Target mkt cap
Saudi Petrochemicals Sector Petrochemicals –Industrial Saudi Arabia 06 March 2016 January 18, 2010
Research Department ARC Research Team Tel +966 11 211 9370, [email protected]
Monthly update In our monthly note, we update price movements of major petrochemical products, manufacturing activity in key demand markets, recent announcements and valuation of Saudi petrochemical companies and their global peers. Price movement of key petrochemical products
Products
1-Month
Y-o-Y
Ethylene
-1.2%
-13.6%
HDPE
+5.6%
-2.2%
LDPE
+4.1%
-0.4%
Propylene
+9.2%
-41.6%
Polypropylene
+5.2%
-18.1%
Methanol
+4.3%
-17.5%
Benzene
+2.8%
-20.7%
Ammonia
-5.6%
-36.3%
+12.8%
-41.3%
Urea
YTD Performance (Rebased to 100) 180 140 100
60
SABIC
Sipchem
SAFCO
Yansab
APC
TASI
Source: Bloomberg, Al Rajhi Capital
Jan-16
Feb-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Feb-15
20
NIC
Petrochemicals Monthly - Mar 2016 Product prices rise supported by crude After showing downward movement over the last few months, benchmark crude prices witnessed improvement (Brent: +8.3% m-o-m; WTI: +0.4% m-om) in February on hopes that global oil glut may ease as major oil producers agreed to freeze production. The decrease in US oil rig count also supported oil prices, while stronger consumer spending in US buoyed hopes of increase in demand. Major petrochemical product prices also rose in February on the back of higher crude prices. Manufacturing PMI in US showed improvement but remained in contraction territory while China’s PMI slipped further. The Saudi Petrochemical index moved up 2.8% during the month, led by gains in major stocks Sipchem (16%), Yansab (10.4%), along with positive contribution from Alujain (15.9%), SABIC (3.3%) and NIC (1.8%). Meanwhile, TASI also inched up 1.6% m-o-m. Crude prices move higher: Brent crude and WTI prices rose 8.3% and 0.4% in February 2016. The increase in crude prices was largely due to major oil members agreeing to freeze their production along with decline in US rig count (400 as of February 26 vs 516 at the beginning of 2016; source: Baker Hughes) and strong US economic data that sparked hopes of increase in demand which will help balance the demand and supply. US crude inventories recorded its highest peak since April 2015, increasing by 10.37mn barrels for the week ending February 26 compared to 3.5mn barrels last month as well as higher than the market expectations of 3.5mn barrels for the week. OPEC crude production dipped by 0.28mbpd in February to record 32.37mbpd as compared to the revised figure of 32.65 mbpd in January 2016 (Source: Bloomberg). Manufacturing shows mixed trend: US January PMI improved to 49.5 supported by new orders and production, but remained in contraction territory. Eurozone PMI dropped to 51.2 in February from 52.3 in January due to sluggish growth in new business and new export orders. The Caixin Manufacturing PMI for China continued to be in the contraction zone declining marginally to 48.0 in February (48.4 in January, 2016) on the back of declining output and total new orders. The manufacturing PMI in India was flat at 51.1 in February, as growth in new business was partially offset by sluggish production. Product prices improve: Almost all the major petrochemical product prices gained over the month following gains in crude oil prices. Urea (+12.8%), Styrene (+11%), MEG (+12.0%), Propylene (+9.2%), Polypropylene (+5.2%), HDPE (+5.6%) were the major gainers over the month. Meanwhile, Methanol (+4.3%), LDPE (+4.1%), Benzene (+2.8%) were also significant gainers. However, MTBE (-8.9%), Ammonia (-5.6%), Ethylene (-1.2%) dropped on m-om basis. Saudi Petrochemical Index rises: The Saudi Petrochemicals Index rose 2.8% in the month of February on the back of uptick in oil prices and major petrochemical products. Sipchem and Yansab advanced 16% and 10.4% respectively, while SABIC and NIC rose 3.3% and 1.8% respectively. Meanwhile, the TASI also rose by 1.6% m-o-m in February.
Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi
research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Key news & announcements Saudi Aramco said to maintain number of oil, gas rigs in 2016: Saudi Aramco is expected to maintain the number of its oil and gas drilling rigs at around 212 this year, despite declining oil prices, Reuters reported, citing unnamed industry sources. The stateowned energy giant has recently asked oilfield service companies and suppliers for more discounts due to oil slump, one source told the news agency, adding that the company was able to save on drilling costs through this approach. Last year, industry sources revealed that Saudi Aramco was planning to increase the number of oil and gas rigs in 2016 to 250. (Source: Argaam) Tasnee, Sahara's butyl acrylate plant operating at 50-60%: Tasnee & Sahara Olefins Co.’s butyl acrylate plant in Jubail is currently operating at 50 to 60% capacity, ICIS reported. The company is expected to maintain operations at these levels, if market conditions do not become more favorable, the source added. Tasnee Sahara Olefins, which is owned by Tasnee and Sahara Petrochemical Co., owns a majority stake in Saudi Acrylic Monomer Co. Limited, the operator of the butyl acrylate project. (Source: Argaam) SIDF approves Chemanol’s debt restructuring plan: The SIDF has approved Methanol Chemical Co.’s nine-payment restructuring plan for a loan worth SAR 385mn, the company, said on Sunday. The payments, which will range between SAR 25mn and SAR 50mn, will be due from January 13, 2017 to October 2, 2020, Chemanol said in a statement to Tadawul, the Saudi bourse. (Source: Argaam) Sipchem pays $100m to raise stakes in 2 units: Sipchem said it has paid 375.3 mn riyals to raise its stake in two subsidiaries. The firm will buy stakes owned by Kuwait’s Ikarus Petroleum Industries in International Acetyl Company and International Vinyl Acetate Company after receiving regulatory approval, Sipchem said in a bourse statement. Sipchem, which already owns 76% of both subsidiaries, said the deals would raise its holdings in each to 87%. The financial impact of the purchases will be shown in the first quarter of 2016, it said in the statement. (Source: Gulf Base) Advanced’s PP production up 3% despite plant shutdown in 2015: APC produced 579,000 tons of poly propylene in 2015, a 3% y-o-y rise despite a 22-day maintenance shutdown, according to a report issued by the board of directors. The Saudi-based petchem producer sold 561,000 tons of PP in 2014. The drop in average production costs per ton was higher than the decrease in product selling prices, which offset the drop in profit margins, the report showed. (Source: Argaam) Petro Rabigh to incur SAR1bn additional costs on project delay: The delay of contractors in accomplishing their works in Phase II of "Rabigh" project owned by Rabigh Refining & Petrochemical Company, for nine months behind schedule led to additional costs by around SAR 1 billion, according to a local gazette. The "Rabigh" project was planned to be handed over by early 2016, Arriyadh newspaper reported. However, the company announced completion of all construction works in the project in September 2016, leading to an escalation in costs by SAR 1bn from SAR 30bn to SAR 31bn. (Source: Mubasher) Saudi Kayan awards $95 mln contract to Taiwan’s CTCI: Saudi Kayan Petrochemical Co. has awarded Taiwan's CTCI Corp. a contract worth $94.5mn to build a new cracker at its complex in Jubail Industrial City, the company said in a bourse statement on Monday. Under the deal, CTCI will manage the engineering, procurement and construction management for the project, which is located in the Eastern Province of Saudi Arabia. The company added that it will secure the related finance from local institutions, expecting to complete the new cracker in H2-2017. The date of trial operation and the expected financial impact will be announced later. (Source: Argaam) SAFCO to shut SAFCO II, SAFCO 5 for maintenance in 2016: SAFCO, has announced plans to halt operations in its SAFCO 5 urea plant and the two urea and Disclosures Please refer to the important disclosures at the back of this report.
2
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
ammonia plants in SAFCO II for scheduled maintenance lasting for 47 days in SAFCO II plant and 25 days in SAFCO V urea plant. However, no specific dates have been announced by the company. The Saudi chemicals producer will further shut its 50 percent-owned Ibn Al-Bayttar ammonia plant for 23 days. (Source: Argaam) Sadara complex is 98% complete, says Saudi Aramco: State-owned oil company, Saudi Aramco, said that the $20 billion Sadara petrochemical complex in Jubail is 98% complete and is expected to launch full operations by 2017. Sadara’s first manufacturing unit, a polyethylene plant, has already started production in December 2015. Sadara is 65% owned by Saudi Aramco and 35% by American- Dow Chemicals, according to data compiled by Argaam. The complex, consisting of 26 manufacturing units, is considered to be the world’s largest complex to be built in a single phase. (Source: Argaam) Chemanol cuts cost impact after Aramco holds gas price till June: Chemanol has lowered the expected financial impact of higher feed gas price in 2016 to SAR 25mn from the SAR 30mn projected earlier following the Saudi cabinet’s decision to raise feedstock gas and energy prices to narrow the government’s budgetary deficit. Chemanol said in a statement to the Saudi bourse, Tadawul, on Monday that the revision comes after it received a notification from Aramco that it will be supplied methane at the old price of $0.75 per MMBTU for a period of seven years and 90 days, starting from the actual supply date. (Source: Argaam) Chemanol won't pay dividend on 2015 results: Chemanol said its board of directors recommended withholding cash dividends for fiscal year 2015. The board’s recommendation aims at supporting the financial position of the company and enhancing strategic plans, the chemicals producer said in a statement on Monday. Chemanol reported a net loss of SAR 139.4mn for FY15, compared to a net profit of SAR 32.2mn in 2014. (Source: Argaam) Nama says to continue developing substitutes for imports: Nama Chemicals Co.’s board of directors approved on Sunday a proposal to continue developing new substitutes for some imported products, the company said in a statement to Tadawul. The company, which produces caustic soda and epoxy resin, narrowed losses in fiscal year 2015 to SAR 74mn, compared with SAR 112.5mn the previous year. (Source: Argaam) Advanced approves SAR 0.75/share (7.5%) dividend for Q415: Advanced Petrochemical Company has approved a 7.5 percent cash dividend to be issued at SAR 0.75 per share for Q4-2015 profit. (Source: Argaam) Advanced plans SAR 0.75/share (7.5%) dividend for Q116: APC’s board of directors has recommended a 7.5 percent cash dividend to be issued at SAR 0.75 per share for the first quarter of 2016. The company’s CEO was recently cited by the media as saying that Advanced will maintain its annual dividend payout of SAR 3 per share. (Source: Argaam)
Tasnee pushes ilmenite plant trial run to H1: National Industrialization Co.’s ilmenite processing plant will delay trial operations to a later time during H1-2016 due to technical issues, the company said in an annual report. Tasnee said in July it would postpone the trial run to Q1-2016, while commercial operation was scheduled to start during H1-2016. The facility, located in Jazan Economic City, will produce titanium slag at an initial annual capacity of 500,000 tons, which is designed to expand to one million tons. (Source: Argaam)
Disclosures Please refer to the important disclosures at the back of this report.
3
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Saudi Petrochemical Index vs. Major Indices Figure 1 Saudi Petrochemical Index vs. TASI and Industry Indices (Petrochemical Index +2.8% and TASI +1.6% m-o-m) 175 150 125 100 75 50 25 0 Feb-13
May-13
Aug-13
Nov-13
Feb-14
Saudi Petrochemical Index
May-14
Aug-14
Nov-14
S&P500 Chemical Index
Feb-15
May-15
MSCI World Chemical Index
Aug-15
Nov-15
Feb-16
TASI
Source: Bloomberg Note: Rebased to 100 on February 28, 2013
Crude, Gas and Naphtha Spot Prices Figure 2 European Brent Crude (+8.3% m-o-m)
Figure 3 WTI Crude (+0.4% m-o-m) US$/barrel 120
US$/barrel 140 120
100
100 80 80 60 60
40 40 20
20 0 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
0 Feb-10
Feb-11
Feb-12
Source: Bloomberg
Source: Bloomberg
Figure 4 Natural gas (Henry Hub) (-28.2% m-o-m)
Figure 5 Naphtha (-6% m-o-m)
Feb-13
Feb-14
Feb-15
Feb-16
Feb-13
Feb-14
Feb-15
Feb-16
US$/ton 1200
US$/mmbtu 10
1000
8
800 6 600
4 400 2
0 Feb-10
200
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
0 Feb-10
Feb-11
Feb-12
Source: Bloomberg
4
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Manufacturing activity and economic growth trend in key markets Figure 6 United States Manufacturing PMI (49.5 vs 48.2)
Figure 7 Euro zone Manufacturing PMI (51.2 vs 52.3)
60
56
58 54 56 52
54 52
50
50 48
Jan-16
Feb-16 Feb-16
54
Jan-16
Figure 9 India Manufacturing PMI (51.1 vs 51.1)
Dec-15
Figure 8 China Manufacturing PMI (48 vs 48.4)
Dec-15
Source: Markit
Nov-15
Source: US ISM
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
46
Jul-15
May-15
Apr-15
Mar-15
Feb-15
46
Jun-15
48
58
56 52 54
50
52 50
48
Source: Caixin-Markit
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
46
Jul-15
May-15
Apr-15
Mar-15
Feb-15
46
Jun-15
48
Source: Nikkei-Markit
Figure 10 Real GDP growth trend % growth 10.0
8.0
6.0
4.0
2.0
0.0 Q4 2014
Q1 2015
Q2 2015
Q3 2015 US
Q4 2015
Q1 2016E Q2 2016E Q3 2016E Q4 2016E Q1 2017E
Euro Area
China
India
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
5
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Petrochemical product price trends Basic Olefins & Polyolefins Figure 11 Ethylene (-1.2% m-o-m)
Figure 12 Polyethylene (HDPE: +5.6%, LDPE: +4.1% m-o-m)
US$/ton 1800
US$/ton 1800
1600
1600
1400
1400
1200
1200
1000
1000 800 800 600 400 Feb-10
600 Feb-10 Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-11
Feb-16
Feb-12
Feb-13
HDPE
Feb-14
Source: Bloomberg
Source: Bloomberg
Figure 13 Propylene (+9.2% m-o-m)
Figure 14 Polypropylene (+5.2% m-o-m)
US$/ton 2000
US$/ton 2000
1800
1800
1600
1600
1400
1400
1200
1200
1000
1000
800
800
600
600
400
400
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
200 Feb-10
Feb-11
Feb-12
Feb-15
Feb-16
Feb-15
Feb-16
LDPE
Feb-13
Feb-14
Source: Bloomberg
Methanol & MTBE Figure 15 Methanol (+4.3% m-o-m)
Figure 16 Methyl Tertiary Butyl Ether (MTBE) (-8.9% m-o-m)
US$/ton 600
US$/ton 1600
500
1400 1200
400
1000
300
800
200 600
100 400
0 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
-100 Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
6
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Benzene & its derivatives Figure 17 Benzene (+2.8% m-o-m)
Figure 18 Toluene (+2.6% m-o-m)
US$/ton 1600
US$/ton 1600
1400
1400
1200
1200
1000
1000
800
800
600
600
400
400
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
200 Feb-10
Feb-11
Feb-12
Feb-13
Source: Bloomberg
Source: Bloomberg
Figure 19 Styrene (+11.0% m-o-m)
Figure 20 Polystyrene (+2.8% m-o-m)
US$/ton 2000
US$/ton 2250
1800
2000
1600
Feb-14
Feb-15
Feb-16
Feb-14
Feb-15
Feb-16
Feb-15
Feb-16
1750
1400 1500 1200 1250 1000 1000
800
750
600 400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
500 Feb-10
Feb-11
Feb-12
Feb-13
Source: Bloomberg
Other key petrochemical products Figure 21 Mono-ethylene glycol (+12.0% m-o-m)
Figure 22 Ethylene Di-Chloride (+0.0% m-o-m) US$/ton 600
US$/ton 1800 1600
500 1400 400
1200 1000
300
800 200 600 400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
100 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Source: Company data, Al Rajhi Capital
7
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Figure 23 Vinyl chloride monomer (+1.7% m-o-m)
Figure 24 Polyvinyl chloride (+4.8% m-o-m)
US$/ton 1200
US$/ton 1400
1200
1000 1000 800
800 600 600
400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
400 Feb-10
Figure 25 Purified terephthalic acid (+3.5% m-o-m)
Feb-13
Feb-14
Feb-15
Feb-16
Figure 26 Caustic soda (+2.3% m-o-m) US$/ton 800
1400
700
1200
600
1000
500
800
400
600
300
Feb-11
Feb-12
Source: Bloomberg
US$/ton 1600
400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Ammonia & Fertilizers Figure 27 Ammonia (-5.6% m-o-m)
Figure 28 Urea (+12.8% m-o-m)
US$/ton 700
US$/ton 700 600
600
500 500 400
400 300 300
200 Feb-10
200
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
100 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
8
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Metals Figure 29 Gold (+10.2% m-o-m)
Figure 30 Aluminum (+5.9% m-o-m)
US$/oz 2000
US$/oz 2000
1800
1800
1600
1600
1400
1400
1200
1200
1000
1000
800
800
600 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
600 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Figure 31 Price movement of key petrochemicals, fertilizers and metals Products
Recent Price
% Change YTD
1-Year
European Brent (US$/bbl)
36.0
8.3
0.6
0.6
(41.8)
WTI (US$/bbl)
33.8
0.4
(8.9)
(8.9)
(32.2)
1.6
(28.2)
(30.1)
(30.1)
(41.3)
326.5
(6.0)
(20.5)
(20.5)
(40.7)
Ethylene
795
(1.2)
(10.7)
(10.7)
(13.6)
HDPE
1130
5.6
7.6
7.6
(2.2)
LDPE
1150
4.1
8.5
8.5
(0.4)
Propylene
563
9.2
(7.6)
(7.6)
(41.6)
Polypropylene
905
5.2
7.1
7.1
(18.1)
Methanol
217
4.3
7.4
7.4
(17.5)
MTBE
471
(8.9)
(10.8)
(10.8)
(40.6)
Benzene
555
2.8
(2.6)
(2.6)
(20.7)
Toluene
585
2.6
(5.6)
(5.6)
(14.0)
Styrene
955
11.0
9.1
9.1
(14.3)
Polystyrene
1085
2.8
1.9
1.9
(6.1)
Mono-ethylene glycol
796
12.0
9.9
9.9
(21.1)
Ethylene di-chloride
225
0.0
(6.3)
(6.3)
(22.4)
Vinyl chloride monomer
600
1.7
(2.4)
(2.4)
(19.5)
Polyvinyl chloride
765
4.8
6.3
6.3
(7.8)
Purified terephthalic acid
585
3.5
0.9
0.9
(8.6)
Caustic soda
542
2.3
0.6
0.6
(0.2)
Natural Gas (US$/mmbtu) Naphtha (US$/ton)
1-Month
QTD
Key petrochemicals (US$/ton)
Other petrochemicals (US$/ton)
Fertilizers (US$/ton) Ammonia
255
(5.6)
(15.0)
(15.0)
(36.3)
Urea
220
12.8
(8.3)
(8.3)
(41.3)
Gold (US$/oz)
1233
10.2
16.2
16.2
1.6
Aluminum (US$/ton)
1677
5.9
(0.5)
(0.5)
(16.9)
Metals
Source: Bloomberg, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
9
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Figure 32 Performance of Saudi petrochemical companies vs. global peers Company
Currency
Last Price
% Change 1 Month
QTD
52-Week YTD
1 Year
High
Dividend Low
LTM
Yield
Saudi Arabia SABIC
SAR
72.73
3.3
(4.9)
(4.9)
(35.2)
110.5
59.5
5.5
7.6%
SAFCO
SAR
68.92
(0.5)
(16.1)
(16.1)
(23.6)
127.5
62.0
5.4
7.8%
Sipchem
SAR
13.26
16.1
(5.4)
(5.4)
(50.3)
36.1
9.8
1.3
9.4%
NIC
SAR
8.69
1.8
(18.1)
(18.1)
(62.4)
27.7
7.5
1.0
11.5%
Yansab
SAR
33.98
10.4
4.8
4.8
(38.1)
57.5
23.8
2.5
7.4%
APC
SAR
36.04
(1.9)
(2.7)
(2.7)
(10.6)
61.0
31.9
3.0
8.3%
SPC
SAR
8.26
0.7
(19.3)
(19.3)
(53.5)
18.1
7.4
0.9
10.3%
Saudi Kayan
SAR
4.88
(2.4)
(27.9)
(27.9)
(50.3)
13.9
4.4
NA
NM
PetroRabigh
SAR
9.30
(4.0)
(24.3)
(24.3)
(50.0)
26.7
7.0
0.5
5.4%
SIIG
SAR
11.42
(4.3)
(17.3)
(17.3)
(51.8)
29.9
9.8
1.0
8.8%
Chemanol
SAR
5.73
6.3
(19.9)
(19.9)
(47.8)
15.1
5.0
NA
NM
Nama
SAR
5.59
0.7
(21.7)
(21.7)
(51.1)
13.6
5.0
NA
NM
Alujain
SAR
13.16
15.9
(8.7)
(8.7)
(35.0)
24.8
9.5
NA
NM
National Petrochemical
SAR
14.93
4.3
(10.6)
(10.6)
(43.3)
30.4
10.6
NA
NM
Industries Qatar
QAR
104.80
4.8
(1.2)
(1.2)
(26.7)
152.2
88.0
5.0
4.8%
Mesaieed Petrochem
QAR
17.90
2.3
(7.7)
(7.7)
(33.2)
28.0
14.0
1.1
6.1%
Sidi Kerir
EGP
11.01
5.2
(3.1)
(3.1)
(26.3)
15.5
10.0
0.4
3.6%
Al Qurain
KWd
174.00
6.1
(7.4)
(7.4)
(25.9)
216.0
140.0
10.0
5.7%
ZAr
42,714.00
2.2
1.8
1.8
(28.5)
49,538.0
35,400.0
1,850.0
4.3%
BASF
EUR
59.77
(16.6)
(15.5)
(15.5)
(5.3)
97.2
56.0
2.8
4.7%
Solvay
EUR
85.49
(13.0)
(12.6)
(12.6)
(9.9)
132.6
70.5
3.3
3.9%
Lanxess
EUR
38.12
(12.4)
(10.7)
(10.7)
(3.1)
56.5
32.9
0.5
1.3%
Arkema
EUR
56.40
(13.7)
(13.4)
(13.4)
17.3
75.8
48.2
1.9
3.3%
Yara
NOK
338.60
(11.8)
(11.6)
(11.6)
22.7
444.6
307.5
13.0
3.8%
Akzo Nobel
EUR
54.24
(13.6)
(13.0)
(13.0)
14.7
75.5
49.9
1.5
2.7%
Clariant
CHF
16.72
(12.6)
(12.0)
(12.0)
10.2
21.7
15.3
0.4
2.4%
Eastman
USD
64.15
(7.1)
(5.4)
(5.4)
(10.3)
83.9
56.0
1.7
2.6%
Dow
USD
48.61
(7.9)
(5.9)
(5.9)
(15.5)
57.1
35.1
1.7
3.5%
Westlake
USD
43.12
(22.2)
(21.0)
(21.0)
(42.6)
79.3
39.9
0.7
1.6%
Celanese Corp
USD
60.34
(10.3)
(10.1)
(10.1)
(1.3)
74.2
54.1
1.2
2.0%
Methanex
USD
31.67
(9.1)
(5.5)
(5.5)
(37.8)
61.4
22.7
1.1
3.4%
LyondellBasell Industries
USD
80.21
(8.6)
(7.7)
(7.7)
(22.8)
107.3
69.1
3.1
3.9%
Axiall Corp
USD
19.90
28.9
28.5
28.5
(38.3)
47.9
9.0
0.6
3.2%
Huntsman Corp
USD
10.86
(4.2)
(3.6)
(3.6)
(37.2)
23.8
7.5
0.5
4.6%
Middle East & Africa (ex-Saudi Arabia)
Sasol Europe
North America
Asia Indorama Ventures
THB
21.50
0.9
0.9
0.9
(17.9)
28.5
19.0
0.4
2.0%
Mitsui Chemicals
JPY
369.00
(31.3)
(31.9)
(31.9)
35.8
545.0
351.0
7.0
1.9%
Sumitomo
JPY
494.00
(29.8)
(29.5)
(29.5)
65.2
795.4
441.0
11.0
2.2%
Formosa Chemicals & Fibre Corp
TWD
74.80
7.3
6.1
6.1
(4.9)
80.4
59.0
1.2
NM
Lotte Chemical Corp
KRW
319,500.00
32.8
31.2
31.2
52.0
334,000.0
186,000.0
2,500.0
NM
Formosa Plastics Corp
TWD
79.00
8.4
7.5
7.5
(5.2)
81.7
59.5
1.7
NM
LG Chem
KRW
300,000.00
(9.6)
(8.7)
(8.7)
(11.3)
344,500.0
206,500.0
4,500.0
1.5%
Saudi Petrochemical Index
SAR
3,850.76
2.8
(9.9)
(9.9)
(44.2)
7,069.2
3,267.1
283.3
7.4%
S&P500 Chemical Index
USD
447.55
(7.2)
(6.2)
(6.2)
(11.6)
538.2
400.4
11.5
2.6%
MSCI World Chemical Index
USD
241.03
(8.9)
(8.2)
(8.2)
(10.5)
301.2
228.4
6.9
2.8%
TASI
SAR
6,092.50
1.6
(11.9)
(11.9)
(32.3)
9,897.5
5,348.6
255.2
4.2%
Indices
Source: Bloomberg, Al Rajhi Capital Note: SAFCO dividends/yield adjusted for bonus shares. Prices as of February 29, 2016.
Disclosures Please refer to the important disclosures at the back of this report.
10
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Figure 33 Margins and Valuation Metrics - Saudi petrochemical companies vs. global peers Company
Market Cap
Operating margin
Net margin
P/E
P/B
EV/Sales
EV/EBITDA
ROE
Operating_R OE
ROA
Saudi Arabia SABIC
218,190
19.5
12.6
11.7x
1.5x
1.8x
6.2x
11.6
18.0
5.6
SAFCO
28,717
55.8
60.1
14.1x
5.0x
9.2x
12.7x
27.6
25.6
23.8
Sipchem
4,862
16.8
8.2
15.5x
1.3x
4.1x
10.0x
4.9
10.0
1.7
NIC
5,813
0.2
(9.5)
NA
1.0x
2.2x
11.1x
(14.5)
0.3
(3.1)
Yansab
19,114
22.3
17.5
14.1x
1.7x
3.4x
8.0x
7.8
10.0
5.6
APC
6,027
31.2
30.0
9.5x
3.1x
2.8x
7.9x
29.2
30.4
18.5
SPC
3,624
14.2
2.5
80.7x
1.0x
4.6x
22.4x
0.6
3.6
0.4
Saudi Kayan
7,320
(7.4)
(15.6)
NA
1.0x
4.1x
15.7x
(9.3)
(4.4)
(2.8)
PetroRabigh
8,147
(3.0)
(3.0)
18.4x
1.5x
1.0x
14.0x
(8.5)
(8.5)
(1.6)
SIIG
5,139
24.0
10.0
9.5x
1.3x
3.1x
10.0x
10.5
25.2
2.7
34.4x
0.7x
2.3x
8.5x
(9.5)
(5.2)
(5.3)
Chemanol
691
(10.4)
(19.0)
Nama
718
(20.1)
(16.1)
NA
0.9x
3.3x
119.3x
(6.4)
(8.0)
(3.0)
Alujain
911
19.0
7.3
8.9x
1.2x
1.7x
6.1x
10.9
28.5
3.1
7,166
24.1
12.4
11.3x
1.8x
2.9x
9.3x
17.0
33.0
4.1
Industries Qatar
63,404
16.8
85.0
13.0x
2.4x
13.4x
62.1x
13.2
2.6
12.3
Mesaieed Petrochem
22,488
NA
NA
20.9x
2.0x
NA
NA
7.6
(0.1)
7.5
5,780
40.0
32.2
7.5x
3.2x
2.0x
4.6x
39.0
48.4
25.2
National Petrochemical Middle East & Africa (ex-Saudi Arabia)
Sidi Kerir Al Qurain
191
7.3
17.0
5.3x
0.6x
0.8x
7.6x
8.8
3.7
5.4
278,235
26.1
16.0
8.3x
1.4x
1.5x
4.5x
16.4
26.6
9.8
BASF
54,897
9.0
5.7
13.7x
2.2x
1.1x
7.4x
13.6
21.6
5.6
Solvay
9,051
NA
NA
27.6x
1.2x
1.0x
6.1x
NA
NA
NA
Lanxess
3,488
3.5
1.0
54.6x
1.8x
0.7x
7.7x
3.6
12.4
1.1
Sasol Europe
Arkema
4,200
6.6
3.5
20.4x
1.2x
0.9x
8.0x
7.0
13.1
3.3
Yara
93,143
13.1
7.5
14.1x
1.6x
1.1x
6.5x
11.7
20.5
7.0
Akzo Nobel
13,504
10.6
6.6
21.4x
2.5x
1.2x
9.6x
16.0
25.6
6.1
5,550
7.2
3.9
20.3x
2.6x
1.2x
8.8x
9.1
16.7
3.0
Clariant North America Eastman
9,482
14.3
8.8
9.9x
2.8x
1.8x
10.8x
22.8
37.1
5.4
54,303
14.8
15.8
12.8x
2.5x
1.3x
7.7x
36.9
36.3
11.2
Westlake
5,615
21.5
14.5
10.4x
2.3x
1.6x
5.4x
20.8
31.1
12.0
Celanese Corp
8,875
5.7
5.4
13.9x
3.0x
1.8x
11.1x
11.7
12.5
3.5
Methanex
2,840
10.7
9.0
17.7x
2.1x
1.9x
8.1x
11.4
13.6
4.3
34,667
18.7
13.7
9.1x
5.0x
1.1x
6.2x
60.1
82.4
19.1
Axiall Corp
1,405
(19.0)
(22.5)
19.5x
0.7x
0.8x
8.5x
(36.1)
(35.1)
(14.7)
Huntsman Corp
2,665
3.9
0.9
7.7x
2.4x
0.8x
9.8x
5.8
25.2
0.9
Indorama Ventures
103,507
5.3
2.8
21.4x
1.3x
0.8x
10.3x
7.6
16.3
3.2
Mitsui Chemicals
377,125
4.6
2.2
13.3x
1.0x
0.6x
9.3x
7.8
16.1
2.3
Sumitomo
817,790
7.9
4.0
13.5x
1.2x
0.9x
8.1x
11.3
22.1
3.0
Formosa Chemicals & Fibre Corp
443,106
3.3
4.6
27.1x
1.5x
1.4x
15.4x
5.7
4.2
2.9
10,950,996
13.8
8.5
13.1x
1.2x
0.7x
5.7x
11.1
19.7
6.9
509,259
5.5
16.1
21.2x
1.6x
2.2x
25.8x
9.0
3.9
5.8
19,881,331
9.0
5.7
17.3x
1.2x
0.8x
6.1x
7.9
13.7
5.7
Saudi Petrochemical Index
316,439
13.5
6.1
15.4x
1.5x
2.4x
9.1x
5.5
NA
2.1
S&P500 Chemical Index
371,227
15.2
11.9
15.9x
4.0x
2.1x
10.6x
27.0
NA
8.4
MSCI World Chemical Index
874,271
11.5
7.9
16.4x
2.6x
1.6x
9.5x
15.5
NA
5.9
1,400,910
18.6
16.5
15.8x
1.8x
3.8x
11.9x
10.4
NA
2.5
Dow
LyondellBasell Industries
Asia
Lotte Chemical Corp Formosa Plastics Corp LG Chem Indices
TASI
Source: Bloomberg, Al Rajhi Capital Notes: 1) Market cap in local currency. 2) Profit margins based on TTM performance. 3) All valuation ratios as on February 29, 2016 prices.
Disclosures Please refer to the important disclosures at the back of this report.
11
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report was prepared by Al Rajhi Capital (Al Rajhi), a company authorized to engage in securities activities in Saudi Arabia. Al Rajhi is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 20 Broad Street 26th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Al Rajhi. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.
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Disclosures Please refer to the important disclosures at the back of this report.
12
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Disclaimer and additional disclosures for Equity Research Disclaimer This research document has been prepared by Al Rajhi Capital Company (“Al Rajhi Capital”) of Riyadh, Saudi Arabia. It has been prepared for the general use of Al Rajhi Capital’s clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Al Rajhi Capital. Receipt and review of this research document constitute your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this document prior to public disclosure of such information by Al Rajhi Capital. The information contained was obtained from various public sources believed to be reliable but we do not guarantee its accuracy. Al Rajhi Capital makes no representations or warranties (express or implied) regarding the data and information provided and Al Rajhi Capital does not represent that the information content of this document is complete, or free from any error, not misleading, or fit for any particular purpose. This research document provides general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment products related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that the price or value of such securities and investments may rise or fall. Fluctuations in exchange rates could have adverse effects on the value of or price of, or income derived from, certain investments. Accordingly, investors may receive back less than originally invested. Al Rajhi Capital or its officers or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments, including long or short positions in securities, warrants, futures, options, derivatives, or other financial instruments. Al Rajhi Capital or its affiliates may from time to time perform investment banking or other services for, solicit investment banking or other business from, any company mentioned in this research document. Al Rajhi Capital, together with its affiliates and employees, shall not be liable for any direct, indirect or consequential loss or damages that may arise, directly or indirectly, from any use of the information contained in this research document. This research document and any recommendations contained are subject to change without prior notice. Al Rajhi Capital assumes no responsibility to update the information in this research document. Neither the whole nor any part of this research document may be altered, duplicated, transmitted or distributed in any form or by any means. This research document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or which would subject Al Rajhi Capital or any of its affiliates to any registration or licensing requirement within such jurisdiction.
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2. Definitions "Time horizon": Our analysts make recommendations on a 6-9 month time horizon. In other words, they expect a given stock to reach their target price within that time. "Fair value": We estimate fair value per share for every stock we cover. This is normally based on widely accepted methods appropriate to the stock or sector under consideration, e.g. DCF (discounted cash flow) or SoTP (sum of the parts) analysis. "Target price": This may be identical to estimated fair value per share, but is not necessarily the same. There may be very good reasons why a share price is unlikely to reach fair value within our time horizon. In such a case we set a target price which differs from estimated fair value per share, and explain our reasons for doing so. Please note that the achievement of any price target may be impeded by general market and economic trends and other external factors, or if a company’s profits or operating performance exceed or fall short of our expectations.
Contact us Pritish K. Devassy, CFA Tel : +966 11 211 9370 [email protected] Al Rajhi Capital Research Department Head Office, King Fahad Road P.O. Box 5561 Riyadh 11432 Kingdom of Saudi Arabia Email: [email protected] Al Rajhi Capital is licensed by the Saudi Arabian Capital Market Authority, License No. 37/07068.
Disclosures Please refer to the important disclosures at the back of this report.
13
Research Department ARC Research Team Tel +966 11 211 9370, [email protected]
Monthly update In our monthly note, we update price movements of major petrochemical products, manufacturing activity in key demand markets, recent announcements and valuation of Saudi petrochemical companies and their global peers. Price movement of key petrochemical products
Products
1-Month
Y-o-Y
Ethylene
-1.2%
-13.6%
HDPE
+5.6%
-2.2%
LDPE
+4.1%
-0.4%
Propylene
+9.2%
-41.6%
Polypropylene
+5.2%
-18.1%
Methanol
+4.3%
-17.5%
Benzene
+2.8%
-20.7%
Ammonia
-5.6%
-36.3%
+12.8%
-41.3%
Urea
YTD Performance (Rebased to 100) 180 140 100
60
SABIC
Sipchem
SAFCO
Yansab
APC
TASI
Source: Bloomberg, Al Rajhi Capital
Jan-16
Feb-16
Dec-15
Oct-15
Nov-15
Sep-15
Jul-15
Aug-15
Jun-15
Apr-15
May-15
Mar-15
Feb-15
20
NIC
Petrochemicals Monthly - Mar 2016 Product prices rise supported by crude After showing downward movement over the last few months, benchmark crude prices witnessed improvement (Brent: +8.3% m-o-m; WTI: +0.4% m-om) in February on hopes that global oil glut may ease as major oil producers agreed to freeze production. The decrease in US oil rig count also supported oil prices, while stronger consumer spending in US buoyed hopes of increase in demand. Major petrochemical product prices also rose in February on the back of higher crude prices. Manufacturing PMI in US showed improvement but remained in contraction territory while China’s PMI slipped further. The Saudi Petrochemical index moved up 2.8% during the month, led by gains in major stocks Sipchem (16%), Yansab (10.4%), along with positive contribution from Alujain (15.9%), SABIC (3.3%) and NIC (1.8%). Meanwhile, TASI also inched up 1.6% m-o-m. Crude prices move higher: Brent crude and WTI prices rose 8.3% and 0.4% in February 2016. The increase in crude prices was largely due to major oil members agreeing to freeze their production along with decline in US rig count (400 as of February 26 vs 516 at the beginning of 2016; source: Baker Hughes) and strong US economic data that sparked hopes of increase in demand which will help balance the demand and supply. US crude inventories recorded its highest peak since April 2015, increasing by 10.37mn barrels for the week ending February 26 compared to 3.5mn barrels last month as well as higher than the market expectations of 3.5mn barrels for the week. OPEC crude production dipped by 0.28mbpd in February to record 32.37mbpd as compared to the revised figure of 32.65 mbpd in January 2016 (Source: Bloomberg). Manufacturing shows mixed trend: US January PMI improved to 49.5 supported by new orders and production, but remained in contraction territory. Eurozone PMI dropped to 51.2 in February from 52.3 in January due to sluggish growth in new business and new export orders. The Caixin Manufacturing PMI for China continued to be in the contraction zone declining marginally to 48.0 in February (48.4 in January, 2016) on the back of declining output and total new orders. The manufacturing PMI in India was flat at 51.1 in February, as growth in new business was partially offset by sluggish production. Product prices improve: Almost all the major petrochemical product prices gained over the month following gains in crude oil prices. Urea (+12.8%), Styrene (+11%), MEG (+12.0%), Propylene (+9.2%), Polypropylene (+5.2%), HDPE (+5.6%) were the major gainers over the month. Meanwhile, Methanol (+4.3%), LDPE (+4.1%), Benzene (+2.8%) were also significant gainers. However, MTBE (-8.9%), Ammonia (-5.6%), Ethylene (-1.2%) dropped on m-om basis. Saudi Petrochemical Index rises: The Saudi Petrochemicals Index rose 2.8% in the month of February on the back of uptick in oil prices and major petrochemical products. Sipchem and Yansab advanced 16% and 10.4% respectively, while SABIC and NIC rose 3.3% and 1.8% respectively. Meanwhile, the TASI also rose by 1.6% m-o-m in February.
Please see penultimate page for additional important disclosures. Al Rajhi Capital (Al Rajhi) is a foreign broker-dealer unregistered in the USA. Al Rajhi
research is prepared by research analysts who are not registered in the USA. Al Rajhi research is distributed in the USA pursuant to Rule 15a-6 of the Securities Exchange Act of 1934 solely by Rosenblatt Securities, an SEC registered and FINRA-member broker-dealer.
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Key news & announcements Saudi Aramco said to maintain number of oil, gas rigs in 2016: Saudi Aramco is expected to maintain the number of its oil and gas drilling rigs at around 212 this year, despite declining oil prices, Reuters reported, citing unnamed industry sources. The stateowned energy giant has recently asked oilfield service companies and suppliers for more discounts due to oil slump, one source told the news agency, adding that the company was able to save on drilling costs through this approach. Last year, industry sources revealed that Saudi Aramco was planning to increase the number of oil and gas rigs in 2016 to 250. (Source: Argaam) Tasnee, Sahara's butyl acrylate plant operating at 50-60%: Tasnee & Sahara Olefins Co.’s butyl acrylate plant in Jubail is currently operating at 50 to 60% capacity, ICIS reported. The company is expected to maintain operations at these levels, if market conditions do not become more favorable, the source added. Tasnee Sahara Olefins, which is owned by Tasnee and Sahara Petrochemical Co., owns a majority stake in Saudi Acrylic Monomer Co. Limited, the operator of the butyl acrylate project. (Source: Argaam) SIDF approves Chemanol’s debt restructuring plan: The SIDF has approved Methanol Chemical Co.’s nine-payment restructuring plan for a loan worth SAR 385mn, the company, said on Sunday. The payments, which will range between SAR 25mn and SAR 50mn, will be due from January 13, 2017 to October 2, 2020, Chemanol said in a statement to Tadawul, the Saudi bourse. (Source: Argaam) Sipchem pays $100m to raise stakes in 2 units: Sipchem said it has paid 375.3 mn riyals to raise its stake in two subsidiaries. The firm will buy stakes owned by Kuwait’s Ikarus Petroleum Industries in International Acetyl Company and International Vinyl Acetate Company after receiving regulatory approval, Sipchem said in a bourse statement. Sipchem, which already owns 76% of both subsidiaries, said the deals would raise its holdings in each to 87%. The financial impact of the purchases will be shown in the first quarter of 2016, it said in the statement. (Source: Gulf Base) Advanced’s PP production up 3% despite plant shutdown in 2015: APC produced 579,000 tons of poly propylene in 2015, a 3% y-o-y rise despite a 22-day maintenance shutdown, according to a report issued by the board of directors. The Saudi-based petchem producer sold 561,000 tons of PP in 2014. The drop in average production costs per ton was higher than the decrease in product selling prices, which offset the drop in profit margins, the report showed. (Source: Argaam) Petro Rabigh to incur SAR1bn additional costs on project delay: The delay of contractors in accomplishing their works in Phase II of "Rabigh" project owned by Rabigh Refining & Petrochemical Company, for nine months behind schedule led to additional costs by around SAR 1 billion, according to a local gazette. The "Rabigh" project was planned to be handed over by early 2016, Arriyadh newspaper reported. However, the company announced completion of all construction works in the project in September 2016, leading to an escalation in costs by SAR 1bn from SAR 30bn to SAR 31bn. (Source: Mubasher) Saudi Kayan awards $95 mln contract to Taiwan’s CTCI: Saudi Kayan Petrochemical Co. has awarded Taiwan's CTCI Corp. a contract worth $94.5mn to build a new cracker at its complex in Jubail Industrial City, the company said in a bourse statement on Monday. Under the deal, CTCI will manage the engineering, procurement and construction management for the project, which is located in the Eastern Province of Saudi Arabia. The company added that it will secure the related finance from local institutions, expecting to complete the new cracker in H2-2017. The date of trial operation and the expected financial impact will be announced later. (Source: Argaam) SAFCO to shut SAFCO II, SAFCO 5 for maintenance in 2016: SAFCO, has announced plans to halt operations in its SAFCO 5 urea plant and the two urea and Disclosures Please refer to the important disclosures at the back of this report.
2
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
ammonia plants in SAFCO II for scheduled maintenance lasting for 47 days in SAFCO II plant and 25 days in SAFCO V urea plant. However, no specific dates have been announced by the company. The Saudi chemicals producer will further shut its 50 percent-owned Ibn Al-Bayttar ammonia plant for 23 days. (Source: Argaam) Sadara complex is 98% complete, says Saudi Aramco: State-owned oil company, Saudi Aramco, said that the $20 billion Sadara petrochemical complex in Jubail is 98% complete and is expected to launch full operations by 2017. Sadara’s first manufacturing unit, a polyethylene plant, has already started production in December 2015. Sadara is 65% owned by Saudi Aramco and 35% by American- Dow Chemicals, according to data compiled by Argaam. The complex, consisting of 26 manufacturing units, is considered to be the world’s largest complex to be built in a single phase. (Source: Argaam) Chemanol cuts cost impact after Aramco holds gas price till June: Chemanol has lowered the expected financial impact of higher feed gas price in 2016 to SAR 25mn from the SAR 30mn projected earlier following the Saudi cabinet’s decision to raise feedstock gas and energy prices to narrow the government’s budgetary deficit. Chemanol said in a statement to the Saudi bourse, Tadawul, on Monday that the revision comes after it received a notification from Aramco that it will be supplied methane at the old price of $0.75 per MMBTU for a period of seven years and 90 days, starting from the actual supply date. (Source: Argaam) Chemanol won't pay dividend on 2015 results: Chemanol said its board of directors recommended withholding cash dividends for fiscal year 2015. The board’s recommendation aims at supporting the financial position of the company and enhancing strategic plans, the chemicals producer said in a statement on Monday. Chemanol reported a net loss of SAR 139.4mn for FY15, compared to a net profit of SAR 32.2mn in 2014. (Source: Argaam) Nama says to continue developing substitutes for imports: Nama Chemicals Co.’s board of directors approved on Sunday a proposal to continue developing new substitutes for some imported products, the company said in a statement to Tadawul. The company, which produces caustic soda and epoxy resin, narrowed losses in fiscal year 2015 to SAR 74mn, compared with SAR 112.5mn the previous year. (Source: Argaam) Advanced approves SAR 0.75/share (7.5%) dividend for Q415: Advanced Petrochemical Company has approved a 7.5 percent cash dividend to be issued at SAR 0.75 per share for Q4-2015 profit. (Source: Argaam) Advanced plans SAR 0.75/share (7.5%) dividend for Q116: APC’s board of directors has recommended a 7.5 percent cash dividend to be issued at SAR 0.75 per share for the first quarter of 2016. The company’s CEO was recently cited by the media as saying that Advanced will maintain its annual dividend payout of SAR 3 per share. (Source: Argaam)
Tasnee pushes ilmenite plant trial run to H1: National Industrialization Co.’s ilmenite processing plant will delay trial operations to a later time during H1-2016 due to technical issues, the company said in an annual report. Tasnee said in July it would postpone the trial run to Q1-2016, while commercial operation was scheduled to start during H1-2016. The facility, located in Jazan Economic City, will produce titanium slag at an initial annual capacity of 500,000 tons, which is designed to expand to one million tons. (Source: Argaam)
Disclosures Please refer to the important disclosures at the back of this report.
3
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Saudi Petrochemical Index vs. Major Indices Figure 1 Saudi Petrochemical Index vs. TASI and Industry Indices (Petrochemical Index +2.8% and TASI +1.6% m-o-m) 175 150 125 100 75 50 25 0 Feb-13
May-13
Aug-13
Nov-13
Feb-14
Saudi Petrochemical Index
May-14
Aug-14
Nov-14
S&P500 Chemical Index
Feb-15
May-15
MSCI World Chemical Index
Aug-15
Nov-15
Feb-16
TASI
Source: Bloomberg Note: Rebased to 100 on February 28, 2013
Crude, Gas and Naphtha Spot Prices Figure 2 European Brent Crude (+8.3% m-o-m)
Figure 3 WTI Crude (+0.4% m-o-m) US$/barrel 120
US$/barrel 140 120
100
100 80 80 60 60
40 40 20
20 0 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
0 Feb-10
Feb-11
Feb-12
Source: Bloomberg
Source: Bloomberg
Figure 4 Natural gas (Henry Hub) (-28.2% m-o-m)
Figure 5 Naphtha (-6% m-o-m)
Feb-13
Feb-14
Feb-15
Feb-16
Feb-13
Feb-14
Feb-15
Feb-16
US$/ton 1200
US$/mmbtu 10
1000
8
800 6 600
4 400 2
0 Feb-10
200
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
0 Feb-10
Feb-11
Feb-12
Source: Bloomberg
4
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Manufacturing activity and economic growth trend in key markets Figure 6 United States Manufacturing PMI (49.5 vs 48.2)
Figure 7 Euro zone Manufacturing PMI (51.2 vs 52.3)
60
56
58 54 56 52
54 52
50
50 48
Jan-16
Feb-16 Feb-16
54
Jan-16
Figure 9 India Manufacturing PMI (51.1 vs 51.1)
Dec-15
Figure 8 China Manufacturing PMI (48 vs 48.4)
Dec-15
Source: Markit
Nov-15
Source: US ISM
Nov-15
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
46
Jul-15
May-15
Apr-15
Mar-15
Feb-15
46
Jun-15
48
58
56 52 54
50
52 50
48
Source: Caixin-Markit
Oct-15
Sep-15
Aug-15
Jul-15
Jun-15
May-15
Apr-15
Mar-15
Feb-15
Feb-16
Jan-16
Dec-15
Nov-15
Oct-15
Sep-15
Aug-15
46
Jul-15
May-15
Apr-15
Mar-15
Feb-15
46
Jun-15
48
Source: Nikkei-Markit
Figure 10 Real GDP growth trend % growth 10.0
8.0
6.0
4.0
2.0
0.0 Q4 2014
Q1 2015
Q2 2015
Q3 2015 US
Q4 2015
Q1 2016E Q2 2016E Q3 2016E Q4 2016E Q1 2017E
Euro Area
China
India
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
5
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Petrochemical product price trends Basic Olefins & Polyolefins Figure 11 Ethylene (-1.2% m-o-m)
Figure 12 Polyethylene (HDPE: +5.6%, LDPE: +4.1% m-o-m)
US$/ton 1800
US$/ton 1800
1600
1600
1400
1400
1200
1200
1000
1000 800 800 600 400 Feb-10
600 Feb-10 Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-11
Feb-16
Feb-12
Feb-13
HDPE
Feb-14
Source: Bloomberg
Source: Bloomberg
Figure 13 Propylene (+9.2% m-o-m)
Figure 14 Polypropylene (+5.2% m-o-m)
US$/ton 2000
US$/ton 2000
1800
1800
1600
1600
1400
1400
1200
1200
1000
1000
800
800
600
600
400
400
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
200 Feb-10
Feb-11
Feb-12
Feb-15
Feb-16
Feb-15
Feb-16
LDPE
Feb-13
Feb-14
Source: Bloomberg
Methanol & MTBE Figure 15 Methanol (+4.3% m-o-m)
Figure 16 Methyl Tertiary Butyl Ether (MTBE) (-8.9% m-o-m)
US$/ton 600
US$/ton 1600
500
1400 1200
400
1000
300
800
200 600
100 400
0 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
-100 Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
6
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Benzene & its derivatives Figure 17 Benzene (+2.8% m-o-m)
Figure 18 Toluene (+2.6% m-o-m)
US$/ton 1600
US$/ton 1600
1400
1400
1200
1200
1000
1000
800
800
600
600
400
400
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
200 Feb-10
Feb-11
Feb-12
Feb-13
Source: Bloomberg
Source: Bloomberg
Figure 19 Styrene (+11.0% m-o-m)
Figure 20 Polystyrene (+2.8% m-o-m)
US$/ton 2000
US$/ton 2250
1800
2000
1600
Feb-14
Feb-15
Feb-16
Feb-14
Feb-15
Feb-16
Feb-15
Feb-16
1750
1400 1500 1200 1250 1000 1000
800
750
600 400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
500 Feb-10
Feb-11
Feb-12
Feb-13
Source: Bloomberg
Other key petrochemical products Figure 21 Mono-ethylene glycol (+12.0% m-o-m)
Figure 22 Ethylene Di-Chloride (+0.0% m-o-m) US$/ton 600
US$/ton 1800 1600
500 1400 400
1200 1000
300
800 200 600 400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
100 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Source: Company data, Al Rajhi Capital
7
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Figure 23 Vinyl chloride monomer (+1.7% m-o-m)
Figure 24 Polyvinyl chloride (+4.8% m-o-m)
US$/ton 1200
US$/ton 1400
1200
1000 1000 800
800 600 600
400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
400 Feb-10
Figure 25 Purified terephthalic acid (+3.5% m-o-m)
Feb-13
Feb-14
Feb-15
Feb-16
Figure 26 Caustic soda (+2.3% m-o-m) US$/ton 800
1400
700
1200
600
1000
500
800
400
600
300
Feb-11
Feb-12
Source: Bloomberg
US$/ton 1600
400 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
200 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Ammonia & Fertilizers Figure 27 Ammonia (-5.6% m-o-m)
Figure 28 Urea (+12.8% m-o-m)
US$/ton 700
US$/ton 700 600
600
500 500 400
400 300 300
200 Feb-10
200
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Disclosures Please refer to the important disclosures at the back of this report.
100 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
8
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Metals Figure 29 Gold (+10.2% m-o-m)
Figure 30 Aluminum (+5.9% m-o-m)
US$/oz 2000
US$/oz 2000
1800
1800
1600
1600
1400
1400
1200
1200
1000
1000
800
800
600 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
600 Feb-10
Feb-11
Feb-12
Feb-13
Feb-14
Feb-15
Feb-16
Source: Bloomberg
Figure 31 Price movement of key petrochemicals, fertilizers and metals Products
Recent Price
% Change YTD
1-Year
European Brent (US$/bbl)
36.0
8.3
0.6
0.6
(41.8)
WTI (US$/bbl)
33.8
0.4
(8.9)
(8.9)
(32.2)
1.6
(28.2)
(30.1)
(30.1)
(41.3)
326.5
(6.0)
(20.5)
(20.5)
(40.7)
Ethylene
795
(1.2)
(10.7)
(10.7)
(13.6)
HDPE
1130
5.6
7.6
7.6
(2.2)
LDPE
1150
4.1
8.5
8.5
(0.4)
Propylene
563
9.2
(7.6)
(7.6)
(41.6)
Polypropylene
905
5.2
7.1
7.1
(18.1)
Methanol
217
4.3
7.4
7.4
(17.5)
MTBE
471
(8.9)
(10.8)
(10.8)
(40.6)
Benzene
555
2.8
(2.6)
(2.6)
(20.7)
Toluene
585
2.6
(5.6)
(5.6)
(14.0)
Styrene
955
11.0
9.1
9.1
(14.3)
Polystyrene
1085
2.8
1.9
1.9
(6.1)
Mono-ethylene glycol
796
12.0
9.9
9.9
(21.1)
Ethylene di-chloride
225
0.0
(6.3)
(6.3)
(22.4)
Vinyl chloride monomer
600
1.7
(2.4)
(2.4)
(19.5)
Polyvinyl chloride
765
4.8
6.3
6.3
(7.8)
Purified terephthalic acid
585
3.5
0.9
0.9
(8.6)
Caustic soda
542
2.3
0.6
0.6
(0.2)
Natural Gas (US$/mmbtu) Naphtha (US$/ton)
1-Month
QTD
Key petrochemicals (US$/ton)
Other petrochemicals (US$/ton)
Fertilizers (US$/ton) Ammonia
255
(5.6)
(15.0)
(15.0)
(36.3)
Urea
220
12.8
(8.3)
(8.3)
(41.3)
Gold (US$/oz)
1233
10.2
16.2
16.2
1.6
Aluminum (US$/ton)
1677
5.9
(0.5)
(0.5)
(16.9)
Metals
Source: Bloomberg, Al Rajhi Capital
Disclosures Please refer to the important disclosures at the back of this report.
9
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Figure 32 Performance of Saudi petrochemical companies vs. global peers Company
Currency
Last Price
% Change 1 Month
QTD
52-Week YTD
1 Year
High
Dividend Low
LTM
Yield
Saudi Arabia SABIC
SAR
72.73
3.3
(4.9)
(4.9)
(35.2)
110.5
59.5
5.5
7.6%
SAFCO
SAR
68.92
(0.5)
(16.1)
(16.1)
(23.6)
127.5
62.0
5.4
7.8%
Sipchem
SAR
13.26
16.1
(5.4)
(5.4)
(50.3)
36.1
9.8
1.3
9.4%
NIC
SAR
8.69
1.8
(18.1)
(18.1)
(62.4)
27.7
7.5
1.0
11.5%
Yansab
SAR
33.98
10.4
4.8
4.8
(38.1)
57.5
23.8
2.5
7.4%
APC
SAR
36.04
(1.9)
(2.7)
(2.7)
(10.6)
61.0
31.9
3.0
8.3%
SPC
SAR
8.26
0.7
(19.3)
(19.3)
(53.5)
18.1
7.4
0.9
10.3%
Saudi Kayan
SAR
4.88
(2.4)
(27.9)
(27.9)
(50.3)
13.9
4.4
NA
NM
PetroRabigh
SAR
9.30
(4.0)
(24.3)
(24.3)
(50.0)
26.7
7.0
0.5
5.4%
SIIG
SAR
11.42
(4.3)
(17.3)
(17.3)
(51.8)
29.9
9.8
1.0
8.8%
Chemanol
SAR
5.73
6.3
(19.9)
(19.9)
(47.8)
15.1
5.0
NA
NM
Nama
SAR
5.59
0.7
(21.7)
(21.7)
(51.1)
13.6
5.0
NA
NM
Alujain
SAR
13.16
15.9
(8.7)
(8.7)
(35.0)
24.8
9.5
NA
NM
National Petrochemical
SAR
14.93
4.3
(10.6)
(10.6)
(43.3)
30.4
10.6
NA
NM
Industries Qatar
QAR
104.80
4.8
(1.2)
(1.2)
(26.7)
152.2
88.0
5.0
4.8%
Mesaieed Petrochem
QAR
17.90
2.3
(7.7)
(7.7)
(33.2)
28.0
14.0
1.1
6.1%
Sidi Kerir
EGP
11.01
5.2
(3.1)
(3.1)
(26.3)
15.5
10.0
0.4
3.6%
Al Qurain
KWd
174.00
6.1
(7.4)
(7.4)
(25.9)
216.0
140.0
10.0
5.7%
ZAr
42,714.00
2.2
1.8
1.8
(28.5)
49,538.0
35,400.0
1,850.0
4.3%
BASF
EUR
59.77
(16.6)
(15.5)
(15.5)
(5.3)
97.2
56.0
2.8
4.7%
Solvay
EUR
85.49
(13.0)
(12.6)
(12.6)
(9.9)
132.6
70.5
3.3
3.9%
Lanxess
EUR
38.12
(12.4)
(10.7)
(10.7)
(3.1)
56.5
32.9
0.5
1.3%
Arkema
EUR
56.40
(13.7)
(13.4)
(13.4)
17.3
75.8
48.2
1.9
3.3%
Yara
NOK
338.60
(11.8)
(11.6)
(11.6)
22.7
444.6
307.5
13.0
3.8%
Akzo Nobel
EUR
54.24
(13.6)
(13.0)
(13.0)
14.7
75.5
49.9
1.5
2.7%
Clariant
CHF
16.72
(12.6)
(12.0)
(12.0)
10.2
21.7
15.3
0.4
2.4%
Eastman
USD
64.15
(7.1)
(5.4)
(5.4)
(10.3)
83.9
56.0
1.7
2.6%
Dow
USD
48.61
(7.9)
(5.9)
(5.9)
(15.5)
57.1
35.1
1.7
3.5%
Westlake
USD
43.12
(22.2)
(21.0)
(21.0)
(42.6)
79.3
39.9
0.7
1.6%
Celanese Corp
USD
60.34
(10.3)
(10.1)
(10.1)
(1.3)
74.2
54.1
1.2
2.0%
Methanex
USD
31.67
(9.1)
(5.5)
(5.5)
(37.8)
61.4
22.7
1.1
3.4%
LyondellBasell Industries
USD
80.21
(8.6)
(7.7)
(7.7)
(22.8)
107.3
69.1
3.1
3.9%
Axiall Corp
USD
19.90
28.9
28.5
28.5
(38.3)
47.9
9.0
0.6
3.2%
Huntsman Corp
USD
10.86
(4.2)
(3.6)
(3.6)
(37.2)
23.8
7.5
0.5
4.6%
Middle East & Africa (ex-Saudi Arabia)
Sasol Europe
North America
Asia Indorama Ventures
THB
21.50
0.9
0.9
0.9
(17.9)
28.5
19.0
0.4
2.0%
Mitsui Chemicals
JPY
369.00
(31.3)
(31.9)
(31.9)
35.8
545.0
351.0
7.0
1.9%
Sumitomo
JPY
494.00
(29.8)
(29.5)
(29.5)
65.2
795.4
441.0
11.0
2.2%
Formosa Chemicals & Fibre Corp
TWD
74.80
7.3
6.1
6.1
(4.9)
80.4
59.0
1.2
NM
Lotte Chemical Corp
KRW
319,500.00
32.8
31.2
31.2
52.0
334,000.0
186,000.0
2,500.0
NM
Formosa Plastics Corp
TWD
79.00
8.4
7.5
7.5
(5.2)
81.7
59.5
1.7
NM
LG Chem
KRW
300,000.00
(9.6)
(8.7)
(8.7)
(11.3)
344,500.0
206,500.0
4,500.0
1.5%
Saudi Petrochemical Index
SAR
3,850.76
2.8
(9.9)
(9.9)
(44.2)
7,069.2
3,267.1
283.3
7.4%
S&P500 Chemical Index
USD
447.55
(7.2)
(6.2)
(6.2)
(11.6)
538.2
400.4
11.5
2.6%
MSCI World Chemical Index
USD
241.03
(8.9)
(8.2)
(8.2)
(10.5)
301.2
228.4
6.9
2.8%
TASI
SAR
6,092.50
1.6
(11.9)
(11.9)
(32.3)
9,897.5
5,348.6
255.2
4.2%
Indices
Source: Bloomberg, Al Rajhi Capital Note: SAFCO dividends/yield adjusted for bonus shares. Prices as of February 29, 2016.
Disclosures Please refer to the important disclosures at the back of this report.
10
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Figure 33 Margins and Valuation Metrics - Saudi petrochemical companies vs. global peers Company
Market Cap
Operating margin
Net margin
P/E
P/B
EV/Sales
EV/EBITDA
ROE
Operating_R OE
ROA
Saudi Arabia SABIC
218,190
19.5
12.6
11.7x
1.5x
1.8x
6.2x
11.6
18.0
5.6
SAFCO
28,717
55.8
60.1
14.1x
5.0x
9.2x
12.7x
27.6
25.6
23.8
Sipchem
4,862
16.8
8.2
15.5x
1.3x
4.1x
10.0x
4.9
10.0
1.7
NIC
5,813
0.2
(9.5)
NA
1.0x
2.2x
11.1x
(14.5)
0.3
(3.1)
Yansab
19,114
22.3
17.5
14.1x
1.7x
3.4x
8.0x
7.8
10.0
5.6
APC
6,027
31.2
30.0
9.5x
3.1x
2.8x
7.9x
29.2
30.4
18.5
SPC
3,624
14.2
2.5
80.7x
1.0x
4.6x
22.4x
0.6
3.6
0.4
Saudi Kayan
7,320
(7.4)
(15.6)
NA
1.0x
4.1x
15.7x
(9.3)
(4.4)
(2.8)
PetroRabigh
8,147
(3.0)
(3.0)
18.4x
1.5x
1.0x
14.0x
(8.5)
(8.5)
(1.6)
SIIG
5,139
24.0
10.0
9.5x
1.3x
3.1x
10.0x
10.5
25.2
2.7
34.4x
0.7x
2.3x
8.5x
(9.5)
(5.2)
(5.3)
Chemanol
691
(10.4)
(19.0)
Nama
718
(20.1)
(16.1)
NA
0.9x
3.3x
119.3x
(6.4)
(8.0)
(3.0)
Alujain
911
19.0
7.3
8.9x
1.2x
1.7x
6.1x
10.9
28.5
3.1
7,166
24.1
12.4
11.3x
1.8x
2.9x
9.3x
17.0
33.0
4.1
Industries Qatar
63,404
16.8
85.0
13.0x
2.4x
13.4x
62.1x
13.2
2.6
12.3
Mesaieed Petrochem
22,488
NA
NA
20.9x
2.0x
NA
NA
7.6
(0.1)
7.5
5,780
40.0
32.2
7.5x
3.2x
2.0x
4.6x
39.0
48.4
25.2
National Petrochemical Middle East & Africa (ex-Saudi Arabia)
Sidi Kerir Al Qurain
191
7.3
17.0
5.3x
0.6x
0.8x
7.6x
8.8
3.7
5.4
278,235
26.1
16.0
8.3x
1.4x
1.5x
4.5x
16.4
26.6
9.8
BASF
54,897
9.0
5.7
13.7x
2.2x
1.1x
7.4x
13.6
21.6
5.6
Solvay
9,051
NA
NA
27.6x
1.2x
1.0x
6.1x
NA
NA
NA
Lanxess
3,488
3.5
1.0
54.6x
1.8x
0.7x
7.7x
3.6
12.4
1.1
Sasol Europe
Arkema
4,200
6.6
3.5
20.4x
1.2x
0.9x
8.0x
7.0
13.1
3.3
Yara
93,143
13.1
7.5
14.1x
1.6x
1.1x
6.5x
11.7
20.5
7.0
Akzo Nobel
13,504
10.6
6.6
21.4x
2.5x
1.2x
9.6x
16.0
25.6
6.1
5,550
7.2
3.9
20.3x
2.6x
1.2x
8.8x
9.1
16.7
3.0
Clariant North America Eastman
9,482
14.3
8.8
9.9x
2.8x
1.8x
10.8x
22.8
37.1
5.4
54,303
14.8
15.8
12.8x
2.5x
1.3x
7.7x
36.9
36.3
11.2
Westlake
5,615
21.5
14.5
10.4x
2.3x
1.6x
5.4x
20.8
31.1
12.0
Celanese Corp
8,875
5.7
5.4
13.9x
3.0x
1.8x
11.1x
11.7
12.5
3.5
Methanex
2,840
10.7
9.0
17.7x
2.1x
1.9x
8.1x
11.4
13.6
4.3
34,667
18.7
13.7
9.1x
5.0x
1.1x
6.2x
60.1
82.4
19.1
Axiall Corp
1,405
(19.0)
(22.5)
19.5x
0.7x
0.8x
8.5x
(36.1)
(35.1)
(14.7)
Huntsman Corp
2,665
3.9
0.9
7.7x
2.4x
0.8x
9.8x
5.8
25.2
0.9
Indorama Ventures
103,507
5.3
2.8
21.4x
1.3x
0.8x
10.3x
7.6
16.3
3.2
Mitsui Chemicals
377,125
4.6
2.2
13.3x
1.0x
0.6x
9.3x
7.8
16.1
2.3
Sumitomo
817,790
7.9
4.0
13.5x
1.2x
0.9x
8.1x
11.3
22.1
3.0
Formosa Chemicals & Fibre Corp
443,106
3.3
4.6
27.1x
1.5x
1.4x
15.4x
5.7
4.2
2.9
10,950,996
13.8
8.5
13.1x
1.2x
0.7x
5.7x
11.1
19.7
6.9
509,259
5.5
16.1
21.2x
1.6x
2.2x
25.8x
9.0
3.9
5.8
19,881,331
9.0
5.7
17.3x
1.2x
0.8x
6.1x
7.9
13.7
5.7
Saudi Petrochemical Index
316,439
13.5
6.1
15.4x
1.5x
2.4x
9.1x
5.5
NA
2.1
S&P500 Chemical Index
371,227
15.2
11.9
15.9x
4.0x
2.1x
10.6x
27.0
NA
8.4
MSCI World Chemical Index
874,271
11.5
7.9
16.4x
2.6x
1.6x
9.5x
15.5
NA
5.9
1,400,910
18.6
16.5
15.8x
1.8x
3.8x
11.9x
10.4
NA
2.5
Dow
LyondellBasell Industries
Asia
Lotte Chemical Corp Formosa Plastics Corp LG Chem Indices
TASI
Source: Bloomberg, Al Rajhi Capital Notes: 1) Market cap in local currency. 2) Profit margins based on TTM performance. 3) All valuation ratios as on February 29, 2016 prices.
Disclosures Please refer to the important disclosures at the back of this report.
11
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
IMPORTANT DISCLOSURES FOR U.S. PERSONS This research report was prepared by Al Rajhi Capital (Al Rajhi), a company authorized to engage in securities activities in Saudi Arabia. Al Rajhi is not a registered broker-dealer in the United States and, therefore, is not subject to U.S. rules regarding the preparation of research reports and the independence of research analysts. This research report is provided for distribution to “major U.S. institutional investors” in reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Rosenblatt Securities Inc, 20 Broad Street 26th Floor, New York NY 10005, a registered broker dealer in the United States. Under no circumstances should any recipient of this research report effect any transaction to buy or sell securities or related financial instruments through Al Rajhi. Rosenblatt Securities Inc. accepts responsibility for the contents of this research report, subject to the terms set out below, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority (“FINRA”) and may not be an associated person of Rosenblatt Securities Inc. and, therefore, may not be subject to applicable restrictions under FINRA Rules on communications with a subject company, public appearances and trading securities held by a research analyst account.
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Disclosures Please refer to the important disclosures at the back of this report.
12
Saudi Petrochemicals Sector Petrochemicals –Industrial 03 March 2016
Disclaimer and additional disclosures for Equity Research Disclaimer This research document has been prepared by Al Rajhi Capital Company (“Al Rajhi Capital”) of Riyadh, Saudi Arabia. It has been prepared for the general use of Al Rajhi Capital’s clients and may not be redistributed, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of Al Rajhi Capital. Receipt and review of this research document constitute your agreement not to redistribute, retransmit, or disclose to others the contents, opinions, conclusion, or information contained in this document prior to public disclosure of such information by Al Rajhi Capital. The information contained was obtained from various public sources believed to be reliable but we do not guarantee its accuracy. Al Rajhi Capital makes no representations or warranties (express or implied) regarding the data and information provided and Al Rajhi Capital does not represent that the information content of this document is complete, or free from any error, not misleading, or fit for any particular purpose. This research document provides general information only. Neither the information nor any opinion expressed constitutes an offer or an invitation to make an offer, to buy or sell any securities or other investment products related to such securities or investments. It is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek financial, legal or tax advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this document and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities or other investments, if any, may fluctuate and that the price or value of such securities and investments may rise or fall. Fluctuations in exchange rates could have adverse effects on the value of or price of, or income derived from, certain investments. Accordingly, investors may receive back less than originally invested. Al Rajhi Capital or its officers or one or more of its affiliates (including research analysts) may have a financial interest in securities of the issuer(s) or related investments, including long or short positions in securities, warrants, futures, options, derivatives, or other financial instruments. Al Rajhi Capital or its affiliates may from time to time perform investment banking or other services for, solicit investment banking or other business from, any company mentioned in this research document. Al Rajhi Capital, together with its affiliates and employees, shall not be liable for any direct, indirect or consequential loss or damages that may arise, directly or indirectly, from any use of the information contained in this research document. This research document and any recommendations contained are subject to change without prior notice. Al Rajhi Capital assumes no responsibility to update the information in this research document. Neither the whole nor any part of this research document may be altered, duplicated, transmitted or distributed in any form or by any means. This research document is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or which would subject Al Rajhi Capital or any of its affiliates to any registration or licensing requirement within such jurisdiction.
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Disclosures Please refer to the important disclosures at the back of this report.
13
