectively, and DAP prices remaining stable.
2
© All rights reserved
Forecasts Update Report Petrochemical sector - Q3 2015 forecasts
September 2015
Please read Disclaimer on the back
Key valuation methodology (After adjustments): 12-month price targets of all petrochemical companies under our coverage are adjusted with our amended valuation methodology. Our adjustment is to reduce the sensitivity of our valuation to terminal value. The key amendments in our valuation methodology are given below; • Upward revision in the company’s risk free rate to 3.32% from 2.84% (due to increase in US 10-year bond yield to 2.175%); where, the impact of such revision on valuation is minimal due to CAPM equation. • Terminal growth rate is taken at 2.8% from 3.0%. • KSA total market risk premium is taken at 13.8% (Bloomberg) from 12.09%.
Q3-2015 earnings estimates - Petrochemical Sector Company code
Company name
New12Forecasted Forecasted – Forecasted – Forecasted – Forecasted Prospective month – Net profits EPS Q3-2015 QoQ growth YoY growth EPS – 2015 PE – 2015 price target Q3-2015(mn)
Rating*
2010
SABIC
3,952.8
1.32
-35.9%
-36.0%
6.33
12.4x
100.3
Overweight
2020
YANSAB
333.4
0.59
46.6%
-51.8%
2.27
19.1x
48.3
Overweight
2290
SAFCO
667.8
1.60
12.1%
-26.9%
6.32
15.2x
108.5
Overweight
2310
Sipchem
137.9
0.38
25.3%
-14.1%
1.28
15.7x
25.4
Overweight
2330
Advanced
183.9
1.12
-24.3%
-19.5%
4.21
10.7x
57.5
Overweight
2060
TASNEE
38.8
0.06
-
-84.1%
(0.29)
NM
20.8
Overweight
2350
KAYAN
(58.4)
(0.04)
-335.1%
-
(0.45)
NM
12.8
Overweight
2260
SAHARA
42.0
0.10
268.0%
145.5%
0.11
108.1x
15.2
Overweight
2002
Petrochem
188.7
0.39
-38.2%
-22.7%
1.63
12.2x
24.5
Overweight
.Source: Aljazira Capital * Our ratings are based on the closing prices of 14/9/2015 NM: not meaningful
Risk of ethylene oversupply The global ethylene market is currently under pressure due to lower demand. Moreover, the US shale gas production has now provided competitive advantage to the US ethylene producers. US announced 14 new projects during the last few years, which would add 10.1mn tons per year of ethylene supply over the next 3–4 years. With this addition and expansions, the capacity of the petrochemicals sector in the US is expected to double over the next decade. This may lead to oversupply of ethylene, weighing down its selling prices. With increased production of ethylene, US chemical companies may take over the market to which conventionally GCC players catered. Chinese chemical companies are also engineering a transformation, with companies considering coal-based liquid production. To counter this threat, Saudi Arabia is considering capacity and product portfolio expansion. Currently, about 26 petrochemical projects worth USD 15bn are under construction in Saudi Arabia and projects worth USD 46bn are in the planning stage.
3
© All rights reserved
RESEARCH DIVISION
AGM - Head of Research
Abdullah Alawi +966 11 2256250 [email protected]
Analyst
Sultan Al Kadi
+966 11 2256115 [email protected]
+966 11 2256374 [email protected]
General manager - brokerage services and sales
AGM-Head of international and institutional
AGM- Head of Western and Southern Region Investment Centers & ADC
Ala’a Al-Yousef
brokerage
Brokerage
+966 11 2256000 [email protected]
Luay Jawad Al-Motawa
Abdullah Q. Al-Misbani
+966 11 2256277 [email protected]
+966 12 6618400 [email protected]
AGM-Head of Sales And Investment Centers
AGM-Head of Qassim & Eastern Province
AGM - Head of Institutional Brokerage
Central Region
Abdullah Al-Rahit
Samer Al- Joauni
Sultan Ibrahim AL-Mutawa
+966 16 3617547 [email protected]
+966 1 225 6352 [email protected]
Jassim Al-Jubran +966 11 2256248 [email protected]
BROKERAGE AND INVESTMENT CENTERS DIVISION RESEARCH DIVISION
Talha Nazar
Analyst
+966 11 2256364 [email protected]
AlJazira Capital, the investment arm of Bank AlJazira, is a Shariaa Compliant Saudi Closed Joint Stock company and operating under the regulatory supervision of the Capital Market Authority. AlJazira Capital is licensed to conduct securities business in all securities business as authorized by CMA, including dealing, managing, arranging, advisory, and custody. AlJazira Capital is the continuation of a long success story in the Saudi Tadawul market, having occupied the market leadership position for several years. With an objective to maintain its market leadership position, AlJazira Capital is expanding its brokerage capabilities to offer further value-added services, brokerage across MENA and International markets, as well as offering a full suite of securities business. 1.
RATING TERMINOLOGY
Senior Analyst
2. 3. 4.
Overweight: This rating implies that the stock is currently trading at a discount to its 12 months price target. Stocks rated “Overweight” will typically provide an upside potential of over 10% from the current price levels over next twelve months. Underweight: This rating implies that the stock is currently trading at a premium to its 12 months price target. Stocks rated “Underweight” would typically decline by over 10% from the current price levels over next twelve months. Neutral: The rating implies that the stock is trading in the proximate range of its 12 months price target. Stocks rated “Neutral” is expected to stagnate within +/- 10% range from the current price levels over next twelve months. Suspension of rating or rating on hold (SR/RH): This basically implies suspension of a rating pending further analysis of a material change in the fundamentals of the company.
Disclaimer The purpose of producing this report is to present a general view on the company/economic sector/economic subject under research, and not to recommend a buy/sell/hold for any security or any other assets. Based on that, this report does not take into consideration the specific financial position of every investor and/or his/her risk appetite in relation to investing in the security or any other assets, and hence, may not be suitable for all clients depending on their financial position and their ability and willingness to undertake risks. It is advised that every potential investor seek professional advice from several sources concerning investment decision and should study the impact of such decisions on his/her financial/legal/tax position and other concerns before getting into such investments or liquidate them partially or fully. The market of stocks, bonds, macroeconomic or microeconomic variables are of a volatile nature and could witness sudden changes without any prior warning, therefore, the investor in securities or other assets might face some unexpected risks and fluctuations. All the information, views and expectations and fair values or target prices contained in this report have been compiled or arrived at by Aljazira Capital from sources believed to be reliable, but Aljazira Capital has not independently verified the contents obtained from these sources 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 report. Aljazira Capital shall not be liable for any loss as that may arise from the use of this report or its contents or otherwise arising in connection therewith. The past performance of any investment is not an indicator of future performance. Any financial projections, fair value estimates or price targets and statements regarding future prospects contained in this document may not be realized. The value of the security or any other assets or the return from them might increase or decrease. Any change in currency rates may have a positive or negative impact on the value/return on the stock or securities mentioned in the report. The investor might get an amount less than the amount invested in some cases. Some stocks or securities maybe, by nature, of low volume/trades or may become like that unexpectedly in special circumstances and this might increase the risk on the investor. Some fees might be levied on some investments in securities. This report has been written by professional employees in Aljazira Capital, and they undertake that neither them, nor their wives or children hold positions directly in any listed shares or securities contained in this report during the time of publication of this report, however, The authors and/or their wives/children 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. This report has been produced independently and separately by the Research Division at Aljazira Capital and no party (in-house or outside) who might have interest whether direct or indirect have seen the contents of this report before its publishing, except for those whom corporate positions allow them to do so, and/or third-party persons/institutions who signed a non-disclosure agreement with Aljazira Capital. Funds managed by Aljazira Capital and its subsidiaries for third parties may own the securities that are the subject of this document. Aljazira Capital or its subsidiaries may own securities in one or more of the aforementioned companies, and/or indirectly through funds managed by third parties. The Investment Banking division of Aljazira Capital maybe in the process of soliciting or executing fee earning mandates for companies that is either the subject of this document or is mentioned in this document. One or more of Aljazira Capital board members or executive managers could be also a board member or member of the executive management at the company or companies mentioned in this report, or their associated companies. No part of this report may be reproduced whether inside or outside the Kingdom of Saudi Arabia without the written permission of Aljazira Capital. 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.
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