Saudi Arabian Amiantit Company 28 July 2016 PDF
July 28, 2016 Rating 12- Month Target Price
Sell SAR 7.30
SAUDI ARABIAN AMIANTIT COMPANY (AMIANTIT) 2Q2016 First Look
No Impact of Provisions
Expected Total Return
Saudi Arabian Amiantit Company (Amiantit) announced 2Q2016 preliminary results on July-27 with numbers beating our expectations. EPS declined by -87% Y/Y but recovered sequentially from a LPS of SAR (0.24) in 1Q2016 to EPS of SAR 0.03 in 2Q2016. Results came above our LPS estimate of SAR (0.27). At first look, we expected the provision impact of SAR 28 million to continue this quarter due to a legal case on its German entity in Iraq. We believe the same is either delayed or partly provisioned. Adjusting the impact, results was below expectation. Amiantit is unlikely to pay any dividends for 2016 due to volatile earnings. 2016E P/E of 41.5x is incomparably high to sector’s 14.3x and TASI’s 13.7x. We revise estimates and reduce target price to SAR 7.30 but continue to recommend Sell, as earnings trend looks volatile in the coming quarters.
SAR 7.90 9 (7.2%)
Price as on Jul-27, 2016 Upside to Target Price Expected Dividend Yield
0.0%
Expected Total Return
(7.2%)
Market Data
SAR 12.4/6.8
52 Week H/L
SAR 913 million
Market Capitalization
SAR 2,855 million
Enterprise Value
115.5million
Shares Outstanding
Revenue marginally above our estimate
77.4%
Free Float
Revenue of SAR 600 million was marginally above our estimate of SAR 570 million. We believe an impact of slowdown was evident with few project announcements from KSA government in 2Q2016. The continued impact of delivery delays is witnessed this quarter, which further affected revenue growth.
1,137.1
12-Month ADTV(000’s)
SAAC AB
Bloomberg Code 1-Year Price Performance
Margins contract this quarter Gross profit of SAR 89 million in 2Q2016 came in-line with our expectations of SAR 86 million declining by -22% Y/Y and -17% Q/Q. Gross margins declined to 14.8% in 2Q2016 from 16.9% in 2Q2015 and 16.5% in the last quarter as a result of lower cost control following Ramadan impact. However, an in-line performance on revenue and gross numbers was offset by a weak operating profit. Operating profit of SAR 26 million this quarter came in lower to our estimate of SAR 37 million, fell by -45% Y/Y and -35% Q/Q. Operating margins contracted to 4.5% in 2Q2016 from 6.9% in 2Q2015 and 6.4% last quarter.
110 100 90 80 70 60 50 40
Earnings decline on one-off items
30 J A S O N D J SAAC TASI
Earnings of SAR 3 million in 2Q2016 declined significantly by -87% Y/Y due to increase of SAR 4 million in financial charges and forex loss of SAR 6 million from associates. However, re-adjusting provisions for 2Q2016, numbers came below our estimate. Earnings retracted to green this quarter after a loss of SAR (28) million in 1Q2016 as it recorded a loss provision of SAR 27 million.
F M A M J J SASEBUILD
Source: Bloomberg 6M
1Y
2Y
40%
Outlook weak, maintain Sell
20%
We revise 2016-18E estimates due to weaker outlook and reduce target price to SAR 7.30 despite 2Q2016 results beating estimates, which we believe is a provision impact. We maintain Sell due to expensive valuations, volatile earnings trends and believe dividends are unlikely in 2016. The stock has underperformed in 2Q2016, with returns of -5% versus TASI’s +5% and sectors +7%. We believe Amiantit is a fading story for investors over medium term. Maintain Sell.
0% -20% -40% -60% -80% SAAC
Fig in SAR Mln MlnMMln Gross Profit
EBIT Net Income EPS (SAR)
TASI
SASEBUILD
RC.Est Estimates 86
37 (28) (0.24)
Actuals
89 26 3 0.03
Key Financial Ratios
Key Financial Figures FY Dec31 (SAR Mln) Revenue EBITDA Net Profit EPS (SAR) DPS (SAR) BVPS (SAR)
2015A 2,750 285 101 0.87 0.65 13.94
2016E 2,655 245 22 0.19 NA 13.97
2017E 2,730 260 72 0.62 0.50 14.37
Santhosh Balakrishnan
Abdullah A. Alrayes
[email protected] +966-11-203-6809
[email protected] +966-11-203-6814
FY Dec31 ROAA ROAE P/E P/B EV/EBITDA EV/Sales
2015A 4% 11% 9.0x 0.6x 10.0x 1.0x
2016E 4% 9% 41.5x 0.6x 11.7x 1.1x
2017E 4% 9% 12.7x 0.5x 11.0x 1.0x
Riyad Capital is licensed by the Saudi Arabia Capital Market Authority (No. 07070-37)
SAUDI ARABIAN AMIANTIT COMPANY (AMIANTIT) 2Q2016 First Look
Stock Rating Buy
Neutral
Sell
Not Rated
Expected Total Return Greater than 15%
Expected Total Return between -15% and +15%
Expected Total Return less than -15%
Under Review/ Restricted
* The expected percentage returns are indicative, stock recommendations also incorporate relevant qualitative factors 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 Page 2 of 4 (“KSA”). Website: www.riyadcapital.com
Sell SAR 7.30
SAUDI ARABIAN AMIANTIT COMPANY (AMIANTIT) 2Q2016 First Look
No Impact of Provisions
Expected Total Return
Saudi Arabian Amiantit Company (Amiantit) announced 2Q2016 preliminary results on July-27 with numbers beating our expectations. EPS declined by -87% Y/Y but recovered sequentially from a LPS of SAR (0.24) in 1Q2016 to EPS of SAR 0.03 in 2Q2016. Results came above our LPS estimate of SAR (0.27). At first look, we expected the provision impact of SAR 28 million to continue this quarter due to a legal case on its German entity in Iraq. We believe the same is either delayed or partly provisioned. Adjusting the impact, results was below expectation. Amiantit is unlikely to pay any dividends for 2016 due to volatile earnings. 2016E P/E of 41.5x is incomparably high to sector’s 14.3x and TASI’s 13.7x. We revise estimates and reduce target price to SAR 7.30 but continue to recommend Sell, as earnings trend looks volatile in the coming quarters.
SAR 7.90 9 (7.2%)
Price as on Jul-27, 2016 Upside to Target Price Expected Dividend Yield
0.0%
Expected Total Return
(7.2%)
Market Data
SAR 12.4/6.8
52 Week H/L
SAR 913 million
Market Capitalization
SAR 2,855 million
Enterprise Value
115.5million
Shares Outstanding
Revenue marginally above our estimate
77.4%
Free Float
Revenue of SAR 600 million was marginally above our estimate of SAR 570 million. We believe an impact of slowdown was evident with few project announcements from KSA government in 2Q2016. The continued impact of delivery delays is witnessed this quarter, which further affected revenue growth.
1,137.1
12-Month ADTV(000’s)
SAAC AB
Bloomberg Code 1-Year Price Performance
Margins contract this quarter Gross profit of SAR 89 million in 2Q2016 came in-line with our expectations of SAR 86 million declining by -22% Y/Y and -17% Q/Q. Gross margins declined to 14.8% in 2Q2016 from 16.9% in 2Q2015 and 16.5% in the last quarter as a result of lower cost control following Ramadan impact. However, an in-line performance on revenue and gross numbers was offset by a weak operating profit. Operating profit of SAR 26 million this quarter came in lower to our estimate of SAR 37 million, fell by -45% Y/Y and -35% Q/Q. Operating margins contracted to 4.5% in 2Q2016 from 6.9% in 2Q2015 and 6.4% last quarter.
110 100 90 80 70 60 50 40
Earnings decline on one-off items
30 J A S O N D J SAAC TASI
Earnings of SAR 3 million in 2Q2016 declined significantly by -87% Y/Y due to increase of SAR 4 million in financial charges and forex loss of SAR 6 million from associates. However, re-adjusting provisions for 2Q2016, numbers came below our estimate. Earnings retracted to green this quarter after a loss of SAR (28) million in 1Q2016 as it recorded a loss provision of SAR 27 million.
F M A M J J SASEBUILD
Source: Bloomberg 6M
1Y
2Y
40%
Outlook weak, maintain Sell
20%
We revise 2016-18E estimates due to weaker outlook and reduce target price to SAR 7.30 despite 2Q2016 results beating estimates, which we believe is a provision impact. We maintain Sell due to expensive valuations, volatile earnings trends and believe dividends are unlikely in 2016. The stock has underperformed in 2Q2016, with returns of -5% versus TASI’s +5% and sectors +7%. We believe Amiantit is a fading story for investors over medium term. Maintain Sell.
0% -20% -40% -60% -80% SAAC
Fig in SAR Mln MlnMMln Gross Profit
EBIT Net Income EPS (SAR)
TASI
SASEBUILD
RC.Est Estimates 86
37 (28) (0.24)
Actuals
89 26 3 0.03
Key Financial Ratios
Key Financial Figures FY Dec31 (SAR Mln) Revenue EBITDA Net Profit EPS (SAR) DPS (SAR) BVPS (SAR)
2015A 2,750 285 101 0.87 0.65 13.94
2016E 2,655 245 22 0.19 NA 13.97
2017E 2,730 260 72 0.62 0.50 14.37
Santhosh Balakrishnan
Abdullah A. Alrayes
[email protected] +966-11-203-6809
[email protected] +966-11-203-6814
FY Dec31 ROAA ROAE P/E P/B EV/EBITDA EV/Sales
2015A 4% 11% 9.0x 0.6x 10.0x 1.0x
2016E 4% 9% 41.5x 0.6x 11.7x 1.1x
2017E 4% 9% 12.7x 0.5x 11.0x 1.0x
Riyad Capital is licensed by the Saudi Arabia Capital Market Authority (No. 07070-37)
SAUDI ARABIAN AMIANTIT COMPANY (AMIANTIT) 2Q2016 First Look
Stock Rating Buy
Neutral
Sell
Not Rated
Expected Total Return Greater than 15%
Expected Total Return between -15% and +15%
Expected Total Return less than -15%
Under Review/ Restricted
* The expected percentage returns are indicative, stock recommendations also incorporate relevant qualitative factors 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 Page 2 of 4 (“KSA”). Website: www.riyadcapital.com
