Petro Rabigh 24 January 2016 PDF
Petro Rabigh 4Q2015 – First Look
Buy
Shutdown Leads to Record 4Q Loss
January 24, 2016
Expected Total Return Price as of Jan-24, 2016
SAR 8.52
Upside to Target Price
42.2 %
Expected Dividend Yield
-
Expected Total Return
42.2 %
Market Data 52 Week H/L
SAR 56.70/7.00
Market Capitalization
SAR 6,631 mln
Enterprise Value
SAR 23,418 mln
Shares Outstanding
876.0 mln
Free Float
25.0%
12-Month ADTV (mln)
5.752
TASI Weight
0520%
Reuters Code
2380.SE
Bloomberg Symbol
PETROR AB
1-Year Price Performance
140
120 100 80 60 F
M
A
M
J
J
Rabigh
A
S
O
TASI
N
D
TPCHEM
Source: Bloomberg
Jan-24-2016
Plant shutdown at Petro Rabigh (PR) lasting for the most part of 4Q led to a net loss in excess of SAR (1) billion versus our forecast of a SAR (672) million loss. Both quarter revenues and bottom line were the worst in the Company’s history. Lower crude and petrochemical prices were prevalent in 4Q, which led to contracting petrochemical margins although refinery margins improved, as per management commentary. As we feared, second half losses more than wiped out first half profits leading to a full year net loss of SAR (759) million. Combining an annual SAR 300 million estimated impact of higher costs with a revision in our product price assumptions; we reduce our target price from SAR 21 to SAR 12. We have not incorporated impact of Petro Rabigh II in our model. Maintain a Buy stance. Lowest quarterly revenues Revenues have recorded a fresh low of SAR 2.7 billion in 4Q, down -60% from 3Q topline and missing our SAR 4.7 billion forecast as maintenance period was extended. Brent prices dropped –42% Y/Y in the outgoing quarter while ethylene prices were–32% lower for the same period. A gross loss of SAR (772) million and an operating loss of SAR (1.02) billion makes for depressing reading. Negative gross margins Negative gross margins of (29)% are a result of pressure in the petrochemical segment despite better refining margins Q/Q. However, the largest impact resulted from lower volumetric sales, which were unable to cover fixed costs leading to a sizeable gross loss. Besides higher operating expenses, most other heads have come in line with forecasts. Revising estimates Management has guided to an approximate SAR 300 million impact due to the amendments in the prices of energy products and electricity tariffs. We have assimilated this from 2016 and also revised down our product price assumptions to take into account new product pricing. Resultantly, we now expect a net loss of SAR (392) million in 2016.
160
J
12-month Target Price SAR 12
RABIGH
TASI
TPCHEM
8.52
2,655
0,485
Target price reduced to SAR 12 The market has severely punished Petro Rabigh. The stock has declined–7..4% versus TASI’s fall of –7..4% since the start of December on anticipation of the 4Q loss. While we expect a loss in 2016, this should narrow in 2017 and turn to a profit in 2018. Although we reduce our target price from SAR 21 to SAR 12, the stock offers a 7...% valuation upside leading us to recommend a Buy. Project work on Petro Rabigh II is ongoing and has not been incorporated in our projections. PR II costs have inclined by SAR 1 billion to SAR 31 billion. Key Financials (*preliminary announced figures)
Total Change (4655)%
FY December 31 (SAR mln)
2014A
2015E
2016E
2017E
(2254)%
(4055) % (0054)%
(0853)%
Revenue
54,237
25,514*
23,743
32,345
(2452)%
(0253)%
(2456)%
1,725
295*
712
1,132
Net Profit
681
(759)*
(392)
(83)
EPS (SAR)
0.78
(0.87)*
(0.45)
(0.09)
Net Margin
1%
(3)%
(2)%
0%
DPS (SAR)
-
0.50
-
-
-
-
-
-
6-months
(6452)%
1-Year 2-Year
Gross Profit
4Q2015 SAR (mln)
Actual
RC Forecast
Gross Profit
(772)
(467)
Payout Ratio
Net Profit
(1,008)
(672)
ROAE
7%
(9)%
(5)%
(1)%
EPS (SAR)
(1.15)
(0.77)
ROAA
2%
(2)%
(1)%
0% 0.7x
Muhammad Faisal Potrik [email protected] +966-71-203-6807
EV / Revenues
0.5x
1.0x
1.0x
EV / EBITDA
7.9x
11.6x
12.2x
9.7x
P / CFPS
2.9x
32.4x
41.5x
48.7x
P/E
9.7x
-
-
-
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
Shutdown Leads to Record 4Q Loss
January 24, 2016
Expected Total Return Price as of Jan-24, 2016
SAR 8.52
Upside to Target Price
42.2 %
Expected Dividend Yield
-
Expected Total Return
42.2 %
Market Data 52 Week H/L
SAR 56.70/7.00
Market Capitalization
SAR 6,631 mln
Enterprise Value
SAR 23,418 mln
Shares Outstanding
876.0 mln
Free Float
25.0%
12-Month ADTV (mln)
5.752
TASI Weight
0520%
Reuters Code
2380.SE
Bloomberg Symbol
PETROR AB
1-Year Price Performance
140
120 100 80 60 F
M
A
M
J
J
Rabigh
A
S
O
TASI
N
D
TPCHEM
Source: Bloomberg
Jan-24-2016
Plant shutdown at Petro Rabigh (PR) lasting for the most part of 4Q led to a net loss in excess of SAR (1) billion versus our forecast of a SAR (672) million loss. Both quarter revenues and bottom line were the worst in the Company’s history. Lower crude and petrochemical prices were prevalent in 4Q, which led to contracting petrochemical margins although refinery margins improved, as per management commentary. As we feared, second half losses more than wiped out first half profits leading to a full year net loss of SAR (759) million. Combining an annual SAR 300 million estimated impact of higher costs with a revision in our product price assumptions; we reduce our target price from SAR 21 to SAR 12. We have not incorporated impact of Petro Rabigh II in our model. Maintain a Buy stance. Lowest quarterly revenues Revenues have recorded a fresh low of SAR 2.7 billion in 4Q, down -60% from 3Q topline and missing our SAR 4.7 billion forecast as maintenance period was extended. Brent prices dropped –42% Y/Y in the outgoing quarter while ethylene prices were–32% lower for the same period. A gross loss of SAR (772) million and an operating loss of SAR (1.02) billion makes for depressing reading. Negative gross margins Negative gross margins of (29)% are a result of pressure in the petrochemical segment despite better refining margins Q/Q. However, the largest impact resulted from lower volumetric sales, which were unable to cover fixed costs leading to a sizeable gross loss. Besides higher operating expenses, most other heads have come in line with forecasts. Revising estimates Management has guided to an approximate SAR 300 million impact due to the amendments in the prices of energy products and electricity tariffs. We have assimilated this from 2016 and also revised down our product price assumptions to take into account new product pricing. Resultantly, we now expect a net loss of SAR (392) million in 2016.
160
J
12-month Target Price SAR 12
RABIGH
TASI
TPCHEM
8.52
2,655
0,485
Target price reduced to SAR 12 The market has severely punished Petro Rabigh. The stock has declined–7..4% versus TASI’s fall of –7..4% since the start of December on anticipation of the 4Q loss. While we expect a loss in 2016, this should narrow in 2017 and turn to a profit in 2018. Although we reduce our target price from SAR 21 to SAR 12, the stock offers a 7...% valuation upside leading us to recommend a Buy. Project work on Petro Rabigh II is ongoing and has not been incorporated in our projections. PR II costs have inclined by SAR 1 billion to SAR 31 billion. Key Financials (*preliminary announced figures)
Total Change (4655)%
FY December 31 (SAR mln)
2014A
2015E
2016E
2017E
(2254)%
(4055) % (0054)%
(0853)%
Revenue
54,237
25,514*
23,743
32,345
(2452)%
(0253)%
(2456)%
1,725
295*
712
1,132
Net Profit
681
(759)*
(392)
(83)
EPS (SAR)
0.78
(0.87)*
(0.45)
(0.09)
Net Margin
1%
(3)%
(2)%
0%
DPS (SAR)
-
0.50
-
-
-
-
-
-
6-months
(6452)%
1-Year 2-Year
Gross Profit
4Q2015 SAR (mln)
Actual
RC Forecast
Gross Profit
(772)
(467)
Payout Ratio
Net Profit
(1,008)
(672)
ROAE
7%
(9)%
(5)%
(1)%
EPS (SAR)
(1.15)
(0.77)
ROAA
2%
(2)%
(1)%
0% 0.7x
Muhammad Faisal Potrik [email protected] +966-71-203-6807
EV / Revenues
0.5x
1.0x
1.0x
EV / EBITDA
7.9x
11.6x
12.2x
9.7x
P / CFPS
2.9x
32.4x
41.5x
48.7x
P/E
9.7x
-
-
-
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
