Petro Rabigh 22 October 2015 PDF
Petro Rabigh 3Q2015 – First Look
Buy
12-month Target Price SAR 21
Look Beyond 2015
October 22, 2015
Expected Total Return Price as of Oct-21, 2015
SAR 16.00
Upside to Target Price
13.1 %
Expected Dividend Yield
1..%
Expected Total Return
13.3%
Market Data 52 Week H/L
SAR 31.60/14.65
Market Capitalization
SAR 14,016 mln
Enterprise Value
SAR 32,260 mln
Shares Outstanding
876.0 mln
Free Float
25.0%
12-Month ADTV (mln)
3.004
TASI Weight
0.82%
Reuters Code
2380.SE
Bloomberg Symbol
PETROR AB
1-Year Price Performance 120
Petro Rabigh (PR) plunged into a loss in the outgoing quarter contrary to market expectations. The stock ended yesterday at the lower price cap as a consequence. Sequentially lowest revenues and negative gross margins flowed down to a net loss of SAR (460) million as compared to our estimate of a SAR 265 million net profit. Lower crude prices and margin contraction in both refining and petrochemical segments have hurt. With an impending complete plant shutdown in 4Q, we are afraid that the second half would wipe out the profits accumulated in the first half. We now expect a net loss of SAR (166) million for the year versus a net profit previously. Our target price has also been slashed to SAR 21 from SAR 26. We urge investors to look beyond 2015 and recommend a Buy. Lowest revenues in 6 years Revenues have been beaten back to the lowest in six years at SAR 6.7 billion, down -55% Y/Y. While we understand Brent prices are also -50% lower Y/Y, key petrochemical prices have dropped close to -30% Y/Y. It would appear that management has opted to build up inventory in preparation of the major shutdown in 4Q. Petro Rabigh has itself estimated a gross profit impact of SAR 900 million, which may be optimistic. Negative gross margins Negative gross margins of (3.75)% clearly point towards negative margins accrued in the refining segment. We believe margins have been positive in the petrochemical segment despite lower prices. However, the sheer size of the refinery segment (approx. 75% of total sales) would have nullified profits from petrochemicals. Financial charges have further climbed to SAR 73 million versus SAR 66 million last year and SAR 67 million in 2Q. Major shutdown in 4Q After two unplanned shutdowns in 2Q, Petro Rabigh has commenced its major plant-wide shutdown in October, which is expected to last 50 days and hit gross profits to the tune of SAR 900 million, according to Company estimates. There have been no further developments on the SAR 7.04 billion rights issue that the Company announced, which makes us skeptical regarding the upcoming Petro Rabigh II project.
100 80 60 40 O
N
D
J
F M
Rabigh
A
M
J
J
TASI
A
S
O
TPCHEM
Source: Bloomberg RABIGH Oct-21-2015
16.00
TASI
TPCHEM
7,479
5,095
Target price down to SAR 21 A net loss of SAR (460) million was not anticipated and combined with an expected loss in 4Q would likely take full year also into the red close to SAR (166) million. We have rationalized our forecasts in view of revised price assumptions but still recommend a Buy albeit with a lower target of SAR 21 as compared to SAR 26 earlier. Key Financials
Total Change 6-months
(1313)% (9312)%
(9.13)%
FY December 31 (SAR mln)
2014A
2015E
2016E
2017E
1-Year
(3.14)% (9.1.)%
(1413)%
Revenue
54,237
28,744
33,176
34,689
2-Year
(3313)%
(931.)%
1,725
862
1,161
1,388
Net Profit
681
(166)
153
345
EPS (SAR)
0.78
(0.19)
0.18
0.39
(319)%
Gross Profit
3Q2015 SAR (mln)
Actual
RC Forecast
Gross Profit
(250)
511
Payout Ratio
-
Net Profit
(460)
265
ROAE
7%
EPS (SAR)
(0.53)
0.30
ROAA
2%
(1)%
Net Margin
1%
(1)%
1%
1%
DPS (SAR)
-
0.50
-
0.25
-
-
64%
(2)%
2%
4%
1%
1%
EV / Revenues
0.6x
1.1x
0.9x
0.8x
EV / EBITDA
10.2x
15.1x
12.5x
10.9x
6.2x
98.3x
79.5x
41.4x
20.6x
-
91.4x
40.7x
P / CFPS P/E
Muhammad Faisal Potrik [email protected] +966-11-203-6807
Yasser bin Ahmed [email protected] +966-11-203-6805
Riyad Capital is licensed by the Saudi Arabia Capital Market Authority (No. 07070-37)
Stock Rating
Strong Buy
Buy
Hold
Sell
Not Rated
Expected Total Return ≥ 25%
Expected Total Return ≥ 15%
Expected Total Return < 15%
Overvalued
Under Review/ Restricted
For any feedback on our reports, please contact [email protected]
Disclaimer The information in this report was compiled in good faith from various public sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable. Riyad Capital makes no representations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad Capital does not represent that the information in this report is complete or free from any error. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this report. Riyad Capital accepts no liability whatsoever for any loss arising from any use of this report or its contents, and neither Riyad Capital nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof. Riyad Capital or its employees or any of its affiliates or clients may have a financial interest in securities or other assets referred to in this report. Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment as at the date of this report only and are therefore subject to change without notice. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections which represent only one possible outcome. Further, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified and future actual results or events could differ materially. The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by changes. Past performance is not necessarily an indicative of future performance. Accordingly, investors may receive back less than originally invested amount. This report provides information of a general nature and does not address the circumstances, objectives, and risk tolerance of any particular investor. Therefore, it is not intended to provide personal investment advice and does not take into account the reader’s financial situation or any specific investment objectives or particular needs which the reader may have. Before making an investment decision the reader should seek advice from an independent financial, legal, tax and/or other required advisers due to the investment in such kind of securities may not be suitable for all recipients. This research report might not be reproduced, nor distributed in whole or in part, and all information, opinions, forecasts and projections contained in it are protected by the copyright rules and regulations.
Riyad Capital is a Saudi limited liability company, with commercial registration number (1010239234), licensed and organized by the Capital Market Authority under License No. (07070-37), and having its registered office at Al Takhassusi Street, Prestige Building, Riyadh, Kingdom of Saudi Arabia (“KSA”). Website: www.riyadcapital.com
Buy
12-month Target Price SAR 21
Look Beyond 2015
October 22, 2015
Expected Total Return Price as of Oct-21, 2015
SAR 16.00
Upside to Target Price
13.1 %
Expected Dividend Yield
1..%
Expected Total Return
13.3%
Market Data 52 Week H/L
SAR 31.60/14.65
Market Capitalization
SAR 14,016 mln
Enterprise Value
SAR 32,260 mln
Shares Outstanding
876.0 mln
Free Float
25.0%
12-Month ADTV (mln)
3.004
TASI Weight
0.82%
Reuters Code
2380.SE
Bloomberg Symbol
PETROR AB
1-Year Price Performance 120
Petro Rabigh (PR) plunged into a loss in the outgoing quarter contrary to market expectations. The stock ended yesterday at the lower price cap as a consequence. Sequentially lowest revenues and negative gross margins flowed down to a net loss of SAR (460) million as compared to our estimate of a SAR 265 million net profit. Lower crude prices and margin contraction in both refining and petrochemical segments have hurt. With an impending complete plant shutdown in 4Q, we are afraid that the second half would wipe out the profits accumulated in the first half. We now expect a net loss of SAR (166) million for the year versus a net profit previously. Our target price has also been slashed to SAR 21 from SAR 26. We urge investors to look beyond 2015 and recommend a Buy. Lowest revenues in 6 years Revenues have been beaten back to the lowest in six years at SAR 6.7 billion, down -55% Y/Y. While we understand Brent prices are also -50% lower Y/Y, key petrochemical prices have dropped close to -30% Y/Y. It would appear that management has opted to build up inventory in preparation of the major shutdown in 4Q. Petro Rabigh has itself estimated a gross profit impact of SAR 900 million, which may be optimistic. Negative gross margins Negative gross margins of (3.75)% clearly point towards negative margins accrued in the refining segment. We believe margins have been positive in the petrochemical segment despite lower prices. However, the sheer size of the refinery segment (approx. 75% of total sales) would have nullified profits from petrochemicals. Financial charges have further climbed to SAR 73 million versus SAR 66 million last year and SAR 67 million in 2Q. Major shutdown in 4Q After two unplanned shutdowns in 2Q, Petro Rabigh has commenced its major plant-wide shutdown in October, which is expected to last 50 days and hit gross profits to the tune of SAR 900 million, according to Company estimates. There have been no further developments on the SAR 7.04 billion rights issue that the Company announced, which makes us skeptical regarding the upcoming Petro Rabigh II project.
100 80 60 40 O
N
D
J
F M
Rabigh
A
M
J
J
TASI
A
S
O
TPCHEM
Source: Bloomberg RABIGH Oct-21-2015
16.00
TASI
TPCHEM
7,479
5,095
Target price down to SAR 21 A net loss of SAR (460) million was not anticipated and combined with an expected loss in 4Q would likely take full year also into the red close to SAR (166) million. We have rationalized our forecasts in view of revised price assumptions but still recommend a Buy albeit with a lower target of SAR 21 as compared to SAR 26 earlier. Key Financials
Total Change 6-months
(1313)% (9312)%
(9.13)%
FY December 31 (SAR mln)
2014A
2015E
2016E
2017E
1-Year
(3.14)% (9.1.)%
(1413)%
Revenue
54,237
28,744
33,176
34,689
2-Year
(3313)%
(931.)%
1,725
862
1,161
1,388
Net Profit
681
(166)
153
345
EPS (SAR)
0.78
(0.19)
0.18
0.39
(319)%
Gross Profit
3Q2015 SAR (mln)
Actual
RC Forecast
Gross Profit
(250)
511
Payout Ratio
-
Net Profit
(460)
265
ROAE
7%
EPS (SAR)
(0.53)
0.30
ROAA
2%
(1)%
Net Margin
1%
(1)%
1%
1%
DPS (SAR)
-
0.50
-
0.25
-
-
64%
(2)%
2%
4%
1%
1%
EV / Revenues
0.6x
1.1x
0.9x
0.8x
EV / EBITDA
10.2x
15.1x
12.5x
10.9x
6.2x
98.3x
79.5x
41.4x
20.6x
-
91.4x
40.7x
P / CFPS P/E
Muhammad Faisal Potrik [email protected] +966-11-203-6807
Yasser bin Ahmed [email protected] +966-11-203-6805
Riyad Capital is licensed by the Saudi Arabia Capital Market Authority (No. 07070-37)
Stock Rating
Strong Buy
Buy
Hold
Sell
Not Rated
Expected Total Return ≥ 25%
Expected Total Return ≥ 15%
Expected Total Return < 15%
Overvalued
Under Review/ Restricted
For any feedback on our reports, please contact [email protected]
Disclaimer The information in this report was compiled in good faith from various public sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts stated in this report are accurate and that the forecasts, opinions and expectations contained herein are fair and reasonable. Riyad Capital makes no representations or warranties whatsoever as to the accuracy of the data and information provided and, in particular, Riyad Capital does not represent that the information in this report is complete or free from any error. This report is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any financial securities. Accordingly, no reliance should be placed on the accuracy, fairness or completeness of the information contained in this report. Riyad Capital accepts no liability whatsoever for any loss arising from any use of this report or its contents, and neither Riyad Capital nor any of its respective directors, officers or employees, shall be in any way responsible for the contents hereof. Riyad Capital or its employees or any of its affiliates or clients may have a financial interest in securities or other assets referred to in this report. Opinions, forecasts or projections contained in this report represent Riyad Capital's current opinions or judgment as at the date of this report only and are therefore subject to change without notice. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or projections which represent only one possible outcome. Further, such opinions, forecasts or projections are subject to certain risks, uncertainties and assumptions that have not been verified and future actual results or events could differ materially. The value of, or income from, any investments referred to in this report may fluctuate and/or be affected by changes. Past performance is not necessarily an indicative of future performance. Accordingly, investors may receive back less than originally invested amount. This report provides information of a general nature and does not address the circumstances, objectives, and risk tolerance of any particular investor. Therefore, it is not intended to provide personal investment advice and does not take into account the reader’s financial situation or any specific investment objectives or particular needs which the reader may have. Before making an investment decision the reader should seek advice from an independent financial, legal, tax and/or other required advisers due to the investment in such kind of securities may not be suitable for all recipients. This research report might not be reproduced, nor distributed in whole or in part, and all information, opinions, forecasts and projections contained in it are protected by the copyright rules and regulations.
Riyad Capital is a Saudi limited liability company, with commercial registration number (1010239234), licensed and organized by the Capital Market Authority under License No. (07070-37), and having its registered office at Al Takhassusi Street, Prestige Building, Riyadh, Kingdom of Saudi Arabia (“KSA”). Website: www.riyadcapital.com
