the Saudi Equity Market PDF
Open for QFIs Event Update
Welcome to the Saudi Equity Market
Research Team [email protected] +966-11-2036807 June 15, 2015 Source: ibtimes
Open for QFIs Event Update
At a Glance Saudi equity market opens for Qualified Foreign Investors (QFIs) from today With a market cap of USD 559bln, it is the largest in the Middle East Avg. trade value of USD 2.3 bln makes Saudi among Top 5 in the EM 67 stocks with market cap > USD 1 bln, only 5 stocks < USD 100mln 170 listed companies, > 90% stocks change hands daily Saudi Mkt Cap/GDP at 75%, plenty of room to grow Rising swap positions indicate growing interest Potential inclusion in the MSCI EM index by 2017 with an estimated weight of 2% (as per MSCI) could trigger new fund flows Expect a gradual entry of QFIs, leading to higher volumes and increase in the proportion of institutional investors in the market We view Saudi equities as a theme-based long-term growth play All data as of June 10, 2015 2
Open for QFIs Event Update
The Saudi Market Opportunity
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Market Snapshot Index
TASI
Top 5 Stocks by Mkt Cap
Avg. Traded Value (USD bln)
2.3
Company SABIC
USD bln 83
Saudi Telecom Company
36
National Commercial Bank
35
Al Rajhi Bank
28
Kingdom Holding Company
21
Trading Hours
11:00
15.30
Listed Companies
170
Market Cap (USD bln)
559
52 week high-low
11,159
7,225 Top 5 Stocks by Weight
Forward P/E (x)
16.6
Current Div Yield %
2.8
Company Al Rajhi Bank
Weight (%) 8.5
Forward P/B (x)
2.2
SABIC
7.1
TASI YTD Performance (%)
14.5
National Commercial Bank
5.2
Jabal Omar Development
4.6
Exchange rate USD-SAR
3.75
Savola Group
3.2
Source: Bloomberg
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Open for QFIs Event Update
QFI Limits QFI* must be a Foreign Fin. Inst. with a minimum AUM of USD 5bln (potentially relaxable to USD 3bln) and 5 years experience. Must be assessed by an AP and approved by CMA. 5%
Maximum single QFI ownership per Company
20%
Maximum total QFI ownership per Company
49%
Total foreign ownership (QFIs, swaps and expats) per Company
10%
Limit of QFI ownership of the market (based on market cap)
Source: Tadawul
Five stocks excluded from foreign ownership: (1) Jabal Omar Development (2) Taiba Holding (3) Makkah Construction and Development (4) Knowledge Economic City and (5) National Shipping Co. Current foreign participation at 1.5% (reported by Tadawul as of May 30th ) * QFI clients could be financial institutions such as investment funds without the above AUMs and years of experience threshold restrictions * Detailed rules and regulations available here 5
Open for QFIs Event Update
TASI is up +25% in the last 2 years
Source: Tadawul, Riyad Capital
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Open for QFIs Event Update
Market offers diverse sector exposure Sector Banks & Financial Services Petrochemical Industries Real Estate Development Cement Agriculture & Food Industries Retail Telecommunication & Information Technology Industrial Investment Insurance Building & Construction Transport Hotel & Tourism Energy & Utilities Multi-Investment Media and Publishing Source: Bloomberg
Weight 33% 18% 9% 7% 7% 6% 4% 4% 3% 2% 2% 2% 2% 1% 0%
Listed Companies 12 14 8 14 16 15 4 15 35 17 4 4 2 7 3
Market Cap USD (bln) 157 133 35 24 35 23 45 22 14 8 8 8 21 24 1
P/E TTM (x) 14.5 19.9 33.1 14.5 24.6 26.6 153.9 25.3 95.8 56.2 23.2 20.5 26.2 47.9 NA
Div Yield (%) 2.3 4.2 1.0 6.1 2.2 2.1 4.3 1.5 0.5 2.0 2.3 1.7 4.1 2.2 0.0
YTD Return (%) 16.0 14.0 31.2 1.1 3.3 13.9 (9.1) 37.8 28.4 12.3 44.6 21.2 16.3 21.2 3.7
Although Banks (33%) and Petchems (18%) are the largest, 13 other sectors available for investment
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Open for QFIs Event Update
Top 15 stocks account for 59% of Market Cap Mcap Price USD EV USD Company (SAR) mln mln SABIC 103.58 82,855 96,710 Saudi Telecom Co 67.99 36,257 32,610 National Commercial Bank 66.35 35,383 NM Al Rajhi Bank 65.63 28,437 NM Kingdom Holding Co 21.66 21,403 20,414 Saudi Electricity Co 17.91 19,898 42,629 Jabal Omar Development Co* 75.55 18,722 20,723 Samba Financial Group 28.20 15,038 NM Almarai Co 91.89 14,701 17,195 Saudi British Bank 35.07 14,027 NM Riyad Bank 17.58 14,062 NM Saudi Arabian Mining Co 44.88 13,983 24,873 Saudi Arabian Fertilizer Co 121.29 13,475 12,782 Banque Saudi Fransi 37.82 12,155 NM Savola Group 74.39 10,592 12,432
52 WkP/B P/S EV/ EV/ Div. YTD Hi P/E (x) (x) (x) Sales EBITDA Yld Return (SAR) 14.9x 1.9x 1.8x 1.7x 6.0x 5.8 24% 136.50 12.3x 2.3x 2.9x 2.4x 5.5x 5.9 3% 76.50 15.1x 2.8x 6.8x NM NM 1.0 21% 72.75 16.0x 2.5x 7.2x NM NM 2.3 28% 79.50 90.2x 2.6x 38.8x 34.5x 287.1x 2.3 20% 25.90 28.9x 1.3x 1.9x 4.1x 9.1x 3.9 20% 21.00 166.4x 7.5x 94.9x 75.6x 116.8x NM 44% 88.75 11.2x 1.5x 6.9x NM NM 3.0 22% 31.20 32.8x 5.0x 4.2x 4.8x 17.7x 1.1 20% 96.50 12.2x 2.0x 7.1x NM NM 2.0 (10%) 44.67 11.9x 1.4x 5.6x NM NM 4.0 3% 24.30 30.9x 1.9x 3.9x 7.2x 21.2x NM 47% 48.40 17.3x 6.0x 11.9x 11.2x 15.3x 4.0 8% 135.60 12.3x 1.6x 6.7x NM NM 2.6 21% 42.50 18.9x 3.9x 1.4x 1.6x 18.1x 2.7 (5%) 90.50
52 Wk- 6M Lo ADTV (SAR) (US$ 70.25 126.8 55.00 17.2 45.00 37.6 48.40 61.2 14.55 5.5 13.80 19.0 44.00 47.8 20.88 12.2 67.00 7.9 31.33 4.0 14.75 12.8 23.20 101.8 100.80 12.2 28.90 3.4 63.50 9.5
6M Shares Avg O/S Vol (Mln) Beta 5.2 3,000 1.2 1.0 2,000 0.9 2.3 2,000 0.8 3.9 1,625 1.0 1.0 3,706 0.9 4.0 4,167 0.9 2.6 929 0.8 1.7 2,000 1.1 0.4 600 0.7 0.4 1,500 0.9 2.7 3,000 0.9 10.0 1,168 1.3 0.4 417 0.7 0.4 1,205 0.9 0.5 534 1.0
* Prohibited for foreign ownership Source: Bloomberg
SABIC ranks as one of the world’s biggest petrochemical producers and the largest public company in the Middle East
Almarai is the world’s largest vertically integrated dairy company 8
Open for QFIs Event Update
Top 15 investible stocks by free float Company Riyad Bank Al Rajhi Bank Dar Al Arkan Alinma Bank Samba Financial Group Saudi Kayan Saudi Electricity National Commercial Bank Banque Saudi Fransi SABIC National Industrialization Co Saudi British Bank Arab National Bank Etihad Etisalat Saudi Arabian Mining
Outstanding Shares Free Float (mln Free float (%) (mln) shares) 3,000 48% 1,426 1,625 73% 1,185 1,080 100% 1,078 1,500 69% 1,036 2,000 50% 1,005 1,500 65% 975 4,167 17% 716 2,000 36% 713 1,205 54% 648 3,000 21% 632 669 87% 583 1,500 33% 488 1,000 49% 486 770 58% 444 1,169 34% 394
Current Foreign Ownership 1% 1% 7% 2% 7% 1% 0% 1% 32% 1% 1% 42% 41% 1% 0%
Price (SAR) 17.58 65.63 9.04 23.83 28.2 11.55 17.91 66.35 37.82 103.58 23.62 35.07 34.06 33.8 44.8
Market Cap (SAR mln) 52,740 106,649 9,763 35,745 56,400 17,325 74,624 132,700 45,573 310,740 15,799 52,605 34,060 26,026 52,349
Source: Tadawul
All foreign investors combined can invest up to a maximum of 49% shares of a Company Updated FOL limits can be found here 9
Open for QFIs Event Update
Steady IPO flow to the market Company Alinma Tokio Marine Najran Cement Al-Tayyar Travel Group* Saudi Airlines Catering City Cement Dallah Healthcare Northern Region Cement National Medical Care Aljazira Takaful AIG-ANB Cooperative Insurance Bawan Saudi Marketing* Umm Al-Qura Cement Abdul Mohsen Al-Hokair Group Al Hammadi* National Commercial Bank Electrical Industries Middle East Paper Saudi Company for Hardware Saudi Ground Services Source: Tadawul
Issue date Mar-12 Apr-12 May-12 Jun-12 Sep-12 Nov-12 Jan-13 Feb-13 May-13 May-13 Nov-13 Jan-14 Apr-14 May-14 Jun-14 Oct-14 Nov-14 May-15 May-15 Jun-15
Offer Size (mln shares)
6.00 85.00 24.00 24.60 94.60 14.20 90.00 13.50 10.50 5.25 15.00 7.50 27.50 16.50 22.50 500.00 13.50 15.00 7.20 56.40
Issue Price (SAR) 10.00 10.00 19.16 54.00 10.00 38.00 10.00 27.00 10.00 10.00 36.00 28.29 10.00 50.00 19.25 45.00 54.00 30.00 70.00 50.00
Current Price (SAR) 51.26 27.9 104.07 158.04 24.98 143.75 22.38 66.7 53.41 54.23 50.92 74.89 39.23 91.05 62.95 66.35 57.75 44.4 135.89
Price Change (Issuance to Date) 413% 179% 443% 193% 150% 278% 124% 147% 434% 442% 41% 165% 292% 82% 227% 47% 7% 48% 94% Ongoing
20 companies listed since 2012. USD 8.5 bln raised
NCB was the 2nd largest IPO globally in 2014 8 new IPO funds launched in 2015 as CMA looks to increase institutional allocation
* Issue price adjusted for capital increase
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Rising swap positions indicates greater interest
Source: Tadawul
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MSCI inclusion could be a trigger for TASI Inclusion in MSCI EM index would likely be a trigger for fund flow into the market According to MSCI, Saudi market would have to wait until June 2017 for addition to the EM index MSCI initial estimates for Saudi weight in MSCI EM index is 2% USD 27 bln likely to flow in as per MSCI estimates With 10% max cap and at current market capitalization, quantum of QFI opportunity stands at USD 56 bln
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Expansionary policy intact despite oil correction Real GDP growth may dip in the short term but likely to maintain long term steady growth
C/A deficit expected in 2015 10.0%
7.4%
165
159
8.6%
133
8.0%
106
5.8%
6.0%
4.6% 4.0%
3.5%
4.0%
67
2.7%
26
706
649
752
744
734
670
527
2.0%
(7) 0.0%
2010
2011
2012
2013 GDP (USD bln)
2014
2015
2010
2016
2012
2013
2014
2015
2016
Current Account Surplus/(Deficit) USD bln
Real growth
Forex reserves may decline, but still formidable
Government spending totaled USD 1.2 trln during 2010-2014, expected to remain healthy 322
2011
325
318
726
732
2013
2014
283 261
657
238
192 541
445
2010
2011
2012
2013
2014
Government Spending, (USD bln)
2015
2016
2010
2011
2012 Forex Reserves (USD bln)
Source: IMF, World Bank
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Comparison to Regional and Global Peers
Open for QFIs Event Update
Saudi’s core sectors are GCC heavy weights (by mkt cap) and portray its market depth Banks Qatar 17% UAE 26%
Telecoms
Petrochemicals Oman 2% Bahrain 3%
Kuwait 11%
Qatar 14%
Kuwait 1%
Qatar 11% UAE 31%
Kuwait 10%
Saudi 85%
Saudi 42%
Saudi 40%
Utilities
Cement UAE 5% Qatar 6% Saudi 82%
Source: Bloomberg
Oman 4% Kuwait 3%
Oman 4% Bahrain 2%
UAE 7%
Qatar 21%
Retail Qatar 4%
Oman 8% Saudi 86%
Kuwait 11%
Saudi 65%
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Valuations are not at large spreads to EM peers Saudi commands better valuations due to its high ROE generation amid low leverage adding further scope for value creation
Saudi’s 16% earnings growth is attractive versus DM, EM and GCC peers when growth in most regions are in low double digits
Source: Bloomberg
*All regional indices are MSCI based. EM refers to MSCI Emerging markets Index, DM refers to Pan Developed Market Indices
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Market cap to GDP ratio implies its growing efficiency which is nearing DM peers
Source: Bloomberg
Plenty of room for Market Cap/GDP ratio to expand
17
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Favorable valuations for Saudi equities as consensus argues a 16% earnings growth for 2015-17E
Source: Bloomberg
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P/B is reasonable considering relative ROEs
Source: Bloomberg
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Valuations could expand further on QFI interest P/B Ratio
4.0
2.7
2.5
P/S Ratio
3.5
2.3 3.0
2.1
1.9
2.5
1.7
3 Yr Avg
5Yr Avg
12M Avg
3 Yr Avg
5Yr Avg
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
P/S
12M Avg
EV/Sales Ratio
5.0
EV/EBITDA Ratio
16.0
Oct-11
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
P/B
Jun-11
2.0
1.5
15.0 4.5
14.0 13.0
4.0
12.0 11.0
3.5
10.0
EV/EBITDA
3 Yr Avg
5Yr Avg
12M Avg
EV/Sales
3 Yr Avg
5Yr Avg
12M Avg
Source: Bloomberg
20
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
3.0 Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
9.0
Open for QFIs Event Update
From market opening announcement, Saudi P/E has expanded 70% Dubai P/E Ratio
Saudi Arabia P/E Ratio
22.0
21.0
20.0
19.0
18.0
17.0
16.0
15.0
13.0
14.0
11.0 12.0 9.0
TASI
3 Yr Avg
DFM
20.0
16.0
18.0
15.0
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
3 Yr Avg
12M Avg
Qatar vs Dubai P/E Ratio
22.0
17.0
Oct-13
Jun-13
Feb-13
Oct-12
12M Avg
Qatar P/E Ratio
18.0
7.0 Jun-12
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
10.0
16.0
14.0 13.0
14.0
12.0
12.0
11.0
10.0
10.0
8.0
9.0
3 Yr Avg
12M Avg
DSM
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
DSM
Jun-12
6.0
8.0
DFM
Source: Bloomberg
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Thank You Muhammad Faisal Potrik [email protected] +966-112036807
Santhosh Balakrishnan [email protected]
Aiyaz Hasan [email protected]
Yasser bin Ahmed [email protected]
Ahmed Al-Fozan [email protected]
Sultan Alabdulkarim [email protected]
Khalid Al-Madhyan [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 do 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’s 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 For feedback, please contact [email protected]
Welcome to the Saudi Equity Market
Research Team [email protected] +966-11-2036807 June 15, 2015 Source: ibtimes
Open for QFIs Event Update
At a Glance Saudi equity market opens for Qualified Foreign Investors (QFIs) from today With a market cap of USD 559bln, it is the largest in the Middle East Avg. trade value of USD 2.3 bln makes Saudi among Top 5 in the EM 67 stocks with market cap > USD 1 bln, only 5 stocks < USD 100mln 170 listed companies, > 90% stocks change hands daily Saudi Mkt Cap/GDP at 75%, plenty of room to grow Rising swap positions indicate growing interest Potential inclusion in the MSCI EM index by 2017 with an estimated weight of 2% (as per MSCI) could trigger new fund flows Expect a gradual entry of QFIs, leading to higher volumes and increase in the proportion of institutional investors in the market We view Saudi equities as a theme-based long-term growth play All data as of June 10, 2015 2
Open for QFIs Event Update
The Saudi Market Opportunity
Open for QFIs Event Update
Market Snapshot Index
TASI
Top 5 Stocks by Mkt Cap
Avg. Traded Value (USD bln)
2.3
Company SABIC
USD bln 83
Saudi Telecom Company
36
National Commercial Bank
35
Al Rajhi Bank
28
Kingdom Holding Company
21
Trading Hours
11:00
15.30
Listed Companies
170
Market Cap (USD bln)
559
52 week high-low
11,159
7,225 Top 5 Stocks by Weight
Forward P/E (x)
16.6
Current Div Yield %
2.8
Company Al Rajhi Bank
Weight (%) 8.5
Forward P/B (x)
2.2
SABIC
7.1
TASI YTD Performance (%)
14.5
National Commercial Bank
5.2
Jabal Omar Development
4.6
Exchange rate USD-SAR
3.75
Savola Group
3.2
Source: Bloomberg
4
Open for QFIs Event Update
QFI Limits QFI* must be a Foreign Fin. Inst. with a minimum AUM of USD 5bln (potentially relaxable to USD 3bln) and 5 years experience. Must be assessed by an AP and approved by CMA. 5%
Maximum single QFI ownership per Company
20%
Maximum total QFI ownership per Company
49%
Total foreign ownership (QFIs, swaps and expats) per Company
10%
Limit of QFI ownership of the market (based on market cap)
Source: Tadawul
Five stocks excluded from foreign ownership: (1) Jabal Omar Development (2) Taiba Holding (3) Makkah Construction and Development (4) Knowledge Economic City and (5) National Shipping Co. Current foreign participation at 1.5% (reported by Tadawul as of May 30th ) * QFI clients could be financial institutions such as investment funds without the above AUMs and years of experience threshold restrictions * Detailed rules and regulations available here 5
Open for QFIs Event Update
TASI is up +25% in the last 2 years
Source: Tadawul, Riyad Capital
6
Open for QFIs Event Update
Market offers diverse sector exposure Sector Banks & Financial Services Petrochemical Industries Real Estate Development Cement Agriculture & Food Industries Retail Telecommunication & Information Technology Industrial Investment Insurance Building & Construction Transport Hotel & Tourism Energy & Utilities Multi-Investment Media and Publishing Source: Bloomberg
Weight 33% 18% 9% 7% 7% 6% 4% 4% 3% 2% 2% 2% 2% 1% 0%
Listed Companies 12 14 8 14 16 15 4 15 35 17 4 4 2 7 3
Market Cap USD (bln) 157 133 35 24 35 23 45 22 14 8 8 8 21 24 1
P/E TTM (x) 14.5 19.9 33.1 14.5 24.6 26.6 153.9 25.3 95.8 56.2 23.2 20.5 26.2 47.9 NA
Div Yield (%) 2.3 4.2 1.0 6.1 2.2 2.1 4.3 1.5 0.5 2.0 2.3 1.7 4.1 2.2 0.0
YTD Return (%) 16.0 14.0 31.2 1.1 3.3 13.9 (9.1) 37.8 28.4 12.3 44.6 21.2 16.3 21.2 3.7
Although Banks (33%) and Petchems (18%) are the largest, 13 other sectors available for investment
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Open for QFIs Event Update
Top 15 stocks account for 59% of Market Cap Mcap Price USD EV USD Company (SAR) mln mln SABIC 103.58 82,855 96,710 Saudi Telecom Co 67.99 36,257 32,610 National Commercial Bank 66.35 35,383 NM Al Rajhi Bank 65.63 28,437 NM Kingdom Holding Co 21.66 21,403 20,414 Saudi Electricity Co 17.91 19,898 42,629 Jabal Omar Development Co* 75.55 18,722 20,723 Samba Financial Group 28.20 15,038 NM Almarai Co 91.89 14,701 17,195 Saudi British Bank 35.07 14,027 NM Riyad Bank 17.58 14,062 NM Saudi Arabian Mining Co 44.88 13,983 24,873 Saudi Arabian Fertilizer Co 121.29 13,475 12,782 Banque Saudi Fransi 37.82 12,155 NM Savola Group 74.39 10,592 12,432
52 WkP/B P/S EV/ EV/ Div. YTD Hi P/E (x) (x) (x) Sales EBITDA Yld Return (SAR) 14.9x 1.9x 1.8x 1.7x 6.0x 5.8 24% 136.50 12.3x 2.3x 2.9x 2.4x 5.5x 5.9 3% 76.50 15.1x 2.8x 6.8x NM NM 1.0 21% 72.75 16.0x 2.5x 7.2x NM NM 2.3 28% 79.50 90.2x 2.6x 38.8x 34.5x 287.1x 2.3 20% 25.90 28.9x 1.3x 1.9x 4.1x 9.1x 3.9 20% 21.00 166.4x 7.5x 94.9x 75.6x 116.8x NM 44% 88.75 11.2x 1.5x 6.9x NM NM 3.0 22% 31.20 32.8x 5.0x 4.2x 4.8x 17.7x 1.1 20% 96.50 12.2x 2.0x 7.1x NM NM 2.0 (10%) 44.67 11.9x 1.4x 5.6x NM NM 4.0 3% 24.30 30.9x 1.9x 3.9x 7.2x 21.2x NM 47% 48.40 17.3x 6.0x 11.9x 11.2x 15.3x 4.0 8% 135.60 12.3x 1.6x 6.7x NM NM 2.6 21% 42.50 18.9x 3.9x 1.4x 1.6x 18.1x 2.7 (5%) 90.50
52 Wk- 6M Lo ADTV (SAR) (US$ 70.25 126.8 55.00 17.2 45.00 37.6 48.40 61.2 14.55 5.5 13.80 19.0 44.00 47.8 20.88 12.2 67.00 7.9 31.33 4.0 14.75 12.8 23.20 101.8 100.80 12.2 28.90 3.4 63.50 9.5
6M Shares Avg O/S Vol (Mln) Beta 5.2 3,000 1.2 1.0 2,000 0.9 2.3 2,000 0.8 3.9 1,625 1.0 1.0 3,706 0.9 4.0 4,167 0.9 2.6 929 0.8 1.7 2,000 1.1 0.4 600 0.7 0.4 1,500 0.9 2.7 3,000 0.9 10.0 1,168 1.3 0.4 417 0.7 0.4 1,205 0.9 0.5 534 1.0
* Prohibited for foreign ownership Source: Bloomberg
SABIC ranks as one of the world’s biggest petrochemical producers and the largest public company in the Middle East
Almarai is the world’s largest vertically integrated dairy company 8
Open for QFIs Event Update
Top 15 investible stocks by free float Company Riyad Bank Al Rajhi Bank Dar Al Arkan Alinma Bank Samba Financial Group Saudi Kayan Saudi Electricity National Commercial Bank Banque Saudi Fransi SABIC National Industrialization Co Saudi British Bank Arab National Bank Etihad Etisalat Saudi Arabian Mining
Outstanding Shares Free Float (mln Free float (%) (mln) shares) 3,000 48% 1,426 1,625 73% 1,185 1,080 100% 1,078 1,500 69% 1,036 2,000 50% 1,005 1,500 65% 975 4,167 17% 716 2,000 36% 713 1,205 54% 648 3,000 21% 632 669 87% 583 1,500 33% 488 1,000 49% 486 770 58% 444 1,169 34% 394
Current Foreign Ownership 1% 1% 7% 2% 7% 1% 0% 1% 32% 1% 1% 42% 41% 1% 0%
Price (SAR) 17.58 65.63 9.04 23.83 28.2 11.55 17.91 66.35 37.82 103.58 23.62 35.07 34.06 33.8 44.8
Market Cap (SAR mln) 52,740 106,649 9,763 35,745 56,400 17,325 74,624 132,700 45,573 310,740 15,799 52,605 34,060 26,026 52,349
Source: Tadawul
All foreign investors combined can invest up to a maximum of 49% shares of a Company Updated FOL limits can be found here 9
Open for QFIs Event Update
Steady IPO flow to the market Company Alinma Tokio Marine Najran Cement Al-Tayyar Travel Group* Saudi Airlines Catering City Cement Dallah Healthcare Northern Region Cement National Medical Care Aljazira Takaful AIG-ANB Cooperative Insurance Bawan Saudi Marketing* Umm Al-Qura Cement Abdul Mohsen Al-Hokair Group Al Hammadi* National Commercial Bank Electrical Industries Middle East Paper Saudi Company for Hardware Saudi Ground Services Source: Tadawul
Issue date Mar-12 Apr-12 May-12 Jun-12 Sep-12 Nov-12 Jan-13 Feb-13 May-13 May-13 Nov-13 Jan-14 Apr-14 May-14 Jun-14 Oct-14 Nov-14 May-15 May-15 Jun-15
Offer Size (mln shares)
6.00 85.00 24.00 24.60 94.60 14.20 90.00 13.50 10.50 5.25 15.00 7.50 27.50 16.50 22.50 500.00 13.50 15.00 7.20 56.40
Issue Price (SAR) 10.00 10.00 19.16 54.00 10.00 38.00 10.00 27.00 10.00 10.00 36.00 28.29 10.00 50.00 19.25 45.00 54.00 30.00 70.00 50.00
Current Price (SAR) 51.26 27.9 104.07 158.04 24.98 143.75 22.38 66.7 53.41 54.23 50.92 74.89 39.23 91.05 62.95 66.35 57.75 44.4 135.89
Price Change (Issuance to Date) 413% 179% 443% 193% 150% 278% 124% 147% 434% 442% 41% 165% 292% 82% 227% 47% 7% 48% 94% Ongoing
20 companies listed since 2012. USD 8.5 bln raised
NCB was the 2nd largest IPO globally in 2014 8 new IPO funds launched in 2015 as CMA looks to increase institutional allocation
* Issue price adjusted for capital increase
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Open for QFIs Event Update
Rising swap positions indicates greater interest
Source: Tadawul
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Open for QFIs Event Update
MSCI inclusion could be a trigger for TASI Inclusion in MSCI EM index would likely be a trigger for fund flow into the market According to MSCI, Saudi market would have to wait until June 2017 for addition to the EM index MSCI initial estimates for Saudi weight in MSCI EM index is 2% USD 27 bln likely to flow in as per MSCI estimates With 10% max cap and at current market capitalization, quantum of QFI opportunity stands at USD 56 bln
12
Open for QFIs Event Update
Expansionary policy intact despite oil correction Real GDP growth may dip in the short term but likely to maintain long term steady growth
C/A deficit expected in 2015 10.0%
7.4%
165
159
8.6%
133
8.0%
106
5.8%
6.0%
4.6% 4.0%
3.5%
4.0%
67
2.7%
26
706
649
752
744
734
670
527
2.0%
(7) 0.0%
2010
2011
2012
2013 GDP (USD bln)
2014
2015
2010
2016
2012
2013
2014
2015
2016
Current Account Surplus/(Deficit) USD bln
Real growth
Forex reserves may decline, but still formidable
Government spending totaled USD 1.2 trln during 2010-2014, expected to remain healthy 322
2011
325
318
726
732
2013
2014
283 261
657
238
192 541
445
2010
2011
2012
2013
2014
Government Spending, (USD bln)
2015
2016
2010
2011
2012 Forex Reserves (USD bln)
Source: IMF, World Bank
13
Open for QFIs Event Update
Comparison to Regional and Global Peers
Open for QFIs Event Update
Saudi’s core sectors are GCC heavy weights (by mkt cap) and portray its market depth Banks Qatar 17% UAE 26%
Telecoms
Petrochemicals Oman 2% Bahrain 3%
Kuwait 11%
Qatar 14%
Kuwait 1%
Qatar 11% UAE 31%
Kuwait 10%
Saudi 85%
Saudi 42%
Saudi 40%
Utilities
Cement UAE 5% Qatar 6% Saudi 82%
Source: Bloomberg
Oman 4% Kuwait 3%
Oman 4% Bahrain 2%
UAE 7%
Qatar 21%
Retail Qatar 4%
Oman 8% Saudi 86%
Kuwait 11%
Saudi 65%
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Open for QFIs Event Update
Valuations are not at large spreads to EM peers Saudi commands better valuations due to its high ROE generation amid low leverage adding further scope for value creation
Saudi’s 16% earnings growth is attractive versus DM, EM and GCC peers when growth in most regions are in low double digits
Source: Bloomberg
*All regional indices are MSCI based. EM refers to MSCI Emerging markets Index, DM refers to Pan Developed Market Indices
16
Open for QFIs Event Update
Market cap to GDP ratio implies its growing efficiency which is nearing DM peers
Source: Bloomberg
Plenty of room for Market Cap/GDP ratio to expand
17
Open for QFIs Event Update
Favorable valuations for Saudi equities as consensus argues a 16% earnings growth for 2015-17E
Source: Bloomberg
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Open for QFIs Event Update
P/B is reasonable considering relative ROEs
Source: Bloomberg
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Open for QFIs Event Update
Valuations could expand further on QFI interest P/B Ratio
4.0
2.7
2.5
P/S Ratio
3.5
2.3 3.0
2.1
1.9
2.5
1.7
3 Yr Avg
5Yr Avg
12M Avg
3 Yr Avg
5Yr Avg
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
P/S
12M Avg
EV/Sales Ratio
5.0
EV/EBITDA Ratio
16.0
Oct-11
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
P/B
Jun-11
2.0
1.5
15.0 4.5
14.0 13.0
4.0
12.0 11.0
3.5
10.0
EV/EBITDA
3 Yr Avg
5Yr Avg
12M Avg
EV/Sales
3 Yr Avg
5Yr Avg
12M Avg
Source: Bloomberg
20
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
3.0 Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
Feb-12
Oct-11
Jun-11
9.0
Open for QFIs Event Update
From market opening announcement, Saudi P/E has expanded 70% Dubai P/E Ratio
Saudi Arabia P/E Ratio
22.0
21.0
20.0
19.0
18.0
17.0
16.0
15.0
13.0
14.0
11.0 12.0 9.0
TASI
3 Yr Avg
DFM
20.0
16.0
18.0
15.0
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
3 Yr Avg
12M Avg
Qatar vs Dubai P/E Ratio
22.0
17.0
Oct-13
Jun-13
Feb-13
Oct-12
12M Avg
Qatar P/E Ratio
18.0
7.0 Jun-12
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
10.0
16.0
14.0 13.0
14.0
12.0
12.0
11.0
10.0
10.0
8.0
9.0
3 Yr Avg
12M Avg
DSM
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-15
Feb-15
Oct-14
Jun-14
Feb-14
Oct-13
Jun-13
Feb-13
Oct-12
Jun-12
DSM
Jun-12
6.0
8.0
DFM
Source: Bloomberg
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Open for QFIs Event Update
Thank You Muhammad Faisal Potrik [email protected] +966-112036807
Santhosh Balakrishnan [email protected]
Aiyaz Hasan [email protected]
Yasser bin Ahmed [email protected]
Ahmed Al-Fozan [email protected]
Sultan Alabdulkarim [email protected]
Khalid Al-Madhyan [email protected]
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