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Global Research<br />
Economy<br />
Saudi Arabia<br />
Saudi Arabia Economic Overview<br />
Expected <strong>to</strong> Stand Firm<br />
January 2009
Global Research<br />
Global Investment House<br />
Tel: (965) 2295 1000 - Fax: (965) 2295 1299<br />
research@global.<strong>com</strong>.kw<br />
www.globalinv.net<br />
Omar M. El-Quqa, CFA<br />
Executive Vice President<br />
omar@global.<strong>com</strong>.kw<br />
Phone No:(965) 2295 1110<br />
Faisal Hasan, CFA<br />
Head of Research<br />
fhasan@global.<strong>com</strong>.kw<br />
Phone No:(965) 22951270<br />
Mohammed Ali Shah<br />
Financial Analyst<br />
mashah@global.<strong>com</strong>.kw<br />
Phone No:(965) 22951283<br />
Syed Mohammed Taimure Akhtar<br />
Financial Analyst<br />
sakhtar@global.<strong>com</strong>.kw<br />
Phone No:(965) 22951278<br />
Umar Faruqui<br />
Financial Analyst<br />
ufaruqui@global.<strong>com</strong>.kw<br />
Phone No:(965) 22951438
Table of Contents<br />
Economy ................................................................................................................. 2<br />
Banking Sec<strong>to</strong>r ..................................................................................................... 16<br />
Petrochemical Sec<strong>to</strong>r ............................................................................................ 25<br />
Fertilizer Sec<strong>to</strong>r.................................................................................................... 35<br />
Real Estate Sec<strong>to</strong>r ................................................................................................. 38<br />
Power Sec<strong>to</strong>r ......................................................................................................... 47<br />
Tele<strong>com</strong> Sec<strong>to</strong>r ..................................................................................................... 51<br />
Cement Sec<strong>to</strong>r ....................................................................................................... 54<br />
Steel Sec<strong>to</strong>r ........................................................................................................... 62<br />
Capital Markets ..................................................................................................... 67<br />
Global Research -Saudi Coverage ........................................................................ 83<br />
Global Investment House Saudi Arabia Economic Overview - January 2009
Economy
Economic Snapshot<br />
Economy<br />
2004 2005 2006 2007 2008E<br />
Economic Performance<br />
Nominal GDP (US$bn) 250.3 315.3 348.7 381.5 467.4<br />
Nominal GDP Growth (%) 16.7 26.0 10.6 9.4 22.0<br />
Real GDP (US$bn) 192.6 203.2 209.6 216.8 225.6<br />
Real GDP Growth (%) 5.3 5.5 3.1 3.4 4.2<br />
Per Capita GDP (US$) 11,043.1 13,650.8 14,724.1 15,737.1 18,923.0<br />
Population (mn) 22.7 23.1 23.7 24.0 24.7<br />
Inflation (cost of living index) (%) 0.3 0.7 2.2 4.1 9.2<br />
Oil Sec<strong>to</strong>r<br />
Crude Oil Production (mnbpd) 8.9 9.4 9.1 8.7 9.2<br />
Oil Exports (US$bn) 110.4 161.1 189.1 204.9 296.0<br />
Oil Exports Price (US$ per barrel) 34.5 50.2 61.1 68.7 95.0<br />
Government Finance<br />
Revenue (US$bn) 104.6 150.5 179.6 165.7 293.3<br />
Expenditure (US$bn) 76.1 92.4 104.9 118.1 136.0<br />
Surplus/(Deficit) (US$bn) 28.6 58.1 74.8 47.6 157.3<br />
Money Supply<br />
M1 Growth (%) 21.6 4.5 10.3 22.6 8.9#<br />
M2 Growth (%) 21.3 10.0 20.0 23.7 11.8#<br />
Foreign Trade<br />
Exports (US$bn) 126.0 180.6 209.6 233.4 326.9<br />
Imports (US$bn) 44.7 59.5 63.8 82.5 162.7<br />
Current Account Balance (US$bn) 51.9 90.0 98.9 95.0 150.6<br />
Current Account Balance / GDP (%) 26.9 44.3 47.2 43.8 32.2<br />
Capital Markets<br />
General Price Index (Points) 8,206.2 16,712.6 7,933.3 11,175.9 4,802.9*<br />
Market Capitalization (US$bn) 306.0 646.2 326.9 519.0 246.0*<br />
Number of Shares Traded (bn) 10.2 12.2 54.4 58.8 59.6*<br />
Value of Trading (US$bn) 473.0 1,103.70 1,402.80 682.1 523.4 *<br />
Source: SAMA, IMF & Global Research<br />
# till Oc<strong>to</strong>ber 2008<br />
* As on 31 st December 2008<br />
Global Investment House Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
» Saudi Arabia’s economic performance<br />
has been exceptional over <strong>the</strong> years, with<br />
nominal GDP rising <strong>to</strong> SR1.7trillion in<br />
2008. The real GDP growth exceeded 3.1%<br />
in <strong>the</strong> last two years, expected <strong>to</strong> reach 4.2%<br />
in 2008.<br />
» The Kingdom with more than 20% of <strong>the</strong><br />
world’s oil reserves, remains <strong>com</strong>mitted <strong>to</strong><br />
<strong>the</strong> economic diversification activity in <strong>the</strong><br />
country.<br />
» The growth outlook for <strong>the</strong> Saudi Arabian<br />
economy looks robust, with public & oil<br />
sec<strong>to</strong>rs investment program exceeding<br />
US$400bn over next 5years.<br />
» Oil revenues coupled with diversification<br />
benefits are likely <strong>to</strong> result in real GDP<br />
growth.<br />
Global Investment House<br />
GDP by Economic Activity (2006-07)<br />
Government Services' Producers<br />
17%<br />
Community & Social & Personal services<br />
4%<br />
GDP<br />
Finance, Insurance, Real Estate &<br />
Business services<br />
11%<br />
Transport, S<strong>to</strong>rage & Communication<br />
Manufacturing Industries<br />
6%<br />
12%<br />
Wholesale, Retail, Restaurants & Hotels Electricity, Gas & Water<br />
8%<br />
Construction<br />
2%<br />
7%<br />
Source: Central Department of Statistics & Information, Ministry of Economy & Planning<br />
Real & Nominal GDP<br />
Import duties<br />
1% Agriculture forestry & fishing<br />
5%<br />
Mining & Quarrying<br />
27%<br />
(SR bn)<br />
1,800<br />
26.0%<br />
27%<br />
1,650<br />
24%<br />
22.0% 21%<br />
1,500<br />
17.1%<br />
18%<br />
1,350<br />
16.7%<br />
15%<br />
13.8%<br />
1,200<br />
12.9%<br />
12%<br />
1,050<br />
9%<br />
7.7%<br />
7.1%<br />
4.9%<br />
5.3% 5.6%<br />
6%<br />
900<br />
3.0%<br />
3.2% 3.4% 4.2% 3%<br />
750<br />
0.5% 0.1%<br />
0%<br />
600<br />
-2.9%<br />
2000 2001 2002 2003 2004 2005 2006 2007 2008p -3%<br />
GDP -Nominal (LHS) GDP Growth -Nominal (RHS) GDP Growth -Real (RHS)<br />
Source: SAMA, & Ministry of Economy & Planning<br />
Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
GDP<br />
» Saudi Arabia (KSA) as per International Finance Corporation -World Bank <strong>report</strong> on “Ease of Doing<br />
Business 2009” was ranked at no. 16 among countries globally, and no. 1 in MENA region.<br />
» As per <strong>the</strong> standard of economic openness (foreign trade of goods & services <strong>to</strong> GDP), KSA during<br />
1990-2007 recorded an avg. economic openness degree of 71.9% vs. 23.8% in USA.<br />
» KSA’s inward FDI flows of US$24.3bn in 2007 recorded an annual increase of 33%, and FDI <strong>to</strong> GDP<br />
ratio of 6.4%.<br />
» Non-oil sec<strong>to</strong>r GDP growth of 4.5%, while <strong>the</strong> oil sec<strong>to</strong>r GDP increased by 8.0% in 2007.<br />
Saudi Arabia's FDI vs. GDP (US$ bn)<br />
Oil & Non-Oil Contribution <strong>to</strong> GDP<br />
2007<br />
59%<br />
56%<br />
63%<br />
60%<br />
2006<br />
2005<br />
2004<br />
0 50 100 150 200 250 300 350<br />
GDP Non-Oil sec<strong>to</strong>r<br />
53%<br />
50%<br />
47%<br />
44%<br />
41%<br />
38%<br />
35%<br />
2003 2004 2005 2006 2007 2008E<br />
57%<br />
54%<br />
51%<br />
48%<br />
45%<br />
42%<br />
39%<br />
36%<br />
GDP Oil sec<strong>to</strong>r<br />
Nominal GDP<br />
Inward FDI<br />
GDP Oil sec<strong>to</strong>r (RHS)<br />
GDP Non-oil sec<strong>to</strong>r (LHS)<br />
Source: SAMA, UNCTAD, World Investment Report 2008<br />
Source: SAMA, & Ministry of Economy & Planning<br />
Global Investment House Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
GDP<br />
» Saudi Arabia possessing more than 20% & 10% of world’s oil & gas reserves, respectively, regarded as<br />
<strong>the</strong> economic powerhouse of Gulf Cooperation Council (GCC), will fur<strong>the</strong>r consolidate its position in<br />
post GCC full economic union.<br />
» In <strong>the</strong> scenario of falling oil prices & slowdown of global economy, we expect Saudi economy <strong>to</strong> record<br />
real GDP growth of 2.2% in 2009 and an oil price of around US$51/bbl could lead <strong>to</strong> balancing of<br />
FY2009 Saudi budget.<br />
Global Investment House<br />
Nominal GDP & Oil Price<br />
(SR bn)<br />
1,800<br />
1,700<br />
1,600<br />
1,500<br />
1,400<br />
1,300<br />
1,200<br />
1,100<br />
1,000<br />
900<br />
800<br />
700<br />
600<br />
(US$/barrel)<br />
1,753.0 100<br />
95.0 95<br />
90<br />
85<br />
84.4<br />
80<br />
1,430.5<br />
1,335.6<br />
75<br />
70<br />
1,182.5<br />
65<br />
59.0<br />
60<br />
55<br />
49.7<br />
50<br />
938.8<br />
45<br />
804.6<br />
40<br />
34.5<br />
35<br />
686.3 707.1<br />
30<br />
27.1<br />
23.1 24.3<br />
25<br />
20<br />
2001 2002 2003 2004 2005 2006 2007 2008E<br />
Nominal GDP (LHS)<br />
Source: SAMA, Ministry of Economy & Planning<br />
Average Price-Arabian Light (RHS)<br />
Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
Current and Trade Account<br />
Current and Trade Accounts<br />
(SR bn)<br />
840<br />
780<br />
720<br />
660<br />
600<br />
540<br />
480<br />
420<br />
360<br />
300<br />
240<br />
180<br />
120<br />
60<br />
0<br />
2003 2004 2005 2006 2007 2008E<br />
Current Account Balance (LHS)<br />
Trade Balance (LHS)<br />
CA % of GDP (RHS)<br />
TB % of GDP (RHS)<br />
46%<br />
42%<br />
38%<br />
34%<br />
30%<br />
26%<br />
22%<br />
18%<br />
14%<br />
10%<br />
Source: SAMA, Central Department of Statistics & Information & Global Research<br />
» Trade Balances improved, driven by:<br />
- High oil prices<br />
- Diversification initiatives<br />
» Trade balances and current account balances both increased in 2008. Also in terms of GDP ratio, both<br />
witnessed increase <strong>to</strong> 46.8% and 32.2%, respectively. In 2009 we estimate current account balance <strong>to</strong><br />
GDP ratio <strong>to</strong> drop <strong>to</strong> around 26.0%.<br />
Global Investment House Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
Money Supply Responds Favorably<br />
Money Supply<br />
» Owing <strong>to</strong> rising inflation, <strong>the</strong> reserve requirement on <strong>to</strong>tal demand deposits was increased from 7% in<br />
Nov 07 <strong>to</strong> 13% till May 08. Although <strong>the</strong> requirement was relaxed later in 2008, <strong>the</strong> move delivered <strong>the</strong><br />
desired results.<br />
» The annual M3 growth dropped from 21.8% in Aug 08 <strong>to</strong> 19.4% in Sep 08. On MoM basis, M2 growth<br />
of 2.8% in Jul 08 reduced <strong>to</strong> 0.2% in Oct 08, while M3 increase of 1.9% in Jul 08 declined <strong>to</strong> 1.4% in<br />
Oct 08.<br />
Money Supply<br />
End of period 2005 2006 2007 2008<br />
(All figures in SR bn) Jan Feb Mar Apr May Jun Jul Aug Sep Oct<br />
Currency in Circulation (1) 64.3 69.3 72.2 71.4 70.8 72.4 71.4 74.4 77.6 78.6 76.9 84.3 81.9<br />
Demand Deposits (2) 219.3 243.4 311.4 326.8 328.3 339.3 337.0 344.4 351.6 349.1 342.3 333.6 335.8<br />
Money Supply (M1) (3) = (1) +(2) 283.5 312.7 383.6 398.2 399.1 411.7 408.4 418.9 429.2 427.7 419.2 417.9 417.6<br />
% growth rate 4.51 10.3 22.6 3.8 0.2 3.2 -0.8 2.6 2.5 -0.3 -2.0 -3.0 -0.1<br />
Time & Savings Deposits (4) 165.3 226.0 283.1 290.8 293.0 294.1 290.8 284.0 282.8 304.4 318.4 326.5 327.9<br />
Money Supply (M2) (5) = (3) +(4) 448.8 538.8 666.6 689.0 692.1 705.8 699.2 702.9 711.9 732.1 737.6 744.4 745.5<br />
% growth rate 10.0 20.0 23.7 3.4 0.5 2.0 -0.9 0.5 1.3 2.8 0.8 0.9 0.2<br />
O<strong>the</strong>r Quasi Monetary Deposits (6) 104.9 121.8 123.1 126.1 135.2 128.2 127.0 141.6 148.8 145.0 148.2 144.0 155.5<br />
Money Supply (M3) (7) = (5) +(6) 553.7 660.6 789.8 815.1 827.4 834.0 826.2 844.4 860.7 877.1 885.8 888.5 901.1<br />
% growth rate 11.6 19.3 19.6 3.2 1.5 0.8 -0.9 2.2 1.9 1.9 1.0 0.3 1.4<br />
Source: SAMA<br />
Global Investment House<br />
Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
Inflation<br />
Inflation Peaks Out<br />
» Saudi Arabia’s strong economic<br />
performance during times of high<br />
oil prices, witnessed a surge in<br />
inflation rate <strong>to</strong>uching <strong>the</strong> highs of<br />
11.1%. His<strong>to</strong>rically (2000-06) Saudi<br />
inflation has been quite low (1.0% <strong>to</strong><br />
2.0%).<br />
» The rental <strong>com</strong>ponent played a<br />
significant upward influence in rising<br />
inflation levels in 2008.<br />
» SAMA closely moni<strong>to</strong>ring <strong>the</strong><br />
inflationary trends has taken various<br />
initiatives that have started bearing<br />
positive results. The fall in <strong>com</strong>modity<br />
prices has offered fur<strong>the</strong>r support<br />
in better managing <strong>com</strong>modity led<br />
inflationary pressures.<br />
Inflation rates in 2008<br />
11.5%<br />
11.0%<br />
10.5%<br />
10.0%<br />
9.5%<br />
9.0%<br />
8.5%<br />
8.0%<br />
7.5%<br />
7.0%<br />
6.5%<br />
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08<br />
Source: SAMA<br />
Global Investment House Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
Demography<br />
Kingdom’s Demographic S<strong>to</strong>ry<br />
» Saudi Arabia with an estimated population of 24.7mn in 2008, has one of <strong>the</strong> fastest population growth<br />
rate amongst <strong>the</strong> Arab countries.<br />
» The Kingdom’s population recorded a 5-year CAGR (2002-07) of 2.2%.<br />
» An annual growth rate of 4.1% during 1975-2004 is estimated <strong>to</strong> drop <strong>to</strong> 2.3% in <strong>the</strong> period of 2004-<br />
2015. However, it is still going <strong>to</strong> be higher than <strong>the</strong> forecasted growth of 2.0% in o<strong>the</strong>r Arab countries<br />
and 1.3% in developing countries.<br />
» The population in Saudi Arabia <strong>com</strong>prises of 72.9% Saudis, and 27.1% non-Saudis.<br />
Population Statistics<br />
(mn) 2001 2002 2003 2004 2005 2006 2007 2008E<br />
Saudi Population 15.2 15.6 16.1 16.4 16.8 17.3 17.5 17.9<br />
Non-Saudi Population 5.7 5.8 5.9 6.1 6.2 6.4 6.5 6.8<br />
Total Population 20.9 21.4 22.0 22.5 23.1 23.7 24.0 24.7<br />
Total Employed 6.2 6.3 6.6 7.2 7.4 7.5 7.7 7.8<br />
Source: Central Department of Statistics, & Ministry of Economy & Planning<br />
Global Investment House<br />
10 Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
Economy<br />
Saudi Arabia’s 10x10 Vision<br />
» SAGIA and <strong>the</strong> Kingdom of Saudi Arabia as a whole are fully <strong>com</strong>mitted <strong>to</strong>wards <strong>the</strong><br />
Kingdom’s ambitious project of 10 x 10, which aims at positioning Saudi Arabia amongst<br />
<strong>the</strong> <strong>to</strong>p ten most <strong>com</strong>petitive nations by 2010.<br />
» The realization of 10x10 vision will require substantial steps and effective initiatives,<br />
which are facilitated through a series of development plans that have reached Eighth<br />
Developmental Plan (2005-09).<br />
» The Eighth Plan marks a new phase in a development process that has spanned more than<br />
three decades. Although <strong>the</strong> oil sec<strong>to</strong>r remains a dominant contribu<strong>to</strong>r <strong>to</strong> <strong>the</strong> Kingdom’s<br />
GDP, its contribution may <strong>com</strong>e down in <strong>com</strong>ing years as <strong>the</strong> government takes on various<br />
plans <strong>to</strong> enhance its economic diversification.<br />
» In <strong>the</strong> <strong>com</strong>ing five years (2005–09), <strong>the</strong> Eighth Development Plan aims at increasing<br />
real GDP from around SR722.2bn in 2004 <strong>to</strong> around SR895.2bn in 2009. The Plan also<br />
envisages that by 2009, <strong>the</strong> share of <strong>the</strong> non-oil sec<strong>to</strong>r in GDP would have increased <strong>to</strong><br />
more than 70%.<br />
Global Investment House 11 Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
Budget<br />
KSA Budget 2009: Kingdom Spending Remains Unabated in 2009<br />
» KSA budgets 2009 fiscal deficit of SR65bn with forecasted expenditure of SR475bn (15.9% higher than<br />
2008) and revenue of SR410bn (8.9% lower than 2008) in 2009.<br />
» Budget estimates do reflect <strong>the</strong> repercussions of global slowdown on Saudi economy but <strong>the</strong> Kingdom<br />
draws support from its accumulated reserves esp. in recent oil boom.<br />
Bugget Revenues & Expenses<br />
(SR bn)<br />
1,200<br />
1,050<br />
900<br />
750<br />
600<br />
450<br />
300<br />
150<br />
0<br />
-150<br />
11.4%<br />
280.4<br />
217.8<br />
107.1<br />
3.2%<br />
22.7<br />
36.0<br />
4.5%<br />
178.5<br />
-26.9 -20.5<br />
-3.9%<br />
-2.9%<br />
2000 2001 2002 2003 2004 2005 2006 2007 2008p<br />
Budget Balance -(LHS)<br />
Revenues -(LHS)<br />
Expenditures -(LHS)<br />
Balance as % of GDP -(RHS)<br />
Source: SAMA, Ministry of Finance, & Ministry of Economy & Planning<br />
18.4%<br />
21.2%<br />
12.6%<br />
590.0<br />
33.7%<br />
35%<br />
30%<br />
25%<br />
20%<br />
15%<br />
10%<br />
5%<br />
0%<br />
-5%<br />
Global Investment House<br />
12 Saudi Arabia Economic Overview - January 2009
Economic Overview<br />
» It is noteworthy that Saudi Arabia like<br />
o<strong>the</strong>r Arab oil-producing countries has<br />
traditionally presented conservative<br />
government budget estimates.<br />
» An announced budget surplus of<br />
SR40bn (US$10.7bn) in 2008 had<br />
an actual out<strong>com</strong>e of SR590bn<br />
(US$157.3bn) posting an exponential<br />
increase of more than 1,300% over<br />
<strong>the</strong> budgeted estimates.<br />
» A record fiscal year 2008 performance<br />
could be mainly attributed <strong>to</strong> <strong>the</strong><br />
outstanding increase in oil prices<br />
during <strong>the</strong> first seven months of<br />
2008.<br />
Conservative Budget<br />
Revenue<br />
(SR bn) Budget Actual<br />
% change<br />
(Actual -<br />
Budget)<br />
Budget<br />
Expenditure<br />
Actual<br />
Budget<br />
% change<br />
(Actual -<br />
Budget)<br />
2000 157 258 64.3% 185 235 27.0%<br />
2001 215 228 6.0% 215 255 18.6%<br />
2002 157 213 35.7% 202 233 15.3%<br />
2003 170 293 72.4% 209 257 23.0%<br />
2004 200 392 96.0% 230 285 23.9%<br />
2005 280 564 101.4% 280 346 23.6%<br />
2006 390 673 72.6% 335 393 17.3%<br />
2007 400 642 60.5% 380 466 22.6%<br />
2008 450 1,100 144.4% 410 510 24.4%<br />
2009 410 - - 475 - -<br />
Source: Ministry of Finance & SAMA<br />
Global Investment House 13 Saudi Arabia Economic Overview - January 2009
Economic Outlook<br />
Economy<br />
» Saudi economy with calculated exposure in <strong>the</strong> global financial markets seems <strong>to</strong> be more<br />
<strong>com</strong>fortably placed in wea<strong>the</strong>ring <strong>the</strong> global distress. However, being an important part of<br />
<strong>the</strong> intertwined global markets, it is not <strong><strong>com</strong>plete</strong>ly insulated from <strong>the</strong> global slowdown.<br />
» Its ability <strong>to</strong> maintain its economic growth plans on track is evident from <strong>the</strong> government<br />
statements that Saudi Arabia’s important economic development projects would not be<br />
significantly impacted by <strong>the</strong> global financial tsunami, and it has adequate fiscal reserves<br />
(build up over <strong>the</strong> oil boom period) <strong>to</strong> handle <strong>the</strong> current conditions.<br />
» In addition <strong>to</strong> <strong>the</strong> government’s continuing efforts and <strong>com</strong>mitment, support from macroeconomic<br />
fac<strong>to</strong>rs is also believed <strong>to</strong> facilitate <strong>the</strong> Kingdom’s economic growth.<br />
- Easing of inflation<br />
- Low debt <strong>to</strong> GDP ratio<br />
- Strong banking system<br />
- Considerable demand generation from domestic consumption<br />
Global Investment House<br />
14 Saudi Arabia Economic Overview - January 2009
Economic Outlook<br />
Economy<br />
» Based on <strong>the</strong> Kingdom’s inherent strengths and our economic forecast for 2009, we are confident that<br />
although <strong>the</strong> year ahead will witness softening of <strong>the</strong> Saudi economy, <strong>the</strong> budgeted fiscal deficit has high<br />
chances of being converted in<strong>to</strong> a fiscal surplus.<br />
» Our forecast of three different scenarios (worst case up-<strong>to</strong> best case) reveals that Saudi Arabia could<br />
<strong>report</strong> a deficit of SR2.3bn in worst case scenario, while it could <strong>report</strong> fiscal surplus between <strong>the</strong> range<br />
of SR79.5bn <strong>to</strong> SR218.7bn in <strong>the</strong> most likely and best case scenarios, respectively.<br />
Scenarios for FY 2009 Budget Out<strong>com</strong>e<br />
(SR mn, unless mentioned) Worst Case Most Likely Best Case<br />
Arab Light Price (US$/b) 55.0 58.0 65.0<br />
Production (mn b/d) 7.50 8.00 8.50<br />
Oil Revenues 531,759.4 600,060.0 719,004.4<br />
O<strong>the</strong>r receipts 69,128.7 78,007.8 93,470.6<br />
Total Revenue 600,888.1 678,067.8 812,474.9<br />
Total Expenditure 603,250.0 598,500.0 593,750.0<br />
Surplus/(Deficit) (2,361.9) 79,567.8 218,724.9<br />
Source: SAMA, OPEC, & Global Research<br />
Global Investment House 15 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r
Banking Sec<strong>to</strong>r<br />
Saudi Banks Wea<strong>the</strong>ring Financial S<strong>to</strong>rm Well<br />
» Saudi banking sec<strong>to</strong>r with its relatively limited exposure <strong>to</strong> <strong>the</strong> global financial<br />
markets was somewhat able <strong>to</strong> escape <strong>the</strong> severe implications of <strong>the</strong> global<br />
financial distress, with not even a single bail out situation <strong>report</strong>ed till now.<br />
» The well provisioned balance sheet of <strong>the</strong> Saudi banking sec<strong>to</strong>r (with <strong>the</strong><br />
NPL Coverage of above 100%) signals <strong>the</strong> overall good health quality of <strong>the</strong><br />
Kingdom’s banking assets.<br />
» However, being an important part of <strong>the</strong> intertwined global markets, some of<br />
<strong>the</strong> dampening effects were directly or indirectly translated in<strong>to</strong> <strong>the</strong> Kingdom’s<br />
banking sec<strong>to</strong>r performance. These eventualities have been adequately handled<br />
by SAMA ‘s appropriate market measures from time <strong>to</strong> time.<br />
» The robust financial structure in <strong>the</strong> Kingdom remains very attractive for financial<br />
market players worldwide.<br />
Global Investment House 17 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
Kingdom’s Actions Post Global Financial Crisis<br />
» Overall, Saudi Arabia’s central bank played down <strong>the</strong> impact of <strong>the</strong> global<br />
financial crisis on <strong>the</strong> Saudi economy. However, SAMA closely followed <strong>the</strong><br />
market developments and remained ready <strong>to</strong> provide liquidity when needed.<br />
» SAMA also informed that it is ready <strong>to</strong> pump liquidity of SR150bn (US$40bn)<br />
<strong>to</strong> help <strong>the</strong> kingdom’s banks if required and at one stage did inject between<br />
US$2-3bn <strong>to</strong> ease money markets.<br />
» Saudi Arabia’s five financial institutions: Riyad Bank, AlRajhi Bank, Banque<br />
Saudi Fransi, Samba Financial Group and Arab National Bank stated that <strong>the</strong>ir<br />
financial positions won’t be affected by <strong>the</strong> global mortgage crisis as <strong>the</strong>y have<br />
no exposure <strong>to</strong> <strong>the</strong> international mortgage market.<br />
» Although Saudi Arabia at large did not face any economic panic situation during<br />
this troubled global financial times, SAMA in order <strong>to</strong> maintain <strong>the</strong> economic<br />
stability in <strong>the</strong> Kingdom acted proactively on various instances.<br />
Global Investment House<br />
18 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
SAMA Repo Rate Cuts Aimed at Improving Liquidity<br />
» Saudi Arabia maintaining its loyalty of <strong>the</strong> Saudi Riyal peg <strong>to</strong> US dollar for more<br />
than two decades, has at large matched <strong>the</strong> Fed rate cuts by changing its reverse<br />
repo rate. However, <strong>the</strong> Kingdom’s proactive approach linked <strong>to</strong> <strong>the</strong> domestic<br />
market dynamics is clearly signaled through its coordinated & uncoordinated rate<br />
cut decisions.<br />
» The US Federal Reserve since Sep07 has cut its Federal Funds Target rate (FFTR)<br />
by 425bps <strong>to</strong> 1.0%, while over <strong>the</strong> same period <strong>the</strong> Saudi reverse repo rate has<br />
been reduced by 300bps <strong>to</strong> 2.0%.<br />
» Since Mar04, <strong>the</strong> first repo rate cut in Saudi Arabia came in Oct08 in <strong>the</strong> wake of<br />
<strong>the</strong> worsening global financial crisis.<br />
» In Oct08, Saudi Arabian Monetary Agency (SAMA) reduced its repo rate by<br />
150bps <strong>to</strong> 4.0% and also lowered <strong>the</strong> reserve requirements <strong>to</strong> 10.0% from 13.0%<br />
of <strong>the</strong> <strong>to</strong>tal demand deposits.<br />
Global Investment House 19 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
SAMA Repo Rate Cuts Aimed Improving Liquidity (contd.)<br />
» SAMA acted again in Nov08 by <strong>the</strong> repo rate cut of 100bps <strong>to</strong> 3.0%, along with <strong>the</strong> fur<strong>the</strong>r reduction in<br />
bank reserve requirements from 10.0% <strong>to</strong> 7.0%.<br />
Reverse-Repo and Repo Rates<br />
7.0%<br />
6.5%<br />
6.0%<br />
5.5%<br />
5.0%<br />
4.5%<br />
4.0%<br />
3.5%<br />
3.0%<br />
2.5%<br />
2.0%<br />
1.5%<br />
1.0%<br />
0.5%<br />
Nov-98<br />
Apr-99<br />
Sep-99<br />
Feb-00<br />
Jul-00<br />
Dec-00<br />
May-01<br />
Oct-01<br />
Mar-02<br />
Aug-02<br />
Jan-03<br />
Jun-03<br />
Nov-03<br />
Apr-04<br />
Sep-04<br />
Feb-05<br />
Jul-05<br />
Dec-05<br />
May-06<br />
Oct-06<br />
Mar-07<br />
Aug-07<br />
Jan-08<br />
Jun-08<br />
Nov-08<br />
Source: SAMA & Global Research<br />
Official Repo Rate<br />
Reverse Repo Rate<br />
» The repo rate cut decisions have been carefully moni<strong>to</strong>red by SAMA, in order <strong>to</strong> effectively generate <strong>the</strong><br />
desired market effects (esp. <strong>to</strong> enhance <strong>the</strong> liquidity in <strong>the</strong> system).<br />
Global Investment House<br />
20 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
» Saudi Banks constituting 32% of<br />
Tadawul market cap., recorded assets<br />
<strong>to</strong> GDP ratio of 73% (Dec07). Overall,<br />
<strong>the</strong> sec<strong>to</strong>r has Loan <strong>to</strong> Deposit ratio<br />
of more than 80%.<br />
Saudi Banking Assets<br />
(SR bn)<br />
240<br />
220<br />
200<br />
180<br />
» Saudi banking assets recording a<br />
5-year CAGR(2002-07) of 16%,<br />
showed YTD asset growth of 20%<br />
closing at SR1.2trillion in Sep08.<br />
160<br />
140<br />
120<br />
100<br />
80<br />
60<br />
» KSA’s strong macro-economic<br />
outlook offers future optimism for<br />
<strong>the</strong> financial institutions that can<br />
capitalize on <strong>the</strong> growing financing<br />
appetite and deposit base in <strong>the</strong><br />
Kingdom.<br />
40<br />
20<br />
0<br />
Al-Jazira Bank<br />
Bank Al-Bilad<br />
Al-Rajhi<br />
Arab National Bank<br />
Banque Saudi Fransi<br />
National Commercial Bank<br />
Riyad Bank<br />
Saudi British Bank<br />
Saudi Investment Bank<br />
SAMBA Financial Group<br />
Saudi Hollandi Bank<br />
2004 2005 2006 2007 9M-2008<br />
Source: SAMA & Global Research<br />
Global Investment House 21 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
» Saudi banks that had consistently<br />
shown good financial performance in<br />
<strong>the</strong> past decade, witnessed a decline<br />
of 14.6% in FY07 (linked <strong>to</strong> <strong>the</strong><br />
dampened activity at Tadawul) and<br />
posted 3-year CAGR(2004-07) of<br />
22%.<br />
» The listed Saudi banks (9M08<br />
profitability) recorded YoY increase<br />
of 1.6%, posting a consolidated net<br />
profit of SR19.3bn in 9M08.<br />
» Based on 9M08 results, Al Rajhi Bank<br />
with <strong>the</strong> largest market cap. recorded<br />
(YoY) rise of 4.7%; while <strong>the</strong> heavy<br />
weights like SAMBA Financial<br />
Group & Riyad Bank declined (YoY)<br />
by 6.3% & 4.8%, respectively.<br />
Saudi Banking Sec<strong>to</strong>r Profitability<br />
(SR mn)<br />
7,500<br />
7,000<br />
6,500<br />
6,000<br />
5,500<br />
5,000<br />
4,500<br />
4,000<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
Al-Jazira Bank<br />
Bank Al-Bilad<br />
Al-Rajhi<br />
Arab National Bank<br />
Banque Saudi Fransi<br />
National Commercial Bank<br />
Riyad Bank<br />
Saudi British Bank<br />
Saudi Investment Bank<br />
2004 2005 2006 2007 9M-2008<br />
SAMBA Financial Group<br />
Saudi Hollandi Bank<br />
Source: SAMA & Global Research<br />
Global Investment House<br />
22 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
Saudi Banks Quarterly Performance (net profit in SR mn)<br />
Symbol Company<br />
Q1-2007 Q2-2007 Q3-2007 Q4-2007 Q1-2008 Q2-2008 Q3-2008<br />
Actual Actual Actual Actual Actual Actual Actual<br />
1010 Riyad Bank 655.1 847.6 715.9 792.8 690.7 906.3 513.3<br />
1020 Bank AlJazira 302.5 207.3 135.0 160.5 153.3 99.9 61.0<br />
1030 The Saudi Investment Bank 306.1 225.4 336.3 -45.6 262.0 284.5 64.8<br />
1040 Saudi Hollandi Bank 215.4 166.5 162.9 -106.3 282.4 326.3 306.0<br />
1050 Saudi Fransi Bank 689.6 727.8 653.1 640.5 733.2 774.1 729.0<br />
1060 The Saudi British Bank 616.3 634.9 650.9 704.8 757.0 795.1 711.0<br />
1080 Arab National Bank 642.9 724.9 607.9 485.6 672.2 752.2 628.0<br />
1090 Samba Financial Group 1,270.2 1,295.8 1,301.7 940.0 1,200.4 1,221.6 1,200.0<br />
1120 Al Rajhi Bank 1,569.4 1,610.2 1,694.2 1,575.8 1,601.8 1,741.8 1,757.0<br />
1140 Bank AlBilad 25.7 34.7 39.1 -27.1 50.8 57.0 44.6<br />
Source: Company <strong>report</strong>s & Global Research<br />
Global Investment House 23 Saudi Arabia Economic Overview - January 2009
Banking Sec<strong>to</strong>r<br />
Saudi Banking Sec<strong>to</strong>r Outlook<br />
» The Saudi banks (as per <strong>the</strong> eleven months data for 2008) posted profitability<br />
increase of 6.0% reaching SR30.0bn.<br />
» Although Saudi banks are somewhat robust against severe implications of global<br />
financial crisis, are estimated <strong>to</strong> record some write downs during <strong>the</strong> last quarter<br />
of 2008.<br />
» According <strong>to</strong> our estimates, <strong>the</strong> FY08 overall banking sec<strong>to</strong>r results will not<br />
experience any significant growth as <strong>the</strong> banking heavy weights performance<br />
could be mixed for <strong>the</strong> full year results. Our estimates indicate that amongst <strong>the</strong><br />
listed big banks Al Rajhi Bank and Saudi British Bank will lead <strong>the</strong> growth, while<br />
Riyad Bank and Samba financial group could witness decline.<br />
» Dependant on <strong>the</strong> stability of global s<strong>to</strong>ck markets in 2009, <strong>the</strong> Kingdom holds<br />
significant potential <strong>to</strong> attract investments. The Kingdom’s continued <strong>com</strong>mitment<br />
<strong>to</strong>wards <strong>the</strong> projects <strong>to</strong> ensure sustainable and balanced economic development<br />
along with banks’ restructuring plans and <strong>to</strong> lower dependence on revenues<br />
from equity markets, provide a window for stable if not higher banking sec<strong>to</strong>r<br />
performance during <strong>the</strong> year.<br />
Global Investment House<br />
24 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r
Petrochemical Sec<strong>to</strong>r<br />
Saudi Industry Overview<br />
Saudi Arabia Regional Share - 2007<br />
» Largest regional petrochemical producing<br />
country.<br />
» SABIC is <strong>the</strong> leading local and regional <strong>com</strong>pany.<br />
» Petrochem exports mainly on intermediates &<br />
polymers.<br />
Saudi Arabia<br />
53%<br />
Source: Zawya & Global Research<br />
MENA<br />
47%<br />
SABIC Regional Share - 2007<br />
Rest of <strong>the</strong> MENA<br />
54.7%<br />
SABIC Share in Saudi Arabia - 2007<br />
Rest of <strong>the</strong> Saudi Arabia<br />
14.1%<br />
SABIC<br />
45.3%<br />
Source: Company Annual Report 2007 & Global Research<br />
SABIC<br />
85.9%<br />
Source: Company Annual Report 2007 & Global Research<br />
Global Investment House 26 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
Saudi Sec<strong>to</strong>r Performance 2007<br />
» Sales revenue increased at a CAGR of 23.1%<br />
during 2004-07 <strong>to</strong> US$34.8bn in 2007.<br />
» The profitability during 2004-07 had increased<br />
at a CAGR of 25.5% <strong>to</strong> US$8.0bn in 2007.<br />
» Profit margins recorded at an average level<br />
of 24.4%.<br />
SABIC Regional Share - 2007<br />
40,000.0<br />
45.6%<br />
35,000.0<br />
30,000.0<br />
25,000.0<br />
20,000.0<br />
15,000.0<br />
15.3%<br />
11.0%<br />
10,000.0<br />
5,000.0<br />
-<br />
2005 2006 2007<br />
Sales Revenue Growth<br />
Source: Zawya & Companies’ Annual Accounts<br />
Global Investment House<br />
50.0%<br />
45.0%<br />
40.0%<br />
35.0%<br />
30.0%<br />
25.0%<br />
20.0%<br />
15.0%<br />
10.0%<br />
5.0%<br />
0.0%<br />
Sec<strong>to</strong>r Net Profit Margins 2004-07 Saudi<br />
27.0%<br />
26.4%<br />
26.0%<br />
25.1%<br />
25.0%<br />
24.0%<br />
23.0%<br />
23.0%<br />
22.0%<br />
21.7%<br />
Higher financial & depreciation cost<br />
21.0%<br />
20.0%<br />
2004 2005 2006 2007<br />
Source: Companies’ Annual Accounts & Global Research<br />
SABIC Regional Share - 2007<br />
9,000.0<br />
8,000.0<br />
40.4%<br />
33.5%<br />
7,000.0<br />
6,000.0<br />
5,000.0<br />
4,000.0<br />
3,000.0<br />
2,000.0<br />
1,000.0<br />
5.6%<br />
-<br />
2005 2006 2007<br />
Profitability Growth<br />
Source: Zawya & Companies’ Annual Accounts<br />
45.0%<br />
40.0%<br />
35.0%<br />
30.0%<br />
25.0%<br />
20.0%<br />
15.0%<br />
10.0%<br />
5.0%<br />
0.0%<br />
27 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
9M-2008 Financial Performance<br />
» Profitability grew at 48.6% over <strong>the</strong> corresponding<br />
period last year.<br />
Sec<strong>to</strong>r Sales Revenue Break Up-9M 2008<br />
SIPCHEM<br />
1.1%<br />
O<strong>the</strong>rs<br />
1.1%<br />
» Gross profit margins recorded at 19.2%.<br />
» SABIC dominancy remained in <strong>the</strong> local market<br />
followed by SIPCHEM.<br />
Sec<strong>to</strong>r Profitability Revenue (US$ Mn)<br />
40,000<br />
35,000<br />
30,000<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
-<br />
9M-2007 9M-2008<br />
Source: Zawya & Companies’ 9M-2008 Accounts<br />
SABIC 97.8%<br />
Source: Zawya & Companies’ 9M-2008 Accounts<br />
Sec<strong>to</strong>r Profitability Revenue (US$ Mn)<br />
40,000<br />
35,000<br />
30,000<br />
25,000<br />
20,000<br />
15,000<br />
10,000<br />
5,000<br />
-<br />
9M-2007 9M-2008<br />
Source: Zawya & Companies’ 9M-2008 Accounts<br />
Global Investment House 28 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
Saudi Investment Plan<br />
» The government of KSA had allocated investment of US$51.7bn (SR194.0bn) for <strong>the</strong> capacity<br />
expansion.<br />
» SABIC and its affiliates claimed major chunk of <strong>the</strong> planned investment in <strong>the</strong> sec<strong>to</strong>r.<br />
Local Petrochemical Investment - Project Wise<br />
Olefins Complex<br />
15.9%<br />
Acetyles Complex<br />
3.5%<br />
O<strong>the</strong>r<br />
6.7%<br />
SBIC<br />
Europe & UK<br />
23.7%<br />
Saudi Menthol<br />
ARRAZI<br />
1.2%<br />
Source: Zawya & Global Research<br />
Global Investment House<br />
Saudi Kayan<br />
Petrochemical<br />
25.6%<br />
YANSAB<br />
11.0%<br />
Saudi European-IBN<br />
ZAHR<br />
2.6%<br />
Eastern Petrochemical<br />
SHARQ<br />
9.8%<br />
Local Petrochemical Investment - By Status<br />
Unclear<br />
29.9%<br />
Incurred but not <strong><strong>com</strong>plete</strong>d<br />
19.9%<br />
Source: Zawya & Global Research<br />
Incurred<br />
50.1%<br />
29 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
Saudi Capacity Expansions<br />
» Based on <strong>the</strong> given expansion plans, <strong>the</strong> production capacity of Saudi Petrochemical sec<strong>to</strong>r<br />
is expected <strong>to</strong> increase at a CAGR of 8.2% during 2007-11 <strong>to</strong> reach 61.2mn <strong>to</strong>ns in 2011.<br />
» Expansion will help Saudi <strong>to</strong> maintain its leading position.<br />
Petrochemical Capacity Expansion (mn <strong>to</strong>ns)<br />
Expansion Break Up 2011E - Company Wise<br />
70.0<br />
60.0<br />
50.0<br />
40.0<br />
30.0<br />
8.3%<br />
13.2%<br />
6.2%<br />
5.2%<br />
14.0%<br />
12.0%<br />
10.0%<br />
8.0%<br />
6.0%<br />
O<strong>the</strong>rs<br />
52.2%<br />
SABIC<br />
44.0%<br />
20.0<br />
4.0%<br />
10.0<br />
2.0%<br />
-<br />
2007 2008E 2009E 2010E 2011E<br />
Petrochemical Expansion Growth<br />
0.0%<br />
SIPCHEM<br />
3.8%<br />
Source: Zawya & Global Research<br />
Source: Zawya & Global Research<br />
Global Investment House 30 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
Name<br />
Basic-Olefins<br />
Aromatic<br />
Basic-<br />
Basic-<br />
Oxygenate<br />
Expected<br />
Production<br />
Saudi European-IBN ZAHR 950,000 - - 4Q2008<br />
Sino-Saudi Petrochemical Project 1,700,000 - - 2010<br />
Saudi Kayan 3,800,000 - - 3Q2010<br />
Sharq-Eastern Petrochemical 2,000,000 - - 3Q2008<br />
YANSAB 2,005,000 - - 4Q2008<br />
SIPCHEM-Olefins 2,100,000 - - 2012<br />
Sahara/Tanesse-Saudi Ethylene & Propylene Plant 1,285,000 - - 4Q2008<br />
Petrokemya-PVC and Offsite - - - 2010<br />
Sadaf-Styrene Palnt-Saudi Petrochemical - 600,000 - 2010<br />
Delta Oil 1,200,000 - - 2009<br />
Source: Zawya & Global Research<br />
Global Investment House<br />
31 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
Feed S<strong>to</strong>ck & Basic Chemical Prices<br />
» We forecast crude oil prices <strong>to</strong> remain in <strong>the</strong> range of US$55-65 per barrel and gas prices at US$5.5-6.5<br />
per mmbtu till 2011, which will result lower basic chemical prices.<br />
» Local <strong>com</strong>plexes are getting feeds<strong>to</strong>ck gas at a highly subsidized rate of US$0.75 per mmbtu and also<br />
getting naphtha at around 30.0% discount <strong>to</strong> <strong>the</strong> international prices.<br />
Crude Oil (US$ / bbl) & Gas (US$ / mmbtu)<br />
120.0<br />
100.0<br />
80.0<br />
60.0<br />
40.0<br />
20.0<br />
8.0<br />
7.0<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
Prices of Basic Chemicals (US$ per <strong>to</strong>n)<br />
1,650<br />
1,450<br />
1,250<br />
1,050<br />
850<br />
650<br />
800.0<br />
700.0<br />
600.0<br />
500.0<br />
400.0<br />
300.0<br />
200.0<br />
-<br />
2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Crude Oil (LHS) Gas (RHS)<br />
Source: OPEC & Global Research<br />
-<br />
4Q07<br />
1Q08<br />
2Q08E<br />
3Q08E<br />
4Q08E<br />
1Q09E<br />
Ethylene<br />
Propylene<br />
Methyl Tretiary Butyl E<strong>the</strong>r (MTBE)<br />
Source: Global Research<br />
2Q09E<br />
3Q09E<br />
Butene<br />
Global Investment House 32 Saudi Arabia Economic Overview - January 2009
Expected Margins in Saudi Arabia<br />
Petrochemical Sec<strong>to</strong>r<br />
» The availability of feed s<strong>to</strong>ck at highly subsidized rates increase <strong>the</strong> capability of local <strong>com</strong>panies <strong>to</strong><br />
perform well in low price scenarios with better margins as <strong>com</strong>pared <strong>to</strong> international as well as local<br />
players.<br />
Expected Margins in Saudi Arabia - Product Wise<br />
2008E 2009E 2010E 2011E<br />
Ethylene High High High High<br />
Propylene Average High High High<br />
MTBE Low Low Low Low<br />
Styrene Average Low Low Low<br />
Benzene High High High High<br />
Paraxylene Low Low Low Low<br />
Mono Ethylene Glycol Average Low Low Low<br />
Di Ethylene Glycol Average Average Average Average<br />
Teri Ethylene Glycol Average Average Average Average<br />
Purified Terephthalic Acid - PTA Low High High High<br />
Ethylene Di Chloride High High High High<br />
Caustic Soda Low High High High<br />
Vinyl Chloride Monomer - VCM Average Average Average Average<br />
Polyethylene Average Average Average Average<br />
Polypropylene Average Average Average Average<br />
Polyvinyl Chloride - PVC High High High High<br />
Polyethylene Terephthalate Resin - PET High Average Average Low<br />
Polystyrene - PS Low Low Low Low<br />
Source: Global Research High Return = 50% Average Return = 20%-50% Low Return = Below 20%<br />
Global Investment House<br />
33 Saudi Arabia Economic Overview - January 2009
Petrochemical Sec<strong>to</strong>r<br />
Expected Sales Revenue (US$ mn) Growth<br />
Expected Profitability (US$ mn) Growth<br />
60,000.0<br />
50,000.0<br />
40,000.0<br />
30,000.0<br />
20,000.0<br />
10,000.0<br />
-<br />
45.7%<br />
Decline in prices<br />
32.4%<br />
-1.0% 6.5% 4.5%<br />
2007 2008E 2009E 2010E 2011E<br />
50.0%<br />
40.0%<br />
30.0%<br />
20.0%<br />
10.0%<br />
0.0%<br />
-10.0%<br />
12,000.0<br />
10,000.0<br />
8,000.0<br />
6,000.0<br />
4,000.0<br />
2,000.0<br />
-<br />
35.6% Higher Financial & Depreciation Charges<br />
13.6%<br />
8.2%<br />
9.3%<br />
-5.8%<br />
2007 2008E 2009E 2010E 2011E<br />
40.0%<br />
35.0%<br />
30.0%<br />
25.0%<br />
20.0%<br />
15.0%<br />
10.0%<br />
5.0%<br />
0.0%<br />
-5.0%<br />
-10.0%<br />
Sales Revnue<br />
Growth<br />
Profitability<br />
Growth<br />
Source: Companies’ Annual Accounts & Global Research<br />
Saudi Petrochemical Outlook<br />
» Based on our coverage, sales revenues and<br />
profitability of <strong>the</strong> sec<strong>to</strong>r will increase at a CAGR<br />
of 9.6% and 6.1% during 2007-11 respectively<br />
» Leading players <strong>to</strong> acquire & establish<br />
manufacturing & marketing units in European<br />
& American region and utilizing <strong>the</strong> platform of<br />
SINOPEC is under-negotiation<br />
Source: Companies’ Annual Accounts & Global Research<br />
Expected Net Profit Margins<br />
24.0%<br />
23.0%<br />
23.0%<br />
Dilution in Depreciation Impact<br />
22.0%<br />
21.0%<br />
20.4%<br />
20.0%<br />
19.3%<br />
19.0%<br />
19.0%<br />
20.2%<br />
18.0%<br />
17.0%<br />
16.0%<br />
15.0%<br />
2007 2008E 2009E 2010E 2011E<br />
Source: Companies’ Annual Accounts & Global Research<br />
Global Investment House 34 Saudi Arabia Economic Overview - January 2009
Fertilizer Sec<strong>to</strong>r
Fertilizer Sec<strong>to</strong>r<br />
Saudi Fertilizer Overview<br />
» Saudi Arabia ended 2007 with a designed capacity <strong>to</strong> produce 6.8mn <strong>to</strong>ns of fertilizer products, which<br />
constitute 24.6% of <strong>the</strong> MENA capacity after Egypt.<br />
» The local sec<strong>to</strong>r is mainly dominated by Saudi Arabian Fertilizer Company (SAFCO), affiliate of SABIC,<br />
which has claimed 74.4% of <strong>the</strong> local capacity in 2007 and mainly produce Ammonia and Urea.<br />
Company Wise Capacity Break Up 2007<br />
O<strong>the</strong>rs<br />
33.7%<br />
Product Wise Capacity Break Up 2007<br />
Sulphuric Acid<br />
1.9%<br />
Melamine<br />
0.3%<br />
SAFCO<br />
66.3%<br />
Ammonia<br />
47.1%<br />
Urea<br />
50.7%<br />
Source: Company Reports & Global Research<br />
Source: Company Reports, Zawya & Global Research<br />
Global Investment House 36 Saudi Arabia Economic Overview - January 2009
Fertilizers Sec<strong>to</strong>rs<br />
Saudi Fertilizer Outlook<br />
» Saudi government had allocated US$8.1bn (SR2.2bn) for making expansions in fertilizer sec<strong>to</strong>r during<br />
2006-12.<br />
Forecasted Saudi Arabian Fertilizer Capacity (000<strong>to</strong>ns)<br />
25,000.0<br />
20,000.0<br />
15,000.0<br />
Product Wise Fertilizer Capacity Break Up 20011<br />
Sulphuric Acid<br />
22.8%<br />
Melamine<br />
0.1%<br />
Phosphorous Acid<br />
7.4%<br />
Urea<br />
29.9%<br />
10,000.0<br />
Completion of SABIC - Maaden Project<br />
5,000.0<br />
-<br />
2007 2008E 2009E 2010E<br />
Source: Company Reports, Zawya & Global Research<br />
2011E<br />
DAP<br />
14.3%<br />
Ammonia<br />
25.6%<br />
Source: Company Reports, Zawya & Global Research<br />
» Based on <strong>the</strong> given plan, we expect <strong>the</strong> production<br />
capacity of Saudi Arabia will increase at a<br />
CAGR of 31.5% during 2007-11 <strong>to</strong> reach at<br />
20.3mn <strong>to</strong>ns.<br />
» Completion of SABIC-Maaden fertilizer project<br />
will add <strong>the</strong> new production capacity <strong>to</strong> produce<br />
2.9mn <strong>to</strong>ns of Di Ammonium Phosphate (DAP).<br />
Global Investment House<br />
37 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r
Real Estate Sec<strong>to</strong>r<br />
» Real estate plays an important role in <strong>the</strong> Kingdom’s non-oil economy, which remains focused on <strong>the</strong><br />
government’s effort for economic diversification .<br />
» Currently <strong>the</strong> housing finance industry in Saudi Arabia is almost non-existent with <strong>the</strong> housing finance<br />
<strong>to</strong> GDP ratio currently estimated at less than 1%.<br />
» Generally, Saudi Arabia is witnessing an escalating demand from young middle in<strong>com</strong>e Saudis. Thus, if<br />
Saudi is <strong>to</strong> meet such demand it will need <strong>to</strong> build 1.5mn new homes by 2015.<br />
» Saudi Arabia being one of <strong>the</strong> largest construction markets in <strong>the</strong> Middle East is estimated <strong>to</strong> have <strong>the</strong><br />
<strong>to</strong>tal real estate investments of around US$300bn, which are expected <strong>to</strong> cross US$400bn mark in near<br />
future.<br />
» The construction and building activity in <strong>the</strong> Kingdom grew by 7.1% in 2007 as against <strong>the</strong> growth of<br />
7.3% in <strong>the</strong> preceding year. With a value of SR48.8bn in 2004, <strong>the</strong> real estate sec<strong>to</strong>r had a contribution<br />
of 6.8% <strong>to</strong> <strong>the</strong> Kingdom’s GDP.<br />
Global Investment House<br />
39 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Real Estate contribution <strong>to</strong> GDP<br />
(SR mn)<br />
900,000<br />
800,000<br />
700,000<br />
600,000<br />
603,589<br />
714,900<br />
7.2%<br />
895,166<br />
7.3%<br />
7.2%<br />
7.1%<br />
500,000<br />
400,000<br />
7.0%<br />
7.0%<br />
300,000<br />
6.9%<br />
200,000<br />
100,000<br />
0<br />
6.8%<br />
42,221 48,822 64,872<br />
1999 2004 2009 (Projected)<br />
Real estate (LHS) GDP (LHS) Real estate /GDP (RHS)<br />
6.8%<br />
6.7%<br />
Source: Ministry of Economy and Planning & Global Research<br />
» The real estate activity in <strong>the</strong> Kingdom is estimated <strong>to</strong> increase at an average annual rate of 5.8%, with<br />
its contribution <strong>to</strong> GDP increasing from 6.8% in 2004 <strong>to</strong> 7.2% in 2009.<br />
Global Investment House 40 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Key Growth Fac<strong>to</strong>rs Of Saudi Real Estate<br />
» Population & Demographic S<strong>to</strong>ry<br />
- Saudi Arabia’s population growth rate, which is <strong>the</strong><br />
fastest amongst <strong>the</strong> Arab countries, opens up <strong>the</strong><br />
Kingdom for vast array of growth opportunities.<br />
Population Age-Group (2007)<br />
64 years and above,<br />
3%<br />
- Kingdom’s population is estimated <strong>to</strong> have grown<br />
by more than threefold during <strong>the</strong> last three decades,<br />
increasing from 7.3mn in 1975 <strong>to</strong> 23.98mn in 2007 (mid<br />
estimate).<br />
Between<br />
30 <strong>to</strong> 64 years,<br />
36%<br />
Under<br />
30 years,<br />
61%<br />
- Having around 60% population between <strong>the</strong> working<br />
age group of 15-64 years indicates a strong demand in<br />
all categories of daily households in years <strong>to</strong> <strong>com</strong>e.<br />
Source: Central Department of Statistics & Information<br />
Global Investment House<br />
41 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Attractive for Foreign & Domestic Inves<strong>to</strong>rs<br />
» Besides <strong>the</strong> government’s focus <strong>to</strong> provide quality housing facilities in <strong>the</strong> Kingdom, <strong>the</strong> demand<br />
fundamentals of real estate sec<strong>to</strong>r increase its attractiveness for both domestic & foreign inves<strong>to</strong>rs.<br />
» The FDI inflow as a % of gross fixed capital formation showed a consistent increase in <strong>the</strong> Kingdom,<br />
recording a rise from 24.0% in 2006 <strong>to</strong> 32.1% in 2007.<br />
Foreign Direct Investment Flows<br />
(US$ bn)<br />
24<br />
33%<br />
22<br />
20<br />
28%<br />
18<br />
16<br />
23%<br />
14<br />
12<br />
18%<br />
10<br />
8<br />
13%<br />
6<br />
4<br />
8%<br />
2<br />
0<br />
3%<br />
2004 2005 2006 2007<br />
FDI Saudi Arabia (LHS) FDI UAE (LHS) Saudi FDI /Gross Fixed Capital Formation (RHS)<br />
Source: UNCTAD, World Investment Report 2008 & Global Research<br />
Global Investment House 42 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Government Focus On Infrastructure Projects<br />
» According <strong>to</strong> <strong>the</strong> estimates, in addition <strong>to</strong> <strong>the</strong> large investments in <strong>the</strong> oil and gas sec<strong>to</strong>rs, planned<br />
investments <strong>to</strong> be implemented under public-private partnerships mostly in infrastructure (during 2007-<br />
12) are expected <strong>to</strong> exceed US$300bn.<br />
» The plan of developing six mega economic cities across <strong>the</strong> Kingdom is one of <strong>the</strong> highlight of Kingdom’s<br />
investment projects in years <strong>to</strong> <strong>com</strong>e.<br />
New Saudi mortgage law expected anytime<br />
» The government has indicated that detailed mortgage law and mortgage financing regulations are under<br />
consideration for finalization and will allow a wider access <strong>to</strong> property ownership in <strong>the</strong> Kingdom.<br />
» In anticipation of <strong>the</strong> long-awaited <strong>com</strong>prehensive mortgage law, a number of banks have started offering<br />
Shariah-Compliant home financing credit with tenors extending up <strong>to</strong> 25 years.<br />
Global Investment House<br />
43 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Economic Cities in Saudi Arabia<br />
» Saudi Arabia’s government as part of its rapid economic growth and diversification goals, has announced<br />
one of <strong>the</strong> largest infrastructure projects undertaken by <strong>the</strong> Kingdom<br />
» It is envisioned that <strong>the</strong> economic cities alone will have three times population of Dubai, a GDP equivalent<br />
<strong>to</strong> that of Singapore and an area four times <strong>the</strong> size of Hong Kong.<br />
» Saudi Arabian General Investment Authority (SAGIA) with an initial plan <strong>to</strong> develop six Economic<br />
Cities in <strong>the</strong> Kingdom, has already launched a <strong>to</strong>tal of four. These cities are expected <strong>to</strong> be home <strong>to</strong> 4-<br />
5mn residents by 2020, besides generating enormous economic growth opportunities.<br />
Economic Cities' Highlights<br />
Area<br />
Investment<br />
Jobs<br />
Population<br />
Exp. <strong>com</strong>pletion<br />
(mn sq.m.)<br />
(US$ bn)<br />
(000s)<br />
(000s)<br />
(year)<br />
Knowledge Economic City 4.8 7 20 150 2014<br />
Prince Abdul Aziz bin Mousaed Economic City 156 8 55 300 2018<br />
Jazan Economic City 100 27 100 300 2011<br />
King Abdullah Economic City 168 27 1,000 2,000 2016<br />
Source: SAGIA, MEED & Global Research<br />
Global Investment House 44 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Saudi Real Estate Market Structure<br />
Residential Real State Market<br />
No. of units in KSA (mn) 4<br />
Avg. price of Land(SR per sqm) 680<br />
Avg. Rent (per sqm p/a) 220<br />
Avg. Sales price(SR per sqm) 2,500<br />
Avg. Rental Yield 9.0%<br />
Occupancy rate >95%<br />
Current Household size (# of persons) 5.7<br />
Residential s<strong>to</strong>ck (mn sqm) 875<br />
Commercial Real State Market<br />
Office Hotel Retail<br />
Space area(mn sqm) 8.0 6.0 3.0<br />
Avg. price of Land(SR per sqm) 15,000 16,000 16,000<br />
Avg. Rent (per sqm p/a) 1,200 - 1,700<br />
Avg. Sales price(SR per sqm) 17,000 -<br />
Avg. Rental Yield 8% - -<br />
Occupancy rate >90% >85% >85%<br />
Source: Mazaya Real Estate Index, Colliers, Jones Lang Lasalle, & Global Research<br />
» With less than 50% of <strong>the</strong> population having home ownership, while 60% of <strong>the</strong> population being under<br />
30years of age and a significant inflow of labour force migration in<strong>to</strong> <strong>the</strong> Kingdom indicates substantial<br />
housing demand in <strong>the</strong> country.<br />
Global Investment House<br />
45 Saudi Arabia Economic Overview - January 2009
Real Estate Sec<strong>to</strong>r<br />
Real Estate Sec<strong>to</strong>r Outlook<br />
» In recent years, Saudi Arabia under<strong>to</strong>ok many economic reform measures that added fur<strong>the</strong>r<br />
clarity <strong>to</strong> laws and regulations and are aimed at attracting foreign investments and providing<br />
direct impetus <strong>to</strong> <strong>the</strong> real estate sec<strong>to</strong>r.<br />
» Unlike some o<strong>the</strong>r Gulf countries, <strong>the</strong> Saudi real estate market is largely driven by demand<br />
fundamentals ra<strong>the</strong>r than mere speculation. We believe that Saudi Real Estate sec<strong>to</strong>r despite<br />
<strong>the</strong> global slowdown offers good growth potential based on <strong>the</strong> domestic demand that is not<br />
yet <strong><strong>com</strong>plete</strong>ly fulfilled.<br />
» Based on <strong>the</strong> 8th Development Plan, <strong>the</strong> housing demand of around 1.0mn units is estimated<br />
over 2005-09, which implies an average increase of 200,000 units/year.<br />
» It is also estimated that <strong>the</strong> average household size could decline from 5.7 <strong>to</strong> 5.2 persons<br />
by 2012. The decline in household size also indicates <strong>the</strong> rise in housing demand in <strong>the</strong><br />
Kingdom over <strong>the</strong> <strong>com</strong>ing years.<br />
Global Investment House<br />
46 Saudi Arabia Economic Overview - January 2009
Power Sec<strong>to</strong>r
Power Sec<strong>to</strong>r<br />
» Saudi Electricity Company (SEC) with quasimonopolistic<br />
position in electricity generation,<br />
transmission and distribution, continues with its<br />
efforts <strong>to</strong> maintain and ensure stability of<br />
electric power supply in <strong>the</strong> Kingdom.<br />
» The <strong>to</strong>tal available capacity for electricity<br />
generation in Saudi Arabia witnessed a rise of<br />
6.1%, rising <strong>to</strong> 36,949MW in 2007.<br />
» The <strong>to</strong>tal peak load during 2007 also witnessed<br />
a rising trend. The peak load recorded increase<br />
of 11.9%, rising from 31,240MW in 2006 <strong>to</strong><br />
34,953MW in 2007.<br />
Kingdom's Power Generation Details<br />
(MW)<br />
38,000<br />
33,500<br />
29,000<br />
24,500<br />
20,000<br />
15,500<br />
11,000<br />
6,500<br />
2,000<br />
2005 2006 2007<br />
Generation Capacity of Purchased Power SEC's Actual Generation Capacity<br />
Total Available Capacity (KSA)<br />
Source:: SEC Financial Reports & Global Research<br />
Region-wise Contribution (MW) from SEC's Own<br />
Generation Units -2007<br />
» The <strong>to</strong>tal actual capacity from SEC constituted<br />
89.2% of <strong>the</strong> <strong>to</strong>tal generating capacities in <strong>the</strong><br />
Kingdom, and posting an increase of 7.5% was<br />
recorded at 32,957MW in 2007.<br />
10,661<br />
3,162<br />
8,314<br />
10,466<br />
Central region Eastern region Western region Sou<strong>the</strong>rn region<br />
Source: SEC Financial Reports & Global Research<br />
Global Investment House<br />
48 Saudi Arabia Economic Overview - January 2009
Power Sec<strong>to</strong>r<br />
» SEC has undertaken ongoing initiatives <strong>to</strong> increase <strong>the</strong> reach of electricity throughout <strong>the</strong> Kingdom and<br />
<strong>to</strong> enhance <strong>the</strong> reliability of its power network.<br />
» During 2007, <strong>the</strong> <strong>to</strong>tal transmission network length rose by 3.6% <strong>to</strong> 37,981ckm and <strong>the</strong> distribution<br />
network increased by 4.8% <strong>to</strong> 161,923ckm in <strong>the</strong> Kingdom.<br />
» SEC has already approved <strong>the</strong> 2009-2013 Operating Plan. The costs over this planned period are estimated<br />
<strong>to</strong> be SR42bn for generation projects, SR38bn for transmission projects and SR10bn for distribution<br />
projects.<br />
» Heightened infrastructure investments activity in Saudi Arabia, improving quality of life standards,<br />
favorable demographics are some of <strong>the</strong> important fac<strong>to</strong>rs that are expected <strong>to</strong> generate higher energy<br />
demand in future.<br />
» SEC also has important participation (31.6% shareholding) in <strong>the</strong> capital of <strong>the</strong> Gulf Cooperation Council<br />
Interconnection Authority (GCCIA). This project will link <strong>the</strong> power networks of <strong>the</strong> six GCC states,<br />
enhancing <strong>the</strong> electricity transmission and distribution between <strong>the</strong> member countries.<br />
Global Investment House 49 Saudi Arabia Economic Overview - January 2009
Power Sec<strong>to</strong>r<br />
Power Sec<strong>to</strong>r Outlook<br />
» The formation of <strong>the</strong> Saudi Electricity Regula<strong>to</strong>ry Authority (SERA) in 2001 was a valuable addition for<br />
effective development of <strong>the</strong> Kingdom’s electricity sec<strong>to</strong>r. According <strong>to</strong> <strong>the</strong> <strong>report</strong>s, a new electricity<br />
law under consideration at <strong>the</strong> Shoura Council envisages privatization of <strong>the</strong> sec<strong>to</strong>r as well as expansion<br />
of power services throughout Saudi Arabia.<br />
» In line with <strong>the</strong> government’s economic reforms <strong>the</strong> new law is expected <strong>to</strong> create a suitable atmosphere for<br />
private investments and also provide consumers a chance <strong>to</strong> select between <strong>the</strong> electricity <strong>com</strong>panies.<br />
» With anticipated growth in power demand, <strong>the</strong> maximum power load in <strong>the</strong> Kingdom is expected <strong>to</strong><br />
reach 62,000MW by 2017. This not only indicates rising demand but also offers attractive growth and<br />
investment opportunities for electricity players in <strong>the</strong> Kingdom.<br />
» The materialization of privatization plans will revolutionize <strong>the</strong> local power sec<strong>to</strong>r by possibly breaking<br />
up <strong>the</strong> quasi-monopolistic SEC in<strong>to</strong> four entities that will be open <strong>to</strong> foreign investment amid plans <strong>to</strong><br />
create <strong>com</strong>petition in <strong>the</strong> electricity sec<strong>to</strong>r.<br />
Global Investment House<br />
50 Saudi Arabia Economic Overview - January 2009
Tele<strong>com</strong> Sec<strong>to</strong>r
Tele<strong>com</strong> Sec<strong>to</strong>r<br />
» The Saudi tele<strong>com</strong> market is <strong>the</strong> largest by size in <strong>the</strong> GCC region.<br />
» The mobile market has been growing rapidly in recent years breaching <strong>the</strong> 100% penetration mark.<br />
However, growth in fixed lines services has been stagnant.<br />
Saudi Tele<strong>com</strong> Sec<strong>to</strong>r Profile<br />
2002 2003 2004 2005 2006 2007<br />
Cellular Subscribers (mn) 5.0 7.2 9.2 14.2 19.7 28.4<br />
Cellular Penetration (%) 23.3 32.9 40.5 61.4 81.6 109.0<br />
Pre paid subscribers (%) 42.0 52.8 53.3 67.4 76.6 83.1<br />
Post paid subscribers (%) 58.0 47.2 46.7 32.6 23.4 16.9<br />
Blended ARPU (US$) 57.0 53.0 48.9 43.8 37.2 35.2<br />
Fixed Line Subscribers (mn) 3.4 3.5 3.7 3.8 4.0 4.0<br />
Fixed Line Penetration (%) 15.1 15.0 15.4 15.6 15.7 16.2<br />
Broadband Subscribers (000s) 34.8 46.0 68.7 67.8 218.2 600.0<br />
Broadband Penetration (%) 0.2 0.2 0.3 0.3 0.9 2.4<br />
Source: ITU & Global Research<br />
Global Investment House<br />
52 Saudi Arabia Economic Overview - January 2009
Tele<strong>com</strong> Sec<strong>to</strong>r<br />
Tele<strong>com</strong> Sec<strong>to</strong>r Reforms<br />
» Post establishment of Communications and Information Technology Commission (CITC) in 2001,<br />
various initiatives were under<strong>to</strong>ok <strong>to</strong> actively develop <strong>the</strong> Kingdom’s tele<strong>com</strong>munications sec<strong>to</strong>r.<br />
» Saudi Tele<strong>com</strong> Company had a full monopoly over <strong>the</strong> mobile market until 2003, when <strong>the</strong> second<br />
mobile license was granted in 2004 <strong>to</strong> Etihad Etisalat Company (Mobily).<br />
» In March 2007, a consortium led by Zain of Kuwait won <strong>the</strong> third mobile license with a bid of US$6.1bn,<br />
and launched its services in 2008.<br />
» The fixed market was liberalized when three consortia- led by Bahrain Tele<strong>com</strong>munications (Batelco),<br />
Hong Kong’s PCCW and US based Verizon Communications won three fixed line licenses in April 2007,<br />
bringing <strong>the</strong> <strong>to</strong>tal number of fixed line licenses in <strong>the</strong> kingdom <strong>to</strong> four and ending STC’s monopoly over<br />
fixed lines.<br />
» These reforms facilitated in stimulating <strong>the</strong> investments in <strong>the</strong> tele<strong>com</strong>munications sec<strong>to</strong>r and create a<br />
<strong>com</strong>petitive environment that provides services at fair charges.<br />
Global Investment House 53 Saudi Arabia Economic Overview - January 2009
Cement Sec<strong>to</strong>r
Cement Sec<strong>to</strong>r<br />
» The Kingdom has huge limes<strong>to</strong>ne deposits.<br />
» There are currently eight producers in Saudi Arabia with a <strong>com</strong>bined annual capacity of around 31mn<br />
<strong>to</strong>ns.<br />
» The planned capacity additions will increase <strong>the</strong> annual capacity <strong>to</strong> 43mn <strong>to</strong>ns by <strong>the</strong> end of 2008 and<br />
49mn by <strong>the</strong> end of 2009.<br />
» The export ban announced by <strong>the</strong> Saudi Ministry of Trade in early June <strong>to</strong> control inflation, should have<br />
a negative effect on <strong>the</strong> industry’s sales growth, albeit on a limited scale and in varying degrees among<br />
different producers.<br />
Sec<strong>to</strong>r Statistics<br />
2003 2004 2005 2006 2007<br />
Cement Sold by KSA (000 Tons) 24,566 25,364 26,079 26,924 30,330<br />
Price per Ton in KSA US$) 48.0 53.3 58.8 64.9 68.0<br />
EV/Ton (US$) 428.2 688.6 829.6 600.7 560.7<br />
Cost per Ton in KSA (US$) 23.5 24.0 24.1 24.9 26.0<br />
Per Capita Cement Consumption (Kg) 1,004 1,007 1,016 1,045 1,104<br />
Source: Company Annual Reports & Industry Statistics<br />
Global Investment House 55 Saudi Arabia Economic Overview - January 2009
Cement Sec<strong>to</strong>r<br />
» In terms of market share, Sou<strong>the</strong>rn Cement leads locally with a share of 16% followed by 14% both by<br />
Yamama and Saudi Cement.<br />
» Saudi Cement, leads in terms of export market with a share of more than 31% followed by 20% by<br />
Eastern Cement.<br />
Market Share at 9M-2008<br />
Tabuk<br />
Cement<br />
4%<br />
Local market Share<br />
O<strong>the</strong>rs<br />
10%<br />
Yamama<br />
Cement<br />
14%<br />
Export Market Share<br />
O<strong>the</strong>rs<br />
15%<br />
Yamama<br />
Cement<br />
12%<br />
Sou<strong>the</strong>rn<br />
Cement<br />
16%<br />
Saudi<br />
Cement<br />
14%<br />
Sou<strong>the</strong>rn<br />
Cement<br />
11%<br />
Arabian<br />
Cement<br />
10%<br />
Yanbu<br />
Cement<br />
14%<br />
Source: Company Reports & Global Research<br />
Qassim<br />
Cement<br />
10%<br />
Eastern<br />
Cement<br />
8%<br />
Qassim<br />
Cement<br />
11%<br />
Eastern<br />
Cement<br />
20%<br />
Source: Company Reports & Global Research<br />
Saudi<br />
Cement<br />
31%<br />
Global Investment House<br />
56 Saudi Arabia Economic Overview - January 2009
» During 2007, cement production rose <strong>to</strong> 30.3mn <strong>to</strong>ns as <strong>com</strong>pared <strong>to</strong> 27.0mn <strong>to</strong>ns in 2006.<br />
Cement Sec<strong>to</strong>r<br />
» Saudi Cement achieved <strong>the</strong> highest production numbers, clocking 5.3mn <strong>to</strong>ns in 2007 as <strong>com</strong>pared <strong>to</strong><br />
5.0mn <strong>to</strong>ns in 2006. Yamama Cement was <strong>the</strong> 2nd largest producer, producing 4.7mn <strong>to</strong>ns in 2007, as<br />
<strong>com</strong>pared <strong>to</strong> 3.8mn in 2006.<br />
» Overall sales volume rose by 13% <strong>to</strong> 30.3mn <strong>to</strong>ns in 2007 against 26.9mn <strong>to</strong>ns in 2006. Domestic<br />
deliveries s<strong>to</strong>od at 26.8mn <strong>to</strong>n in 2007 as <strong>com</strong>pared <strong>to</strong> 24.7mn <strong>to</strong>ns in 2006, rest being taken by <strong>the</strong><br />
exports.<br />
Cement Statistics of Saudi Arabia<br />
Production<br />
Total Sales<br />
(000' <strong>to</strong>ns)<br />
2005 2006 2007 9M-2008 2005 2006 2007 9M-2008<br />
Yamama Cement 3,566 3,847 4,653 3,589 3,566 3,772 4,628 3,576<br />
Saudi Cement 5,003 4,966 5,276 4,102 5,014 4,977 5,304 3,969<br />
Eastern Cement 2,493 3,229 3,482 2,447 2,498 3,221 3,491 2,438<br />
Qassim Cement 2,226 2,231 3,464 2,491 2,218 2,229 3,460 2,465<br />
Yanbu Cement 3,742 3,521 4,620 3,311 3,722 3,490 4,651 3,300<br />
Arabian Cement 3,022 3,026 2,824 2,178 3,045 3,026 2,829 2,196<br />
Sou<strong>the</strong>rn Cement 4,561 4,600 4,613 3,915 4,589 4,581 4,607 3,930<br />
Tabuk Cement 1,419 1,633 1,358 937 1,427 1,628 1,360 937<br />
Total* 26,032 27,053 30,290 25,756 26,079 26,924 30,330 25,557<br />
Source: Yamama Cement<br />
* Sum wouldn’t match because new players production and sales are also included in <strong>the</strong> <strong>to</strong>tal.<br />
Global Investment House 57 Saudi Arabia Economic Overview - January 2009
Cement Sec<strong>to</strong>r<br />
» The massive, liquidity-fuelled infrastructure investment rose <strong>the</strong> per capita cement consumption <strong>to</strong><br />
1103kg in 2007 from less than a thousand in 2005.<br />
» Going forward, with <strong>the</strong> liquidity crunch and lower oil prices, <strong>the</strong> construction activity might slow<br />
down.<br />
Per Capita Consumption in Saudi Arabia<br />
1,300<br />
1,225<br />
(Kg)<br />
1,150<br />
1,075<br />
1,000<br />
2006 2007 2008 (F) 2009 (F) 2010 (F) 2011 (F)<br />
Source: Company Reports & Global Research<br />
Global Investment House<br />
58 Saudi Arabia Economic Overview - January 2009
Cement Sec<strong>to</strong>r<br />
Saudi Cement Demand Supply<br />
» Over <strong>the</strong> years, <strong>the</strong>re was a gap between <strong>the</strong> demand and supply which in <strong>the</strong> <strong>com</strong>ing years is expected<br />
<strong>to</strong> be over supplied on account of <strong>com</strong>missioning of new cement plants and slow down in construction<br />
activities.<br />
(<strong>to</strong>ns)<br />
35,000<br />
(<strong>to</strong>ns)<br />
250<br />
30,000<br />
200<br />
25,000<br />
150<br />
20,000<br />
100<br />
15,000<br />
50<br />
10,000<br />
-<br />
5,000<br />
-50<br />
-<br />
-100<br />
2005 2006 2007 9M-2008<br />
Exports (LHS) Local Demand (LHS) Supply (LHS) GAP (RHS)<br />
Source: Yamama Cement & Global Research<br />
Global Investment House 59 Saudi Arabia Economic Overview - January 2009
Cement Sec<strong>to</strong>r<br />
» Cement prices in Saudi Arabia are way lower than that in o<strong>the</strong>r GCC Countries such as Kuwait, Qatar<br />
and Bahrain.<br />
» On an average cement prices in Saudi Arabia has increased at a CAGR of 9% during 2003-07.<br />
Cement price per <strong>to</strong>n (Saudi Arabia)<br />
300.0<br />
275.0<br />
250.0<br />
225.0<br />
200.0<br />
175.0<br />
2003<br />
2004<br />
2005<br />
(SR)<br />
2006<br />
2007<br />
2008F<br />
Source: Company Reports & Global Research<br />
Global Investment House<br />
60 Saudi Arabia Economic Overview - January 2009
Cement Sec<strong>to</strong>r<br />
Saudi Cement Sec<strong>to</strong>r Financial Performance<br />
» Sec<strong>to</strong>r revenue has grown at a CAGR of 12.9% while cost increased at a CAGR of<br />
8% during 2003-07.<br />
» Net Profit of <strong>the</strong> sec<strong>to</strong>r surpassed SR4.5bn mark and grew at a CAGR of 16.5%<br />
during 2003-07.<br />
» As of 9M-2008, its assets has crossed SR21.6bn mark, with equity accounting <strong>to</strong><br />
77% of <strong>the</strong> <strong>to</strong>tal.<br />
» Net Profit of <strong>the</strong> sec<strong>to</strong>r were close <strong>to</strong> SR3.2bn at <strong>the</strong> end of 9M-2008 as against<br />
SR3.5bn in <strong>the</strong> corresponding period of last year.<br />
» During 3Q-2008, sec<strong>to</strong>r profits went down <strong>to</strong> SR786mn as against SR1.2bn in 3Q-<br />
2007.<br />
» The decline in <strong>the</strong> profits of <strong>the</strong> cement <strong>com</strong>panies during 9M-2008 was on account<br />
of decline in sales volume due <strong>to</strong> <strong>the</strong> ban on cement exports.<br />
Global Investment House 61 Saudi Arabia Economic Overview - January 2009
Steel Sec<strong>to</strong>r
Steel Sec<strong>to</strong>r<br />
» Primary steel production in Saudi Arabia<br />
has grown at a 2003-2007 CAGR of<br />
15.6% <strong>to</strong> 7.8mn <strong>to</strong>ns per annum (tpa).<br />
Steel Production Capacity (<strong>to</strong>ns per annum)<br />
» Saudi Arabia imported 4.9mn <strong>to</strong>ns of<br />
steel in 2007 <strong>to</strong> quench its increasing<br />
demand. An estimated 55.0-60.0% of<br />
Saudi Steel consumption is made up of<br />
rebar.<br />
» The primary steel capacity in Saudi<br />
Arabia is expected <strong>to</strong> increase <strong>to</strong> 13.5mn<br />
<strong>to</strong>ns by 2011 <strong>to</strong> meet <strong>the</strong> surging local<br />
demand.<br />
» Steel producers in Saudi Arabia enjoy<br />
a <strong>com</strong>parative advantage due <strong>to</strong> low<br />
energy costs of around US$0.8-1.5 per<br />
mmbtu <strong>com</strong>pared <strong>to</strong> US$4.0-6.0 per<br />
mmbtu worldwide.<br />
Source: Zawya, Company Websites & Global Research<br />
Steel Imports (mn <strong>to</strong>ns)<br />
6.0<br />
5.0<br />
4.0<br />
3.0<br />
2.0<br />
1.0<br />
0.0<br />
2003 2004 2005 2006 2007<br />
Source: Iron and Steel Statistics Bureau<br />
Global Investment House 63 Saudi Arabia Economic Overview - January 2009
» Saudi Consumption has grown at a 2003-2007 CAGR of 27.9% <strong>to</strong> 10.4mn <strong>to</strong>ns per annum.<br />
» Steel demand will be driven by massive a investment in petrochemical industry, construction, real-estate<br />
and infrastructure building.<br />
» Saudi Arabia is determined <strong>to</strong> go-ahead with multi-billion dollar projects which includes <strong>the</strong> economic<br />
cities which will keep <strong>the</strong> steel demand strong despite <strong>the</strong> prevailing financial turmoil<br />
Consumption in Saudi Arabia (mn <strong>to</strong>ns)<br />
Steel Sec<strong>to</strong>r<br />
12<br />
10<br />
8<br />
6<br />
4<br />
2<br />
0<br />
2003 2004 2005 2006 2007<br />
Source: Zawya, Metal Bulletin, Company websites & Global Research<br />
Global Investment House<br />
64 Saudi Arabia Economic Overview - January 2009
Steel Sec<strong>to</strong>r<br />
» Saudi Arabia has six major steel <strong>com</strong>panies.<br />
» No steel <strong>com</strong>pany is listed on <strong>the</strong> Tadawul S<strong>to</strong>ck Exchange.<br />
» However, inves<strong>to</strong>rs can get exposure <strong>to</strong> <strong>the</strong> steel sec<strong>to</strong>r through SABIC which<br />
owns 100% of Hadeed Steel.<br />
» Hadeed steel, located in <strong>the</strong> Industrial city of Jubail, is <strong>the</strong> largest integrated steel<br />
producer in Saudi Arabia with a capacity of 2.2mn tpa of flat and 3.3 mn tpa of<br />
long products.<br />
Company Category Capacity<br />
Hadeed steel (SABIC) Primary metal Flat 2.2mn tpa Long 3.3mn tpa<br />
Ittefaq steel mills Fabricated metal 1.2mn tpa of steel bars<br />
Al-Rajih steel Primary metal 0.8mn tpa of reinforcement bars, 0.8mn tpa billets<br />
United Gulf steel Fabricated metal 0.5mn tpa of steel<br />
Attieh steel Fabricated metal 0.6mn tpa of steel<br />
Al-Azizia Steel <strong>com</strong>pany Ltd. Primary metals Steel billets 0.5mn tpa Rebars 0.1mn tpa<br />
Source: Zawya, Company Websites & Global Research<br />
Global Investment House 65 Saudi Arabia Economic Overview - January 2009
Steel Sec<strong>to</strong>r<br />
» Hadeed production has grown at a CAGR of 6.3% <strong>to</strong> 4.8mn <strong>to</strong>ns.<br />
» Hadeed exports its products <strong>to</strong> more than 30 countries across <strong>the</strong> world including GCC, Asia and<br />
Europe.<br />
» Hadeed announced plans <strong>to</strong> expand its <strong>to</strong>tal steel production capacity from 5.5mn tpa <strong>to</strong> 10mn tpa by<br />
2015, and subsequently <strong>to</strong> 15mn tpa by 2020.<br />
Hadeed Steel Production (000 <strong>to</strong>ns)<br />
5,000<br />
4,500<br />
4,000<br />
3,500<br />
3,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
0<br />
Global Investment House<br />
2003 2004 2005 2006 2007<br />
Source: Zawya, Company Websites & Global Research<br />
66 Saudi Arabia Economic Overview - January 2009
Capital Markets
» The Saudi s<strong>to</strong>ck market got engulfed in <strong>the</strong><br />
downward rush in <strong>the</strong> global equity markets<br />
triggered by <strong>the</strong> prevailing financial crisis.<br />
The Saudi s<strong>to</strong>ck market lost 52.6% of<br />
its capitalization in 2008 despite 16 new<br />
listings.<br />
» Petro-chemical industry lost 66.1% while<br />
<strong>the</strong> banking sec<strong>to</strong>r lost 53.1% in 2008<br />
which pulled <strong>the</strong> index down. The market<br />
capitalization, including <strong>the</strong> new listings,<br />
s<strong>to</strong>od at US$246bn at December 31, 2008<br />
<strong>com</strong>pared <strong>to</strong> US$519bn at <strong>the</strong> start of <strong>the</strong><br />
year.<br />
» Tele<strong>com</strong>munication sec<strong>to</strong>r, <strong>the</strong> third largest<br />
constituent of <strong>the</strong> index, accounting for 14.4%<br />
of <strong>to</strong>tal market capitalization, witnessed a<br />
decline of 36.0% in 2008.<br />
Global Investment House<br />
Tadawul All Share Index Performance<br />
12,000<br />
11,000<br />
10,000<br />
9,000<br />
8,000<br />
7,000<br />
6,000<br />
5,000<br />
4,000<br />
Source: Tadawul & Global Research<br />
Market Cap (US$ bn)<br />
S<strong>to</strong>ck Market<br />
1-Jan-08<br />
22-Jan-08<br />
12-Feb-08<br />
04-Mar-08<br />
25-Mar-08<br />
15-Apr-08<br />
06-May-08<br />
27-May-08<br />
17-Jun-08<br />
08-Jul08<br />
29-Jul-08<br />
19-Aug-08<br />
09-Sep-08<br />
30-Sep-08<br />
21-Oct-08<br />
11-Nov-08<br />
02-Dec-08<br />
23-Dec-08<br />
700<br />
600<br />
500<br />
400<br />
300<br />
200<br />
100<br />
0<br />
2003 2004 2005 2006 2007 2008<br />
Source: Tadawul & Global Research<br />
68 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
S<strong>to</strong>ck Market Indica<strong>to</strong>rs<br />
Trading Information 2003 2004 2005 2006 2007 2008<br />
Transactions (mn) 3.8 13.3 46.6 96.1 65.7 52.1<br />
Shares Traded (bn) 5.6 10.3 12.3 73.4 58.9 59.6<br />
Value Traded (SR bn) 597 1,774 4,139 5,262 2,558 1,963<br />
Number of Trading Days 300 300 299 265 248 252<br />
Daily Average of Transactions (000) 12.5 44.3 155.8 362.6 264.7 206<br />
Daily average of shares (mn) 19 34 41 277 237 244<br />
Daily Average of Values (SR bn) 2 5.9 13.8 19.9 10.3 7.7<br />
Market Capitalization (SR bn) 589 1,148 2,438 1,225 1,946 924<br />
All Share Index (TASI) 4,437 8,206 16,713 7,933 11,175 4,802<br />
No. of Listed Companies 70 73 77 86 111 127<br />
P/E 29.21 36.47 63.77 16.89 23.21 15.55*<br />
P/B 3.74 6.57 10.11 3.54 4.29 3.50*<br />
Source: Tadawul, Global Research<br />
*Estimated figures<br />
Global Investment House 69 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Summary By Sec<strong>to</strong>r-2008<br />
Sec<strong>to</strong>r<br />
Trades (mn)<br />
% of<br />
Value Traded<br />
% of<br />
Volume (mn) % of Market<br />
Market US$ (bn) Market<br />
Banks & Financial Services 5.2 10.01% 9,462 15.85% 55.7 10.65%<br />
Petrochemical Industries 9.9 18.98% 14,614 24.49% 170.0 32.49%<br />
Cement 0.5 0.93% 379 0.63% 7.1 1.36%<br />
Retail 2.6 4.91% 1,637 2.74% 14.6 2.80%<br />
Energy & Utilities 0.5 1.04% 1,793 3.00% 7.6 1.45%<br />
Agriculture & Food Industries 3.7 7.19% 3,089 5.18% 26.5 5.08%<br />
Tele<strong>com</strong>munication & Information<br />
Technology<br />
4.5 8.58% 6,103 10.23% 41.1 7.85%<br />
Insurance 7.6 14.65% 2,973 4.98% 40.8 7.80%<br />
Multi-Investment 2.1 4.08% 3,122 5.23% 17.3 3.32%<br />
Industrial Investment 5.6 10.65% 4,428 7.42% 40.3 7.72%<br />
Building & Construction 4.1 7.82% 2,178 3.65% 33.2 6.36%<br />
Real Estate Development 3.7 7.09% 6,304 10.56% 43.6 8.34%<br />
Transport 1.4 2.73% 2,968 4.97% 19.8 3.79%<br />
Media and Publishing 0.4 0.68% 331 0.55% 2.7 0.52%<br />
Hotel & Tourism 0.4 0.68% 301 0.50% 2.5 0.48%<br />
Total 52.1 100.00% 59,683 100.00% 523.4 100.00%<br />
Source: Tadawul, Global Research<br />
Global Investment House 70 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
New Listings in 2008<br />
Company Date of Listing Offer size<br />
Rabigh Refining and Petrochemical Co Jan-08 219mn shares @ SR21/sh<br />
Arabia Insurance Cooperative Co. Feb-08 8mn shares @ SR10/sh<br />
Trade Union Cooperative Insurance Co. Feb-08 10.5mn shares @ SR10/sh<br />
Al Sagr Co operative Insurance Company Feb-08 8.4mn shares @ SR10/sh<br />
Mobile Tele<strong>com</strong>. Co. Saudi Arabia (ZAIN KSA) Mar-08 700mn shares @SR10/sh<br />
Bupa Arabia for Cooperative Insurance Co. May-08 16mn shares @ SR10/sh<br />
Saudi Re for Cooperative Reinsurance Co. May-08 40mn shares @ SR10/sh<br />
Mohammad Al Mojil Group Co. May-08 30mn shares @ SR70/sh<br />
Alinma Bank Jun-08 1,050mn shares@ SR10/sh<br />
Basic Chemical Industries Co. (BCI) Jun-08 6.6mn shares@ SR30/sh<br />
United Cooperative Assurance Co. (U C A) Jun-08 8mn shares @ SR10/sh<br />
Abdullah Al Othaim Markets Co. Jul-08 6.75mn @ SR40/sh<br />
Halwani Bros Co. Jul-08 8.75mn shares @ SR20/sh<br />
Saudi Arabian Mining Co. - MA’ADEN Jul-08 462.5mn shares@ SR20/sh<br />
Astra Industrial Group Company Aug-08 22.2mn shares @ SR42/sh<br />
Methanol Chemicals Company Aug-08 60.3mn shares @ SR12/sh<br />
Source: Tadawul<br />
Global Investment House<br />
71 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Market Cap (LHS) vs. Number Of Listed Companies<br />
(RHS)<br />
Total Volume (LHS) vs. Value Traded (RHS)<br />
3,000<br />
140<br />
6,000<br />
80<br />
2,500<br />
2,000<br />
130<br />
120<br />
110<br />
100<br />
5,000<br />
4,000<br />
3,000<br />
70<br />
60<br />
50<br />
40<br />
1,500<br />
1,000<br />
90<br />
80<br />
70<br />
2,000<br />
1,000<br />
30<br />
20<br />
10<br />
500<br />
2003 2004 2005 2006 2007 2008<br />
Market Capitalization (SR bn)<br />
No. of Listed Companies<br />
60<br />
0<br />
2003 2004 2005 2006 2007 2008<br />
Value Traded (SR bn) Shares Traded (bn)<br />
0<br />
Source: Tadawul<br />
Source: Tadawul<br />
Global Investment House 72 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Market Profitability<br />
» The <strong>to</strong>tal market profitability increased by 7.7% in <strong>the</strong> 9M-2008 <strong>com</strong>pared <strong>to</strong> <strong>the</strong> corresponding<br />
period last year. The profitability was led by <strong>the</strong> petrochemical sec<strong>to</strong>r which rode on high<br />
crude oil and fertilizer prices <strong>to</strong> register a 17.8% increase in 9M08 YoY.<br />
» The Saudi banking escaped severe repercussions at a time of global financial distress due <strong>to</strong><br />
limited exposure <strong>to</strong> <strong>the</strong> global financial markets. The banking sec<strong>to</strong>r posted a modest growth<br />
of 1.6% in <strong>the</strong> 9M08 YoY. The bank profitability growth was held back in <strong>the</strong> third quarter<br />
with some banks posting a decline on account of investment portfolio losses.<br />
» Tele<strong>com</strong>munications sec<strong>to</strong>r profitability witnessed a rise of 13.9% in 9M08 YoY which was<br />
driven by volumetric growth despite a fall in average revenue per unit.<br />
» Cement sec<strong>to</strong>r witnessed a decline in profitability by 7.1% in 9M-2008 YoY mainly due <strong>to</strong><br />
a ban on exports which was imposed in June 2008 <strong>to</strong> cater for strong local demand while <strong>the</strong><br />
Energy and Utilities sec<strong>to</strong>r witnessed a decline of 25.6% on account of higher operational<br />
costs.<br />
Global Investment House<br />
73 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Tadawul Sec<strong>to</strong>rs 9M-2008 Profitability (SR mn)<br />
9M-2007 9M-2008 Change %<br />
Banking 19,071.0 19,373.6 1.6%<br />
Petrochemicals 22,771.7 26,820.3 17.8%<br />
Cement 3,525.2 3,273.4 -7.1%<br />
Retail 483.6 597.2 23.5%<br />
Energy & Utilities 2,175.7 1,618.0 -25.6%<br />
Agriculture & Food 1,714.4 1,671.2 -2.5%<br />
Tele<strong>com</strong>munications 9,827.0 11,195.3 13.9%<br />
Insurance 489.4 66.0 -86.5%<br />
Multi-investment 1,214.8 868.2 -28.5%<br />
Industrial investment 674.9 827.4 22.6%<br />
Building and Construction 1,473.5 1,974.6 34.0%<br />
Real Estate 2,182.8 2,274.0 4.2%<br />
Transport 461.8 698.8 51.3%<br />
Media and Publishing 419.9 310.8 -26.0%<br />
Hotel and Tourism 44.9 91 102.6%<br />
Market 66,530.6 71,659.7 7.7%<br />
Source: Bloomberg, Global Research<br />
Global Investment House 74 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Capital Market Reforms<br />
» Saudi Arabia’s Capital Market Authority (CMA) during <strong>the</strong> year 2008 has taken some<br />
important decisions <strong>to</strong> make <strong>the</strong> Kingdom’s s<strong>to</strong>ck market –Tadawul (TASI), more efficient,<br />
transparent and accessible <strong>to</strong> foreign inves<strong>to</strong>rs.<br />
» CMA has moved <strong>to</strong> implement <strong>the</strong> transparency rule whereby <strong>the</strong> exchange will disclose <strong>the</strong><br />
names of inves<strong>to</strong>rs with stakes of 5% or more in any listed <strong>com</strong>pany.<br />
» Under <strong>the</strong> set of new regulations, a widely appreciated new foreign ownership rule give<br />
foreigners for <strong>the</strong> first time a chance <strong>to</strong> buy and sell swaps of Saudi-listed shares through<br />
authorized brokers. The foreign inves<strong>to</strong>rs will be allowed <strong>to</strong> invest in individual s<strong>to</strong>cks that<br />
are traded at <strong>the</strong> TASI through swap agreements with local investment banks.<br />
Global Investment House<br />
75 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Riyad Bank -57.2% 31,800 3.44<br />
Bank Al-Jazirah -69.4% 4,515 0.49<br />
Saudi Investment Bank -67.5% 7,448 0.81<br />
Bank Al Saudi Al-Hollandi -36.0% 10,584 1.14<br />
Bank Al Saudi Al-Faransi -61.0% 25,369 2.74<br />
Saudi British Bank -39.7% 32,400 3.50<br />
Arab National Bank -63.2% 20,280 2.19<br />
Samba Financial Group -57.3% 46,125 4.99<br />
Al Rajhi Bank -52.2% 84,000 9.09<br />
Bank Al Bilad -30.4% 8,400 0.91<br />
Alinma Bank 11.0% 16,650 1.80<br />
Total Banks & Financial Services 287,570 31.11<br />
Methanol Chemicals Company -7.1% 1,345 0.15<br />
Saudi Basic Industries Corp -68.9% 154,500 16.71<br />
Saudi Arabia Fertilizers Co. -43.5% 22,438 2.43<br />
National Industrialization Co. -69.5% 6,012 0.65<br />
Alujain Corporation -77.3% 747 0.08<br />
NAMA Co -68.0% 1,099 0.12<br />
Saudi Industrial Investment Group -74.4% 4,523 0.49<br />
Sahara Petrochemical Co. -72.1% 2,259 0.24<br />
Yanbu National Petrochemical Company (YANSAB) -71.9% 8,325 0.90<br />
Saudi International Petrochemical Co -64.8% 5,167 0.56<br />
Global Investment House 76 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Advanced Polypropylene Company -68.1% 2,177 0.24<br />
Saudi Kayan Petrochemical Co. -62.5% 14,625 1.58<br />
Rabigh Refining and Petrochemical Co -25.9% 13,622 1.47<br />
Total Petrochemical Industries 236,838 25.62<br />
Arab Cement -67.6% 2,488 0.27<br />
Yamamah Cement -64.0% 4,577 0.50<br />
Saudi Cement -55.5% 5,763 0.62<br />
Qassim Cement -55.4% 3,634 0.39<br />
Sou<strong>the</strong>rn Cement -46.6% 6,524 0.71<br />
Yanbu Cement -58.6% 4,095 0.44<br />
Eastern Cement -55.1% 3,440 0.37<br />
Tabuk Cement -52.7% 1,787 0.19<br />
Total Cement 32,307 3.49<br />
Abdullah Al Othaim Markets Company 0.0% 900 0.01<br />
Saudi Au<strong>to</strong>motive Services Co. -56.8% 520 0.06<br />
National Agriculture Marketing Co. -72.5% 147 0.02<br />
Ahmed H. Fitaihi Company -70.3% 528 0.06<br />
Jarir Marketing Co 9.2% 5,160 0.56<br />
Aldrees Petroleum & Transport Co. -52.6% 623 0.07<br />
Fawaz Abdulaziz Al Hokair & Co -49.4% 2,240 0.24<br />
Global Investment House<br />
77 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Alkhaleej Training and Education Company -66.0% 449 0.05<br />
Total Retail 10,566 1.14<br />
National Gas and Industrialization Company -49.9% 1,298 0.14<br />
Saudi Electricity Co. -37.3% 38,541 4.17<br />
Total Energy & Utilities 39,839 4.31<br />
SAVOLA Group -32.3% 12,100 1.31<br />
Food Products -71.2% 223 0.02<br />
Saudia Dairy and Foodstuff Company -62.4% 566 0.06<br />
Almarai 16.9% 15,260 1.65<br />
Anaam International Holding Group 112.1% 382 0.04<br />
Halwani Bros 3.0% 589 0.06<br />
National Agriculture Development Co. -25.2% 1,896 0.21<br />
Qassim Agriculture -66.6% 380 0.04<br />
Hail Agriculture Development Co. -37.9% 633 0.07<br />
Tabuk Agriculture Development Co. -68.1% 362 0.04<br />
Saudi Fisheries -62.3% 496 0.05<br />
Ash-Sharqiyah Agricultural Development Co. -72.2% 134 0.01<br />
Al-Jouf Agriculture Development Co. -51.5% 417 0.05<br />
Bishah Agriculture Development Co. 0.0% 349 0.04<br />
Jazan Agricultural Development Co. -63.0% 463 0.05<br />
Total Agriculture & Food Industries 34,247 3.70<br />
Global Investment House 78 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Saudi Tele<strong>com</strong> Co. -41.4% 98,200 10.62<br />
Etihad Etisalat (Mobily) -46.6% 21,700 2.35<br />
Mobile Tele<strong>com</strong>munications Company Saudi Arabia 6.5% 14,910 1.61<br />
Total Tele<strong>com</strong>munication & Information Technology 134,810 14.58<br />
NCCI -77.4% 1,700 0.18<br />
Malath Cooperative Insurance and Reinsurance -78.7% 978 0.11<br />
Medgulf Saudi -69.0% 1,360 0.15<br />
Saudi Fransi Cooperative Insurance Company -63.7% 419 0.05<br />
Saudi IAIC Cooperative Insurance Company -66.1% 332 0.04<br />
Saudi United Cooperative Insurance Company -77.3% 286 0.03<br />
Arabian Shield Cooperative Insurance Co. -78.5% 276 0.03<br />
SABB Takaful -71.4% 333 0.04<br />
Sanad Insurance & Reinsurance Cooperative Company -79.7% 242 0.03<br />
Saudi Arabian Cooperative Insurance Company -84.1% 224 0.02<br />
Saudi Indian Company for Co- operative Insurance -60.4% 423 0.05<br />
Gulf Union Cooperative Insurance Company -79.2% 278 0.03<br />
Alahli Takaful Company -70.3% 431 0.05<br />
Al Ahlia Insurance Company -80.0% 239 0.03<br />
Allied Cooperative Insurance Group -77.3% 229 0.02<br />
Global Investment House<br />
79 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Arabia Insurance Cooperative Company 32.0% 264 0.03<br />
Trade Union Cooperative Insurance Company 28.0% 320 0.03<br />
Al Sagr Company for Cooperative Insurance 21.0% 242 0.03<br />
United Cooperative Assurance Co 252.0% 704 0.08<br />
Saudi Re for Cooperative Reinsurance Company -12.0% 880 0.01<br />
Bupa Arabia for Cooperative Insurance 19.5% 478 0.05<br />
Total Insurance 10,638 1.15<br />
Saudi Arabia Refineries Co. -39.0% 870 0.09<br />
Saudi Advanced Industries Co. (SAIDC) -69.5% 434 0.05<br />
Al Ahsa -70.7% 421 0.05<br />
Saudi Industrial Services Co. -65.5% 639 0.07<br />
Aseer Trading, Toursim & Manufacturing Co. -76.6% 1,251 0.14<br />
Al Baha Investment & Development Co. -72.1% 149 0.02<br />
Kingdom Holding Co. -62.4% 29,610 3.20<br />
Total Multi-Investment 33,375 3.61<br />
Basic Chemical Industries Co. -20.7% 524 0.06<br />
Saudi Arabian Mining Company -46.8% 9,851 1.07<br />
Astra Industrial Group -41.8% 1,812 0.20<br />
Saudi Pharmaceutical Indust.& Med. Appliances Corp. -59.6% 1,479 0.16<br />
The National Co. for Glass Industries -55.0% 725 0.08<br />
Global Investment House 80 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Filling & Packing Materials Mnfg Co. -49.6% 303 0.03<br />
National Metal Manufacturing and Casting Co. -49.8% 554 0.06<br />
Saudi Chemicals Co. -42.2% 1,325 0.14<br />
Saudi Paper Manufacturing Co. 22.2% 2,228 0.24<br />
Al Abdulatif Industrial Investment Co. -18.5% 3,624 0.39<br />
Saudi Industrial Export Company -65.8% 248 0.03<br />
Total Industrial Investment 22,672 2.45<br />
Mohammad Al Mojil Group Company -37.0% 4,410 0.48<br />
Saudi Ceramic -1.8% 2,663 0.29<br />
National Gypsum -60.1% 960 0.10<br />
Saudi Cables -53.5% 2,014 0.22<br />
Saudi Industrial Development Co. -70.7% 296 0.03<br />
Saudi Arabian Amiantit Co. -48.2% 2,033 0.22<br />
Saudi Pipe Co -44.2% 1,405 0.15<br />
Zamil Industrial Investment Co -37.7% 2,565 0.28<br />
Al Babtain Power & Tele<strong>com</strong>munications Company -19.8% 1,755 0.19<br />
Saudi Vitrified Clay Pipes Co. -69.7% 495 0.05<br />
Middle East Specialized Cables Co -44.6% 1,484 0.16<br />
Red Sea Housing Services 8.7% 2,243 0.24<br />
Total Building & Construction 22,321 2.41<br />
Global Investment House<br />
81 Saudi Arabia Economic Overview - January 2009
S<strong>to</strong>ck Market<br />
Company Name Change 2008/2007<br />
Market Cap Market Cap<br />
(SR mn)<br />
(%)<br />
Real Estate -61.6% 2,364 0.26<br />
Taibah Holding -50.6% 2,648 0.29<br />
Makkah Construction -47.4% 3,857 0.42<br />
Arriyadh Development Co. -60.4% 970 0.10<br />
Emaar <strong>the</strong> Economic City -60.7% 7,608 0.82<br />
Jabal Omar Development Company -24.1% 13,629 1.47<br />
Dar Alarkan Real Estate Development Company -59.6% 16,092 1.74<br />
Total Real Estate Development 47,167 5.10<br />
National Shipping -34.0% 5,198 0.56<br />
Saudi Public Transport Co. -59.4% 888 0.01<br />
Saudi Land Transport Co. -70.2% 224 0.02<br />
United International Transportation Company Ltd. -69.2% 692 0.07<br />
Total Transport 7,001 0.76<br />
Tihamah -62.7% 236 0.03<br />
Saudi Research and Marketing Group -49.6% 2,368 0.26<br />
Saudi Printing & Packaging CO -66.1% 840 0.09<br />
Total Media and Publishing 3,444 0.37<br />
Hotels and Resorts -42.5% 1,577 0.17<br />
Tourism Enterprises Co. -67.9% 158 0.02<br />
Total Hotel & Tourism 1,717 0.19<br />
Total Market 924,511 100.00<br />
Source: Tadawul<br />
Price change & Market cap as of 31 st December 2008<br />
Global Investment House 82 Saudi Arabia Economic Overview - January 2009
Global - Saudi Coverage
1120.SE (Reuters)<br />
RJHI AB (Bloomberg)<br />
Al Rajhi Bank<br />
CMP: SR55.5<br />
» Al Rajhi Bank (RJHI) with <strong>the</strong> largest market cap. of 9.5% amongst listed banks, after <strong>the</strong> subdued FY07<br />
performance, recorded 9M08 net profit increase (YoY) of 4.7%. Besides <strong>the</strong> inherent low cost funding (Islamic<br />
deposits), RJHI’s performance is based on its success in developing both corporate & investment banking sec<strong>to</strong>rs<br />
<strong>to</strong>ge<strong>the</strong>r with its retail banking activities.<br />
» Its increasing efforts <strong>to</strong> diversify in<strong>com</strong>e source from capital markets have started showing positive results,<br />
reflecting <strong>the</strong> bank’s ability <strong>to</strong> adapt <strong>to</strong> <strong>the</strong> fast changing market dynamics.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 95,038 105,209 124,886 172,446 190,258 212,616 237,174<br />
Gross Investments 82,894 92,621 108,627 147,698 161,729 185,989 212,027<br />
Deposits 73,684 77,889 92,871 129,743 148,233 167,262 188,067<br />
Shareholders’ Equity 12,878 19,181 22,382 24,372 26,469 28,479 30,793<br />
Net Investment In<strong>com</strong>e 5,686 6,826 7,722 8,909 10,716 12,559 14,521<br />
Net profit 5,633 7,302 6,450 6,634 6,988 8,041 9,258<br />
Ratios<br />
Yield on earning assets (%) 7.7% 8.5% 8.4% 7.8% 7.6% 8.0% 8.1%<br />
Cost of funds (%) 0.4% 1.1% 1.0% 1.0% 0.8% 0.9% 0.9%<br />
Spreads (%) 7.3% 7.4% 7.4% 6.8% 6.8% 7.1% 7.1%<br />
Investments <strong>to</strong> Deposits ratio (%) 112.5% 118.9% 117.0% 113.8% 109.1% 111.2% 112.7%<br />
NPIs /Gross Investments (%) 2.0% 2.2% 2.9% 2.7% 2.7% 2.6% 2.6%<br />
NPI coverage (%) 166.5% 135.4% 109.1% 108.0% 116.7% 126.9% 132.3%<br />
ROAA (%) 6.5% 7.3% 5.6% 4.5% 3.9% 4.0% 4.1%<br />
ROAE (%) 52.6% 45.6% 31.0% 28.4% 27.5% 29.3% 31.2%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 24.4% 21.1% 27.4% 31.4% 35.5% 35.8% 36.0%<br />
Dividend yield (%) 0.8% 0.8% 1.8% 5.6% 5.9% 7.2% 8.3%<br />
Earnings per Share (SR) 3.8 4.9 4.3 4.4 4.7 5.4 6.2<br />
Book Value per Share (SR) 8.6 12.8 14.9 16.2 17.6 19.0 20.5<br />
P/E (x) 43.3 17.8 27.3 12.5 11.9 10.4 9.0<br />
P/BV (x) 18.9 6.8 7.9 3.4 3.1 2.9 2.7<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 84 Saudi Arabia Economic Overview - January 2009
1080.SE (Reuters)<br />
ARNB AB (Bloomberg)<br />
Arab National Bank<br />
CMP: SR29.6<br />
» Arab National Bank (ANB) despite FY07 net in<strong>com</strong>e decline of 1.7% s<strong>to</strong>od 2nd (in profitability terms) amongst<br />
<strong>the</strong> sec<strong>to</strong>r. ANB with overall improved performance was able <strong>to</strong> bear <strong>the</strong> losses incurred in its investment portfolio<br />
and recorded 9M08 profitability increase (YoY) of 3.9%.<br />
» ANB’s expansion plans, both domestically & regionally, ac<strong>com</strong>panied by its new strategic initiatives are expected<br />
<strong>to</strong> facilitate <strong>the</strong> bank in streng<strong>the</strong>ning brand image & generating higher future business growth.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 67,492 78,035 94,468 118,138 137,401 151,417 166,731<br />
Gross Loans 40,477 50,932 62,237 80,279 92,412 103,553 115,922<br />
Deposits 48,832 61,773 73,692 91,480 107,284 118,411 130,734<br />
Shareholders’ Equity 6,337 7,980 10,525 11,947 13,287 14,882 16,456<br />
Net Interest In<strong>com</strong>e 2,189 2,525 2,904 3,521 4,038 4,757 5,259<br />
Net In<strong>com</strong>e 1,828 2,505 2,461 2,586 2,679 3,192 3,496<br />
Ratios<br />
Yield on earning assets (%) 5.7% 6.7% 6.9% 7.0% 7.0% 7.4% 7.4%<br />
Cost of funds (%) 2.2% 3.1% 3.1% 3.4% 3.4% 3.6% 3.6%<br />
Spreads (%) 3.5% 3.6% 3.8% 3.6% 3.6% 3.8% 3.8%<br />
Loans <strong>to</strong> Deposits ratio (%) 82.9% 82.5% 84.5% 87.8% 86.1% 87.5% 88.7%<br />
NPLs /Gross Loans (%) 2.1% 0.7% 0.5% 0.5% 0.6% 0.6% 0.6%<br />
NPL coverage (%) 200.6% 320.5% 354.0% 313.6% 259.9% 240.0% 259.9%<br />
ROAA (%) 2.8% 3.4% 2.9% 2.4% 2.1% 2.2% 2.2%<br />
ROAE (%) 32.8% 35.7% 26.6% 23.0% 21.2% 22.7% 22.3%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 36.8% 33.6% 36.7% 37.9% 39.6% 37.7% 37.6%<br />
Dividend yield (%) 1.1% 0.9% 0.0% 5.8% 6.7% 8.0% 9.6%<br />
Earnings per Share (SR) 2.8 3.9 3.8 4.0 4.1 4.9 5.4<br />
Book Value per Share (SR) 9.7 12.3 16.2 18.4 20.4 22.9 25.3<br />
P/E (x) 27.2 14.2 22.3 7.4 7.2 6.0 5.5<br />
P/BV (x) 7.8 4.4 5.2 1.6 1.4 1.3 1.2<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House<br />
85 Saudi Arabia Economic Overview - January 2009
1050.SE (Reuters)<br />
BSFR AB (Bloomberg)<br />
Banque Saudi Fransi<br />
CMP: SR42.0<br />
» Banque Saudi Fransi’s (BSF) dampened profitability results in FY07, showed improvement in its results posting<br />
9M08 increase (YoY) of 8.0%.<br />
» The bank’s improving core banking performance coupled with strong corporate cus<strong>to</strong>mer relationships, places <strong>the</strong><br />
bank in a good position <strong>to</strong> derive maximum benefit as it pursues with its strategic priorities.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 67,501 79,581 99,808 124,783 141,428 153,491 169,771<br />
Gross Loans 43,941 52,024 60,675 82,792 81,747 91,556 98,924<br />
Deposits 51,093 61,998 74,007 83,628 96,172 107,713 120,639<br />
Shareholders’ Equity 6,929 9,203 10,927 12,071 13,227 14,385 15,814<br />
Net Interest In<strong>com</strong>e 1,706 2,017 2,296 2,695 3,048 3,497 4,305<br />
Net In<strong>com</strong>e 2,216 3,007 2,711 2,785 2,884 3,298 4,073<br />
Ratiost<br />
Yield on earning assets (%) 5.2% 6.4% 6.4% 5.9% 6.0% 6.2% 6.5%<br />
Cost of funds (%) 2.4% 3.5% 3.5% 3.1% 3.2% 3.2% 3.3%<br />
Spreads (%) 2.8% 2.8% 2.9% 2.7% 2.8% 3.0% 3.3%<br />
Loans <strong>to</strong> Deposits ratio (%) 86.0% 83.9% 82.0% 99.0% 85.0% 85.0% 82.0%<br />
NPLs /Gross Loans (%) 1.2% 1.2% 0.7% 0.7% 0.7% 0.7% 0.7%<br />
NPL coverage (%) 181.8% 148.3% 189.6% 199.6% 206.4% 191.5% 188.5%<br />
ROAA (%) 3.5% 4.1% 3.0% 2.5% 2.2% 2.2% 2.5%<br />
ROAE (%) 35.6% 37.3% 26.9% 24.2% 22.8% 23.9% 27.0%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 25.1% 21.9% 25.9% 26.6% 27.6% 26.4% 23.8%<br />
Dividend yield (%) 1.0% 1.5% 1.5% 6.8% 7.0% 8.7% 10.8%<br />
Earnings per Share (SR) 3.9 5.3 4.8 5.0 5.1 5.9 7.2<br />
Book Value per Share (SR) 12.3 16.4 19.4 21.5 23.5 25.6 28.1<br />
P/E (x) 27.4 15.5 24.0 8.5 8.2 7.2 5.8<br />
P/BV (x) 8.7 5.1 6.0 2.0 1.8 1.6 1.5<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 86 Saudi Arabia Economic Overview - January 2009
1010.SE (Reuters)<br />
RIBL AB (Bloomberg)<br />
Global Investment House<br />
Riyad Bank<br />
CMP: SR20.3<br />
» Riyad Bank (RIBL) being <strong>the</strong> only Saudi bank showing positive profitability results in FY07, showed (YoY)<br />
decline of 4.8% in its 9M08 results. At times of increased global financial volatility, <strong>the</strong> decline in bank’s net<br />
profit was mainly due <strong>to</strong> <strong>the</strong> revaluation of <strong>the</strong> bank’s trading portfolio during 3Q08.<br />
» Overall, RIBL’s continuing focus on core banking activities ac<strong>com</strong>panied by its openness for expansion through<br />
joint ventures in Gulf, business acquisitions, and venturing in<strong>to</strong> o<strong>the</strong>r businesses lines provide <strong>the</strong> bank with a<br />
wide array of profit generating opportunities.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 80,079 94,016 121,351 149,694 162,627 181,441 198,929<br />
Gross Loans 46,973 53,660 68,865 96,542 100,207 113,920 131,008<br />
Deposits 52,730 69,192 84,331 89,391 105,481 126,578 145,564<br />
Shareholders’ Equity 10,960 11,992 13,187 26,064 26,921 28,009 29,169<br />
Net Interest In<strong>com</strong>e 2,672 2,926 3,266 3,803 4,745 5,372 6,109<br />
Net In<strong>com</strong>e 2,837 2,909 3,011 2,669 2,857 3,626 4,142<br />
Ratios<br />
Yield on earning assets (%) 5.7% 7.0% 6.8% 5.9% 5.7% 5.8% 5.9%<br />
Cost of funds (%) 2.2% 3.6% 3.2% 2.7% 2.6% 2.7% 2.6%<br />
Spreads (%) 3.6% 3.4% 3.6% 3.1% 3.1% 3.2% 3.3%<br />
Loans <strong>to</strong> Deposits ratio (%) 89.1% 77.6% 81.7% 108.0% 95.0% 90.0% 90.0%<br />
NPLs /Gross Loans (%) 1.1% 1.6% 1.6% 1.0% 1.1% 1.1% 1.1%<br />
NPL coverage (%) 269.5% 176.8% 139.2% 175.8% 180.9% 187.9% 192.2%<br />
ROAA (%) 3.7% 3.3% 2.8% 2.0% 1.8% 2.1% 2.2%<br />
ROAE (%) 29.7% 27.7% 26.1% 14.0% 10.8% 13.2% 14.5%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 33.7% 35.6% 37.6% 42.6% 44.9% 42.6% 41.7%<br />
Dividend yield (%) 1.5% 4.0% 2.7% 5.8% 6.3% 8.1% 9.5%<br />
Earnings per Share (SR) 1.9 1.9 2.0 1.8 1.9 2.4 2.8<br />
Book Value per Share (SR) 6.7 7.3 8.1 17.4 17.9 18.7 19.4<br />
P/E (x) 37.4 17.3 24.6 11.4 10.6 8.4 7.3<br />
P/BV (x) 10.5 4.6 6.1 1.2 1.1 1.1 1.0<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
87 Saudi Arabia Economic Overview - January 2009
1060.SE (Reuters)<br />
SABB AB (Bloomberg)<br />
Saudi British Bank<br />
CMP: SR52.3<br />
» Saudi British Bank’s (SABB) net in<strong>com</strong>e decline of more than 14% in FY07 has been successfully turned around<br />
by <strong>the</strong> bank recording stable growth performance in 2008, posting 9M08 (YoY) rise of 18.8%.<br />
» The bank’s focus on structured finance deals, advisory & loan syndication, insurance, etc. signal attractive growth<br />
avenues in time <strong>to</strong> <strong>com</strong>e. Along with its planned expansion, o<strong>the</strong>r alternative delivery channels are likely <strong>to</strong> assist<br />
<strong>the</strong> bank in fur<strong>the</strong>r streng<strong>the</strong>ning its franchise.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 65,928 77,189 98,213 134,872 152,047 167,930 183,779<br />
Gross Loans 41,233 42,948 62,572 87,604 95,085 107,106 121,030<br />
Deposits 48,534 59,258 71,848 98,432 113,196 129,044 145,819<br />
Shareholders’ Equity 7,206 8,514 9,534 10,655 11,820 13,046 14,459<br />
Net Interest In<strong>com</strong>e 1,974 2,584 3,059 3,460 4,509 5,254 5,972<br />
Net In<strong>com</strong>e 2,504 3,040 2,607 2,801 2,912 3,504 4,038<br />
Ratios<br />
Yield on earning assets (%) 5.5% 6.9% 7.1% 6.0% 6.0% 6.2% 6.2%<br />
Cost of funds (%) 2.3% 3.1% 2.9% 2.6% 2.7% 2.7% 2.7%<br />
Spreads (%) 3.2% 3.8% 4.2% 3.4% 3.4% 3.5% 3.5%<br />
Loans <strong>to</strong> Deposits ratio (%) 85.0% 72.5% 87.1% 89.0% 84.0% 83.0% 83.0%<br />
NPLs /Gross Loans (%) 0.5% 0.4% 0.3% 0.4% 0.5% 0.6% 0.6%<br />
NPL coverage (%) 194.3% 301.4% 289.7% 308.0% 327.0% 345.7% 355.4%<br />
ROAA (%) 4.0% 4.2% 3.0% 2.4% 2.0% 2.2% 2.3%<br />
ROAE (%) 39.8% 38.7% 28.9% 27.7% 25.9% 28.2% 29.4%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 32.5% 31.6% 35.4% 36.0% 38.7% 37.0% 35.8%<br />
Dividend yield (%) 0.9% 3.3% 2.7% 5.2% 5.4% 7.0% 8.1%<br />
Earnings per Share (SR) 4.2 5.1 4.3 4.7 4.9 5.8 6.7<br />
Book Value per Share (SR) 12.0 14.2 15.9 17.8 19.7 21.7 24.1<br />
P/E (x) 32.9 14.5 20.6 11.2 10.8 8.9 7.8<br />
P/BV (x) 11.4 5.2 5.6 2.9 2.7 2.4 2.2<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec. 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 88 Saudi Arabia Economic Overview - January 2009
1090.SE (Reuters)<br />
SAMBA AB (Bloomberg)<br />
Global Investment House<br />
SAMBA Financial Group<br />
CMP: SR47.9<br />
» Although Samba continues <strong>to</strong> maintain its core banking strength, it witnessed <strong>the</strong> performance pressure due <strong>to</strong><br />
subdued non-<strong>com</strong>mission in<strong>com</strong>e. Samba’s FY07 dampened profitability performance has not recorded any turn<br />
around yet. The bank as per its 9M08 results recorded (YoY) decline of 6.3%.<br />
» The bank’s core banking strength coupled with its developed brand name offers it good potential <strong>to</strong> benefit by<br />
pursuing various strategic initiatives. Besides <strong>the</strong> bank’s future growth plans domestically, it actively plans on<br />
regional expansion in<strong>to</strong> attractive markets.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 108,306 124,015 154,414 191,265 214,967 233,336 251,235<br />
Gross Loans 65,140 69,813 83,553 101,147 121,554 136,141 149,901<br />
Deposits 85,240 94,856 115,811 127,092 145,348 163,505 183,209<br />
Shareholders’ Equity 12,906 15,300 17,845 20,022 22,651 24,892 27,016<br />
Net Interest In<strong>com</strong>e 3,508 4,301 4,944 5,480 6,542 7,994 8,757<br />
Net In<strong>com</strong>e 4,018 5,210 4,808 4,364 4,780 6,404 7,076<br />
Ratios<br />
Yield on earning assets (%) 5.7% 6.7% 6.9% 5.8% 5.9% 6.3% 6.3%<br />
Cost of funds (%) 2.1% 2.7% 2.9% 2.2% 2.4% 2.4% 2.4%<br />
Spreads (%) 3.6% 4.0% 4.0% 3.6% 3.6% 3.9% 3.9%<br />
Loans <strong>to</strong> Deposits ratio (%) 76.4% 73.6% 72.1% 79.6% 83.6% 83.3% 81.8%<br />
NPLs /Gross Loans (%) 3.4% 2.2% 2.2% 2.3% 2.4% 2.4% 2.5%<br />
NPL coverage (%) 124.4% 182.4% 159.6% 152.2% 135.3% 135.3% 131.8%<br />
ROAA (%) 4.0% 4.5% 3.5% 2.5% 2.4% 2.9% 2.9%<br />
ROAE (%) 39.4% 41.2% 30.5% 23.3% 22.2% 26.7% 27.1%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 27.3% 25.7% 30.2% 35.3% 34.2% 29.4% 29.4%<br />
Dividend yield (%) 1.5% 2.6% 1.6% 3.5% 5.0% 9.7% 11.5%<br />
Earnings per Share (SR) 4.5 5.8 5.3 4.8 5.3 7.1 7.9<br />
Book Value per Share (SR) 12.4 15.8 19.2 22.4 25.3 27.9 30.3<br />
P/E (x) 29.1 16.1 22.5 9.9 9.0 6.7 6.1<br />
P/BV (x) 10.5 5.9 6.2 2.1 1.9 1.7 1.6<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
89 Saudi Arabia Economic Overview - January 2009
1040.SE (Reuters)<br />
AAAL AB (Bloomberg)<br />
Saudi Hollandi Bank<br />
CMP: SR40.1<br />
» Saudi Hollandi Bank’s (SHB) continued efforts <strong>to</strong> recover from its 2007 dismal performance started showing<br />
results in 2008 as <strong>the</strong> bank posted a third consecutive double digit growth for its quarterly results, recording 9M08<br />
(YoY) increase of 67.8%.<br />
» The bank’s improved core banking performance has been supported by its non-<strong>com</strong>mission in<strong>com</strong>e. However, <strong>the</strong><br />
turnaround in results needs yet need <strong>to</strong> show <strong>the</strong> sustainable level of performance.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 39,958 46,740 50,411 62,828 72,759 82,749 93,610<br />
Gross Loans 24,253 27,259 28,741 42,517 49,177 56,444 64,910<br />
Deposits 28,565 32,414 34,605 45,949 55,077 64,388 75,295<br />
Shareholders’ Equity 39,958 46,740 50,411 62,828 72,759 82,749 93,610<br />
Net Interest In<strong>com</strong>e 1,014 1,180 1,200 1,413 1,710 1,999 2,285<br />
Net In<strong>com</strong>e 1,052 953 438 1,023 1,051 1,184 1,291<br />
Ratios<br />
Yield on earning assets (%) 5.3% 6.5% 6.4% 5.7% 5.8% 5.9% 6.1%<br />
Cost of funds (%) 2.6% 3.9% 4.0% 3.3% 3.3% 3.3% 3.5%<br />
Spreads (%) 2.7% 2.6% 2.4% 2.4% 2.5% 2.6% 2.6%<br />
Loans <strong>to</strong> Deposits ratio (%) 84.9% 84.1% 83.1% 92.5% 89.3% 87.7% 86.2%<br />
NPLs /Gross Loans (%) 1.2% 2.5% 3.8% 3.4% 3.1% 2.9% 2.9%<br />
NPL coverage (%) 158.4% 113.6% 110.0% 100.0% 109.7% 123.6% 133.9%<br />
ROAA (%) 2.9% 2.2% 0.9% 1.8% 1.6% 1.5% 1.5%<br />
ROAE (%) 33.1% 24.7% 10.0% 21.7% 20.8% 21.9% 22.5%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 35.0% 40.4% 65.8% 46.1% 48.1% 47.5% 47.5%<br />
Dividend yield (%) 1.5% 1.2% 1.3% 6.3% 6.9% 7.8% 9.1%<br />
Earnings per Share (SR) 4.0 3.6 1.7 3.9 4.0 4.5 4.9<br />
Book Value per Share (SR) 13.1 16.1 17.2 18.5 19.7 21.1 22.3<br />
P/E (x) 24.9 17.5 37.7 10.4 10.1 9.0 8.2<br />
P/BV (x) 7.6 3.9 3.6 2.2 2.0 1.9 1.8<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 90 Saudi Arabia Economic Overview - January 2009
1030.SE (Reuters)<br />
SIBC AB (Bloomberg)<br />
» Although Saudi Investment Bank’s (SAIB) significant profitability decline in FY07 recorded relative improvement,<br />
its performance remained under pressure. In 9M08 results, SAIB showed profitability decline (YoY) of 30.5%,<br />
which was mainly due <strong>to</strong> high provisions carried out <strong>to</strong> address any decline in part of its investment portfolio<br />
linked <strong>to</strong> <strong>the</strong> global financial distressed conditions.<br />
» As SAIB continues <strong>to</strong> work on improving its non-<strong>com</strong>mission in<strong>com</strong>e, <strong>the</strong> bank also needs <strong>to</strong> fur<strong>the</strong>r boost its<br />
efforts for posting improved core banking performance.<br />
Global Investment House<br />
Saudi Investment Bank<br />
CMP: SR15.9<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Assets 39,581 40,845 46,542 57,192 67,560 76,245 83,204<br />
Gross Loans 20,481.8 21,468.6 23,850.8 33,948.2 40,737.9 46,848.5 51,533.4<br />
Deposits 27,858.1 27,931.0 32,768.3 45,713.7 55,627.3 63,798.2 70,213.4<br />
Shareholders’ Equity 5,306.7 6,001.3 6,769.5 7,107.4 7,384.2 7,701.4 8,039.8<br />
Net Interest In<strong>com</strong>e 785.7 1,030.5 1,056.0 1,058.4 1,123.9 1,401.3 1,501.0<br />
Net In<strong>com</strong>e 1,064.5 2,006.3 822.2 415.0 538.2 765.8 817.0<br />
Ratios<br />
Yield on earning assets (%) 5.5% 6.7% 6.4% 5.9% 5.3% 6.0% 6.0%<br />
Cost of funds (%) 3.3% 4.4% 4.3% 4.0% 3.5% 3.8% 3.8%<br />
Spreads (%) 2.2% 2.3% 2.1% 1.9% 1.9% 2.2% 2.2%<br />
Loans <strong>to</strong> Deposits ratio (%) 73.5% 76.9% 72.8% 74.3% 73.2% 73.4% 73.4%<br />
NPLs /Gross Loans (%) 0.9% 1.0% 1.2% 1.5% 1.5% 1.5% 1.5%<br />
NPL coverage (%) 364.0% 357.7% 243.2% 230.1% 243.6% 259.8% 284.2%<br />
ROAA (%) 3.1% 5.0% 1.9% 0.8% 0.9% 1.1% 1.0%<br />
ROAE (%) 24.1% 35.5% 12.9% 6.0% 7.4% 10.2% 10.4%<br />
Cost <strong>to</strong> In<strong>com</strong>e (%) 24.8% 18.4% 37.1% 54.5% 50.8% 44.5% 44.9%<br />
Dividend yield (%) 0.4% 0.0% 0.0% 0.5% 1.7% 3.0% 3.2%<br />
Earnings per Share (SR) 2.4 4.5 1.8 0.9 1.2 1.7 1.8<br />
Book Value per Share (SR) 11.8 13.3 15.0 15.8 16.4 17.1 17.9<br />
P/E (x) 31.5 10.6 27.9 17.2 13.3 9.3 8.8<br />
P/BV (x) 6.3 3.5 3.4 1.0 1.0 0.9 0.9<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
91 Saudi Arabia Economic Overview - January 2009
2010.SE (Reuters)<br />
SABIC AB Equity (Bloomberg)<br />
Saudi Basic Industries Corporation<br />
CMP: SR52.5<br />
» SABIC’s growth s<strong>to</strong>ry is mainly associated with <strong>the</strong> expected increase in <strong>the</strong> production capacity at a CAGR of<br />
6.2% during 2007-11.<br />
» The Company is focusing on <strong>the</strong> acquisition and establishment of <strong>com</strong>panies in European, American and Far<br />
East regions. This will help <strong>the</strong> <strong>com</strong>pany <strong>to</strong> encounter with <strong>the</strong> expected slowdown in demand of petrochemical<br />
product.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 78,254 86,328 126,204 165,908 163,418 173,736 181,999<br />
Gross Profit 33,084 34,912 47,950 58,051 53,041 57,231 61,994<br />
Operating Profit 29,170 30,886 41,047 46,215 44,053 47,676 51,984<br />
Net Profit 19,160 20,294 27,022 28,074 27,254 29,177 31,756<br />
Total Assets 136,950 166,589 256,247 297,369 327,794 347,512 361,571<br />
Total Liabilities 51,729 66,099 121,751 144,946 158,131 160,897 161,331<br />
Total Shareholders’ Equity & Minority Interest 85,222 100,490 134,496 152,423 169,663 186,615 200,240<br />
Ratios<br />
Current Ratio (x) 2.6 2.9 3.1 2.5 2.1 1.9 1.8<br />
EBITDA 35,073 35,936 48,653 58,668 59,154 64,925 70,896<br />
EV 257,945 202,864 426,342 202,169 212,179 215,785 214,519<br />
EV/EBITDA (x) 7.4 5.6 8.8 3.4 3.6 3.3 3.0<br />
EBITDA Margin% 44.8% 41.6% 38.6% 35.4% 36.2% 37.4% 39.0%<br />
Net Profit Margin% 24.5% 23.5% 21.4% 16.9% 16.7% 16.8% 17.4%<br />
Return On Average Assets % 14.6% 13.4% 12.8% 10.1% 8.7% 8.6% 9.0%<br />
Return On Average Equity % 33.8% 30.0% 32.9% 28.2% 23.5% 22.0% 21.6%<br />
EPS 6.4 6.8 9.0 9.4 9.1 9.7 10.6<br />
Book Value Per Share 31.2 29.2 36.5 36.0 41.4 46.8 51.0<br />
Dividend Payout % 40.2% 48.0% 32.4% 40.0% 40.0% 45.0% 60.0%<br />
Market Price 87.7 70.2 132.3 52.5 52.5 52.5 52.5<br />
P/E Ratio (x) 13.7 10.4 14.7 5.6 5.8 5.4 5.0<br />
P/BV (x) 2.8 2.4 3.6 1.5 1.3 1.1 1.0<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 92 Saudi Arabia Economic Overview - January 2009
2310.SE (Reuters)<br />
SIPCHEM AB Equity (Bloomberg)<br />
Saudi International Petrochemical Company<br />
CMP: SR15.6<br />
» The production is expected <strong>to</strong> increase at 2007-11 CAGR of 20.4%, which will lead <strong>the</strong> profitability <strong>to</strong> increase at<br />
a CAGR of 22.1% during 2007-11.<br />
» SIPCHEM is under bidding process <strong>to</strong> acquire Lucite International Company of UK, which is involved in <strong>the</strong><br />
production of acrylic products by using Acetate Acid as a feeds<strong>to</strong>ck.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 726 1,334 1,528 1,833 2,614 3,494 3,422<br />
Gross Profit 476 822 953 1,089 1,491 2,213 2,106<br />
Operating Profit 451 773 896 1,029 1,387 2,073 1,969<br />
Net Profit 325 494 594 613 927 1,382 1,318<br />
Total Assets 4,428 5,262 7,750 9,725 10,055 10,608 11,112<br />
Total Liabilities 2,073 2,302 3,858 3,673 3,529 3,152 2,790<br />
Total Shareholders’ Equity & Minority Interest 2,355 2,960 3,892 6,052 6,527 7,456 8,322<br />
Ratios<br />
Current Ratio (x) 6.2 3.0 0.9 1.8 1.8 1.6 1.9<br />
EBITDA 575 975 1,087 1,425 1,909 2,640 2,589<br />
EV 690 8,048 14,223 5,105 4,776 5,240 5,118<br />
EV/EBITDA (x) 1.2 8.3 13.1 3.6 2.5 2.0 2.0<br />
EBITDA Margin% 79.2% 73.1% 71.1% 77.7% 73.0% 75.6% 75.6%<br />
Net Profit Margin% 44.8% 37.0% 38.9% 33.4% 35.5% 39.6% 38.5%<br />
Return On Average Assets % 9.2% 10.2% 9.1% 7.0% 9.4% 13.4% 12.1%<br />
Return On Average Equity % 19.0% 18.6% 17.3% 12.3% 14.7% 19.8% 16.7%<br />
EPS 1.0 1.5 1.8 1.8 2.8 4.1 4.0<br />
Book Value Per Share 12.6 14.4 15.7 15.5 16.9 19.7 22.3<br />
Dividend Payout % 0.0% 0.0% 0.0% 73.5% 48.5% 32.6% 34.1%<br />
Market Price - 23.6 44.1 15.6 15.6 15.6 15.6<br />
P/E Ratio (x) - 15.9 24.7 8.5 5.6 3.8 3.9<br />
P/BV (x) - 1.6 2.8 1.0 0.9 0.8 0.7<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House<br />
93 Saudi Arabia Economic Overview - January 2009
2290.SE (Reuters)<br />
YANSAB AB Equity (Bloomberg)<br />
Yanbu National Petrochemical Company<br />
CMP: SR14.6<br />
» Being a subsidiary of SABIC, <strong>the</strong> Company has an advantage of guaranteed takeoff through <strong>the</strong> well established<br />
platform of SABIC.<br />
» YANSAB is planned <strong>to</strong> <strong>com</strong>mence its production by 4Q2008 and expected <strong>to</strong> post after tax profit of SR73.4mn.<br />
SRmn 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue - - 2,110 12,858 12,952 12,831<br />
Gross Profit - - 114 1,534 1,625 1,620<br />
Operating Profit (49) (83) (308) (212) (262) (420)<br />
Net Profit 140 110 73 581 734 795<br />
Total Assets 7,082 15,309 22,952 25,141 25,984 26,090<br />
Total Liabilities 1,329 9,587 17,156 18,765 18,874 18,184<br />
Total Shareholders’ Equity & Minority Interest 5,753 5,723 5,796 6,376 7,111 7,906<br />
Ratios<br />
Current Ratio (x) 0.7 1.4 0.2 0.3 0.3 0.2<br />
EBITDA N/A 114 456 3,129 3,352 3,477<br />
EV N/A 36,143 20,912 19,413 18,276 17,325<br />
EV/EBITDA (x) N/A N/A 45.8 6.2 5.5 5.0<br />
EBITDA Margin% N/A N/A 21.6% 24.3% 25.9% 27.1%<br />
Net Profit Margin% N/A N/A 3.5% 4.5% 5.7% 6.2%<br />
Return On Average Assets % 2.0% 1.0% 0.4% 2.4% 2.9% 3.1%<br />
Return On Average Equity % 2.4% 1.9% 1.3% 9.5% 10.9% 10.6%<br />
EPS N/A 0.2 0.1 1.0 1.3 1.4<br />
Book Value Per Share N/A 17.0 30.5 33.4 33.6 32.3<br />
Dividend Payout % N/A 0.0% 0.0% 0.0% 0.0% 0.0%<br />
Market Price N/A 52.8 14.6 14.6 14.6 14.6<br />
P/E Ratio (x) N/A N/A N/A 14.1 11.2 10.3<br />
P/BV (x) N/A 3.1 0.5 0.4 0.4 0.5<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 94 Saudi Arabia Economic Overview - January 2009
2330.SE (Reuters)<br />
Advanced Polypropylene Company<br />
APPC AB Equity (Bloomberg) CMP: 15.5<br />
» The production from APPC’s facility <strong>com</strong>menced in 3Q2008, which resulted a first ever shipment of<br />
polypropylene.<br />
» The Company is expected <strong>to</strong> show net profit of SR406.5mn for 2008.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue N/A N/A N/A 1,597 2,533 2,548 2,521<br />
Gross Profit N/A N/A (1) 460 488 489 479<br />
Operating Profit N/A (2.3) (1) 441 438 438 429<br />
Net Profit N/A 1.7 2.2 407 399 408 407<br />
Total Assets N/A 1,815 2,545 3,005 3,125 3,209 3,301<br />
Total Liabilities N/A 400 1,129 1,385 1,306 1,186 1,075<br />
Total Shareholders' Equity & Minority Interest N/A 1,415 1,416 1,620 1,819 2,023 2,226<br />
Ratios<br />
Current Ratio (x) N/A 1.4 1.8 1.1 1.3 1.8 2.3<br />
EBITDA N/A 4.1 2.7 524.5 590.6 598.6 597.1<br />
EV N/A 7,542 8,757 3,028 2,913 2,639 2,367<br />
EV/EBITDA (x) N/A N/A N/A 5.8 4.9 4.4 4.0<br />
EBITDA Margin% N/A N/A N/A 32.8% 23.3% 23.5% 23.7%<br />
Net Profit Margin% N/A N/A N/A 25.5% 15.8% 16.0% 16.1%<br />
Return On Average Assets % N/A 0.1% 0.1% 14.7% 13.0% 12.9% 12.5%<br />
Return On Average Equity % N/A 0.1% 0.2% 26.8% 23.2% 21.2% 19.1%<br />
EPS N/A 0.01 0.02 2.88 2.82 2.88 2.88<br />
Book Value Per Share N/A 10.0 10.0 11.5 12.9 14.3 15.7<br />
Dividend Payout % N/A 0.0% 0.0% 50.0% 50.0% 50.0% 50.0%<br />
Market Price N/A N/A 55.0 15.5 15.5 15.5 15.5<br />
P/E Ratio (x) N/A N/A N/A 5.4 5.5 5.4 5.4<br />
P/BV (x) N/A N/A 5.5 1.4 1.2 1.1 1.0<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House<br />
95 Saudi Arabia Economic Overview - January 2009
2020.SE (Reuters)<br />
SAFCO AB Equity (Bloomberg)<br />
Saudi Arabia Fertilizers Company<br />
CMP: SR87.2<br />
» SAFCO has <strong>the</strong> largest fertilizer producing facilities in Saudi Arabia and at present, is in a negotiation stage <strong>to</strong><br />
finalize <strong>the</strong> supply of feeds<strong>to</strong>ck gas for SAFCO-V project, which will add <strong>the</strong> 2.7mn <strong>to</strong>ns in <strong>the</strong> existing capacity<br />
by 2011 and lead <strong>the</strong> earning <strong>to</strong> increase at a CAGR of 13.2% during 2007-11.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 1,824 1,831 3,516 6,208 4,461 4,691 5,754<br />
Gross Profit 1,075 1,090 2,295 4,818 2,949 3,028 3,707<br />
Operating Profit 982 989 2,127 4,659 2,740 2,800 3,459<br />
Net Profit 1,100 1,151 2,209 4,848 2,893 2,968 3,633<br />
Total Assets 6,207 6,729 8,153 9,905 10,606 11,229 12,175<br />
Total Liabilities 1,419 1,989 2,139 2,436 2,270 2,151 2,188<br />
Total Shareholders' Equity & Minority Interest 4,788 4,739 6,014 7,469 8,337 9,079 9,987<br />
Ratios<br />
Current Ratio (x) 2.7 2.6 3.1 2.9 3.1 3.2 3.3<br />
EBITDA 1,178 1,183 2,471 5,012 3,137 3,243 3,952<br />
EV 24,991 17,569 28,879 20,018 19,219 18,918 18,311<br />
EV/EBITDA (x) 21.2 14.9 11.7 4.0 6.1 5.8 4.6<br />
EBITDA Margin% 64.6% 64.6% 70.3% 80.7% 70.3% 69.1% 68.7%<br />
Net Profit Margin% 60.3% 62.9% 62.8% 78.1% 64.8% 63.3% 63.1%<br />
Return On Average Assets % 19.2% 17.8% 29.7% 53.7% 28.2% 27.2% 31.0%<br />
Return On Average Equity % 24.4% 24.2% 41.1% 71.9% 36.6% 34.1% 38.1%<br />
EPS 4.4 4.6 8.8 19.4 11.6 11.9 14.5<br />
Book Value Per Share 19.2 19.0 24.1 29.9 33.3 36.3 39.9<br />
Dividend Payout % 50.9% 116.4% 54.3% 70.0% 70.0% 75.0% 75.0%<br />
Market Price 98.4 68.4 118.5 87.2 87.2 87.2 87.2<br />
P/E Ratio (x) 22.4 14.9 13.4 4.5 7.5 7.3 6.0<br />
P/BV (x) 5.1 3.6 4.9 2.9 2.6 2.4 2.2<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 96 Saudi Arabia Economic Overview - January 2009
3020.SE (Reuters)<br />
YACCO AB Equity (Bloomberg)<br />
Yamama Saudi Cement Company<br />
CMP: SR34.0<br />
» Sales revenue of <strong>the</strong> <strong>com</strong>pany is expected <strong>to</strong> increase at a CAGR of 8% during 2007-11.<br />
» The <strong>com</strong>pany is not undergoing any expansions and will be utilizing its funds and cash <strong>to</strong> remove <strong>the</strong> bottlenecks<br />
in production process and increase its margins.<br />
» The <strong>com</strong>pany gets cushion from its investments as well.<br />
SR’000’ 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 791,087 950,121 1,185,501 1,151,251 1,167,502 1,387,531 1,486,324<br />
Gross Profit 541,653 631,561 768,781 677,772 649,025 770,787 822,340<br />
Net Profit 500,883 601,159 731,429 618,850 595,249 715,550 763,062<br />
Equity 1,576,310 1,938,757 2,365,382 2,522,960 2,650,805 2,831,825 2,925,750<br />
Assets 2,706,197 3,127,862 3,604,324 3,620,164 3,586,681 3,764,671 3,987,458<br />
Investments 79,117 203,703 336,384 403,661 504,576 555,034 610,537<br />
Ratios<br />
EPS (SR) 3.71 4.45 5.42 4.58 4.41 5.3 5.65<br />
Gross Margins (%) 68.5 66.5 64.8 58.9 55.6 55.6 55.3<br />
Operating Margins (%) 63.4 62.7 61.5 54.6 51.3 51.7 51.4<br />
Net Margins (%) 63.3 63.3 61.7 53.8 51 51.6 51.3<br />
ROAA (%) 21.5 20.6 21.7 17.1 16.5 19.5 19.7<br />
ROAE (%) 34.3 34.2 34 25.3 23 26.1 26.5<br />
Market Capitalization (SR mn) 7,019 10,598 12,724 4,590 4,590 4,590 4,590<br />
EV/Ton (US$) 637 658 545 200 200 194 189<br />
P/E (x) 42 17.6 17.4 7.4 7.7 6.4 6<br />
P/Bv (x) 13.4 5.5 5.4 1.8 1.7 1.6 1.6<br />
Dividend Yield (%) 3.8 2.5 3.2 10.3 10.3 11.8 14.7<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House<br />
97 Saudi Arabia Economic Overview - January 2009
3060.SE (Reuters)<br />
YNCCO AB Equity (Bloomberg)<br />
Yanbu Cement Company<br />
CMP: SR38.1<br />
» Yanbu Cement Company (YCC) is planning <strong>to</strong> undergo expansion and by <strong>the</strong> end of 2011 it will have a cement<br />
capacity of 7mn <strong>to</strong>ns per annum.<br />
» Its sales revenue and net in<strong>com</strong>e is expected <strong>to</strong> grow at a CAGR of 12% and 10.5% during 2007-11.<br />
SR’000’ 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 778,930 843,243 1,170,728 1,066,931 1,045,364 1,123,831 1,851,641<br />
Gross Profit 476,313 525,914 680,338 580,007 541,158 584,147 1,029,831<br />
Net Profit 453,615 512,201 660,953 553,698 502,556 539,178 955,703<br />
Equity 1,942,264 2,084,765 2,323,518 2,455,016 2,535,372 2,547,350 2,870,853<br />
Assets 2,243,356 2,250,022 2,563,399 2,715,632 3,220,616 3,384,549 3,912,925<br />
Investments 240,240 286,811 646,550 355,602 391,163 430,279 473,307<br />
Ratios<br />
EPS (SR) 4.32 4.88 6.29 5.27 4.79 5.14 9.1<br />
Gross Margins (%) 61.1 62.4 58.1 54.4 51.8 52 55.6<br />
Operating Margins (%) 58.8 60.1 56 52 49.4 49.6 53.5<br />
Net Margins (%) 58.2 60.7 56.5 51.9 48.1 48 51.6<br />
ROAA (%) 20.8 22.8 27.5 21 16.9 16.3 26.2<br />
ROAE (%) 22.9 25.4 30 23.2 20.1 21.2 35.3<br />
Market Capitalization (SR mn) 15,267 7,534 9,896 4,001 4,001 4,001 4,001<br />
EV/Ton (US$) 1,020 500 549 194 222 244 157<br />
P/E (x) 33.7 14.7 15 7.2 8 7.4 4.2<br />
P/Bv (x) 7.9 3.6 4.3 1.6 1.6 1.6 1.4<br />
Dividend Yield (%) 3.4 4.9 4.2 10.5 10.5 13.1 15.7<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respective year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 98 Saudi Arabia Economic Overview - January 2009
3030.SE (Reuters)<br />
SACCO AB Equity (Bloomberg)<br />
Saudi Cement Company<br />
CMP: SR55.0<br />
» Saudi Cement Company is on its way <strong>to</strong> be<strong>com</strong>e <strong>the</strong> biggest cement producer of <strong>the</strong> country. The <strong>com</strong>pany<br />
presently has 10 cement kilns with a <strong>to</strong>tal clinker capacity of 13,825 <strong>to</strong>ns daily (4.15mn <strong>to</strong>ns annually), and<br />
cement grinding capacity of 6.0mn <strong>to</strong>ns.<br />
» Saudi Cement Company is investing around SR2.2bn (US$578mn) <strong>to</strong> step up its production capacity <strong>to</strong><br />
11.3mtpa by 2009.<br />
SR’000’ 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 1,116,342 1,200,235 1,361,950 1,349,040 2,004,719 2,223,696 2,312,644<br />
Gross Profit 528,767 676,023 746,982 702,893 1,048,269 1,184,282 1,253,347<br />
Net Profit 484,292 637,759 686,397 628,228 919,834 1,049,020 1,114,025<br />
Equity 1,969,626 2,421,585 2,738,582 2,956,610 3,466,244 4,003,064 4,502,889<br />
Assets 2,211,866 2,704,581 3,860,734 4,669,625 4,678,944 4,713,284 5,241,136<br />
Investments 49,182 669,310 59,722 68,680 74,175 81,592 601,990<br />
Ratios<br />
EPS (SR) 4.75 6.25 6.73 6.16 9.02 10.28 10.92<br />
Gross Margins (%) 47.4 56.3 54.8 52.1 52.3 53.3 54.2<br />
Operating Margins (%) 42.2 51.1 49.1 46.0 46.1 47.1 48.1<br />
Net Margins (%) 43.4 53.1 50.4 46.6 45.9 47.2 48.2<br />
ROAA (%) 21.7 25.9 20.9 14.7 19.7 22.3 22.4<br />
ROAE (%) 24.2 29 26.6 22.1 28.6 28.1 26.2<br />
Market Capitalization (SR mn) 14,540 10,047 12,954 5,559 5,559 5,559 5,559<br />
EV/Ton (US$) 633 443 595 269 139 128 129<br />
P/E (x) 30.0 15.8 18.9 8.8 6.0 5.3 5.0<br />
P/Bv (x) 7.4 4.1 4.7 1.9 1.6 1.4 1.2<br />
Dividend Yield (%) 3.8 1.8 2.8 7.3 7.3 9.2 11.0<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House<br />
99 Saudi Arabia Economic Overview - January 2009
3010.SE (Reuters)<br />
ARCCO AB Equity (Bloomberg)<br />
Arabian Cement Company<br />
CMP: SR31.4<br />
» The <strong>com</strong>pany has embarked upon regional expansion and is currently in <strong>the</strong> process of preparing 2.5mtpa plant<br />
capacity in Al-Qatarana, Jordan of which ACC holds 95% stake.<br />
» The <strong>com</strong>pany has undertaken a 51:49 joint venture with, Italcementi, <strong>to</strong> prepare a cement plant with a production<br />
capacity of 3mtpa <strong>to</strong> be located in Labouna.<br />
SR’000’ 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 687,227 747,848 721,572 945,201 876,160 1,310,224 1,384,135<br />
Gross Profit 348,550 372,645 421,534 430,621 401,645 633,628 663,361<br />
Net Profit 330,851 333,580 392,165 342,495 320,679 551,096 577,163<br />
Equity 1,630,063 1,646,779 1,840,544 2,241,365 2,135,198 2,311,298 2,356,133<br />
Assets 1,751,070 1,809,594 2,365,727 3,019,091 3,147,004 3,193,438 3,113,708<br />
Investments 693,503 687,589 352,794 282,236 254,012 279,413 307,355<br />
Ratios<br />
EPS (SR) 4.14 4.17 4.9 4.28 4.01 6.89 7.21<br />
Gross Margins (%) 50.7 49.8 58.4 45.6 45.8 48.4 47.9<br />
Operating Margins (%) 45.6 43.3 51.7 38.6 38.8 42.7 42.3<br />
Net Margins (%) 48.1 44.6 54.3 36.2 36.6 42.1 41.7<br />
ROAA (%) 19.9 18.7 18.8 12.7 10.4 17.4 18.3<br />
ROAE (%) 21.7 20.4 22.5 16.8 14.7 24.8 24.7<br />
Market Capitalization (SR mn) 12,684 4,830 6,720 2,512 2,512 2,512 2,512<br />
EV/Ton (US$) 509 717 255 202 237 156 158<br />
P/E (x) 51.1 19.3 19.6 7.3 7.8 4.6 4.4<br />
P/Bv (x) 10.4 3.9 4.2 1.1 1.2 1.1 1.1<br />
Dividend Yield (%) 1.6 4.5 3.4 15.9 15.9 15.9 22.3<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 100 Saudi Arabia Economic Overview - January 2009
3040.SE (Reuters)<br />
QACCO AB Equity (Bloomberg)<br />
Qassim Cement Company<br />
CMP: SR80.0<br />
» Qassim Cement Company’s current annual clinker capacity of <strong>the</strong> <strong>com</strong>pany stands at 3.0mtpa, while <strong>the</strong> cement<br />
capacity is 3.7mtpa.<br />
» The <strong>com</strong>pany is expected <strong>to</strong> <strong>report</strong> a CAGR of 9% in its net profits during 2007-11.<br />
» The <strong>com</strong>pany enjoys better gross margins as <strong>com</strong>pared <strong>to</strong> o<strong>the</strong>r players in <strong>the</strong> country.<br />
SR’000’ 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 493,728 543,079 847,004 868,892 840,569 925,615 1,025,889<br />
Gross Profit 298,169 334,786 557,386 555,796 514,239 565,428 633,501<br />
Net Profit 281,522 315,585 540,548 527,607 491,520 538,165 603,735<br />
Equity 1,187,751 1,294,736 1,523,384 1,689,191 1,773,911 1,860,276 2,012,211<br />
Assets 1,631,131 1,755,258 2,059,235 2,146,020 2,048,552 2,148,753 2,226,913<br />
Investments 11,639 8,479 56,091 249,455 324,590 407,761 560,879<br />
Ratios<br />
EPS (SR) 6.26 7.01 12.01 11.72 10.92 11.96 13.42<br />
Gross Margins (%) 60.4 61.6 65.8 64 61.2 61.1 61.8<br />
Operating Margins (%) 58 58.8 63.5 61.3 58.6 58.6 59.3<br />
Net Margins (%) 57 58.1 63.8 60.7 58.5 58.1 58.8<br />
ROAA (%) 19.4 18.6 28.3 25.1 23.4 25.6 27.6<br />
ROAE (%) 24.5 25.4 38.4 32.8 28.4 29.6 31.2<br />
Market Capitalization (SR mn) 10,654 6,975 8,145 3,600 3,600 3,600 3,600<br />
EV/Ton (US$) 1,238 808 567 248 247 247 256<br />
P/E (x) 37.8 22.1 15.1 6.8 7.3 6.7 6<br />
P/Bv (x) 9 5.4 5.3 2.1 2 1.9 1.8<br />
Dividend Yield (%) 1.9 3 3.8 10 11.3 12.5 12.5<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House<br />
101 Saudi Arabia Economic Overview - January 2009
5110.SE (Reuters)<br />
SECO AB (Bloomberg)<br />
Saudi Electricity Co.<br />
CMP: SR9.3<br />
» The revenues of Saudi Electricity Co. (SEC) are cyclical, affected by seasonal wea<strong>the</strong>r changes during <strong>the</strong> year.<br />
The <strong>com</strong>pany’s revenues are lower during <strong>the</strong> winter months so <strong>the</strong> first & last quarter financial results do not<br />
reflect <strong>the</strong> accurate picture for <strong>the</strong> full year results. The summer months due <strong>to</strong> intense wea<strong>the</strong>r witness higher<br />
energy consumption & mostly result in higher revenues.<br />
» SEC’s profitability increase of 9.8% in FY07, seems <strong>to</strong> be closing at subdued FY08 levels as 9M08 performance<br />
recorded 26.5% (YoY) decline. The increased level of operational costs are believed <strong>to</strong> be <strong>the</strong> major profitability<br />
dampener, over which <strong>the</strong> <strong>com</strong>pany is trying <strong>to</strong> develop better control in future.<br />
SRmn 2005 2006 2007 2008E 2009E 2010E 2011E<br />
Sales Revenue 18,761 19,707 20,979 22,401 23,798 25,261 27,058<br />
Gross Profit 1,645 1,337 1,539 780 1,050 1,433 1,762<br />
Net Profit 1,483 1,414 1,553 911 1,209 1,571 1,877<br />
Shareholders’ Equity 46,262 47,129 48,134 48,496 49,157 50,179 51,507<br />
Gross Fixed Assets 170,662 181,636 194,599 210,280 224,559 238,453 252,523<br />
Total Assets 117,563 127,208 136,510 148,248 159,017 167,109 175,959<br />
Ratios<br />
Gross Profit Margin(%) 8.8 6.8 7.3 3.5 4.5 5.7 6.5<br />
Operating Profit Margin(%) 6.7 5.9 6.0 2.1 3.1 4.4 5.2<br />
Net Profit Margin (%) 7.9 7.2 7.4 4.1 5.1 6.2 6.9<br />
LT Debt /Equity (x) 0.5 0.8 0.8 0.8 0.9 0.9 0.9<br />
ROAA (%) 1.3 1.2 1.2 0.6 0.8 1.0 1.1<br />
ROAE (%) 3.2 3.0 3.3 1.9 2.5 3.2 3.7<br />
Earnings per Share (SR) 0.36 0.34 0.37 0.22 0.29 0.38 0.45<br />
P/E (x) 81.8 38.3 39.6 42.3 31.9 24.5 20.5<br />
P/BV (x) 2.6 1.1 1.3 0.8 0.8 0.8 0.7<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 102 Saudi Arabia Economic Overview - January 2009
7010.SE (Reuters)<br />
STC AB (Bloomberg)<br />
Global Investment House<br />
Saudi Tele<strong>com</strong> Company<br />
CMP: SR48.7<br />
» Saudi Tele<strong>com</strong> (STC) lost its monopoly when <strong>the</strong> second mobile license was granted in 2004 <strong>to</strong> Etihad Etisalat<br />
Company (Mobily). In Mar 2007, a consortium led by Zain of Kuwait won <strong>the</strong> third mobile, and launched services<br />
in 2008. In Apr. 2007, three fixed line licenses were granted in Saudi, ending STC’s monopoly over fixed lines.<br />
» As a result of increasing <strong>com</strong>petition, <strong>the</strong> <strong>com</strong>pany started expanding outside its home market beginning with <strong>the</strong><br />
Maxis deal which gave STC foothold in Malaysia, India, and Indonesia. Later, STC won <strong>the</strong> bid for a 26% stake in<br />
Kuwait’s third mobile service opera<strong>to</strong>r. It also acquired a 35% stake in Oger Tele<strong>com</strong>, which gave STC presence<br />
in Turkey and South Africa.<br />
SRbn 2005 2006 2007 2008(F) 2009(F) 2010(F) 2011(F)<br />
Sales Revenue 32.5 32.4 34.5 48.9 52.5 56.2 59.9<br />
Gross Profit 19.3 18.4 19.2 28.3 29.7 31.3 33.2<br />
EBITDA 17.5 16.5 16.7 21.7 23.2 24.6 26.0<br />
Net Profit 12.4 12.8 12.0 13.4 14.7 15.9 17.1<br />
Total Assets 44.7 46.1 68.8 110.2 121.5 127.8 133.7<br />
Total Shareholders’ Equity 32.9 34.2 35.9 37.8 40.1 42.5 44.3<br />
Ratios<br />
Current Ratio (x) 1.3 1.4 0.8 0.9 1.0 1.0 1.0<br />
Quick Ratio (x) 1.2 1.4 0.8 0.9 1.0 1.0 1.0<br />
Gross Profit Margin (%) 59.4 56.9 55.6 57.9 56.5 55.8 55.4<br />
EBITDA Margin (%) 53.7 50.9 48.5 44.4 44.1 43.8 43.4<br />
Net Profit Margin (%) 38.3 39.5 34.9 27.3 28.0 28.3 28.5<br />
Return on Average Assets (%) 28.7 28.2 20.9 14.9 12.7 12.8 13.0<br />
Return on Average Equity (%) 39.0 38.2 34.3 36.3 37.8 38.5 39.3<br />
EPS (SR) 8.3 6.4 6.0 6.7 7.4 8.0 8.5<br />
Book Value Per Share (SR) 21.9 17.1 17.9 18.9 20.0 21.3 22.1<br />
EV/EBITDA 14.4 10.2 9.7 3.2 2.9 2.9 2.7<br />
Market Price (SR) 139.2 83.0 83.8 48.7 48.7 48.7 48.7<br />
P/E Ratio (x) 16.8 13.0 13.9 7.3 6.6 6.1 5.7<br />
P/BV (x) 6.4 4.9 4.7 2.6 2.4 2.3 2.2<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008<br />
(Source: Company Reports & Global Research)<br />
103 Saudi Arabia Economic Overview - January 2009
7020.SE (Reuters)<br />
EEC AB (Bloomberg)<br />
Etihad Etisalat Company (Mobily)<br />
CMP: SR28.8<br />
» Mobily, Saudi’s second mobile opera<strong>to</strong>r, launched services in May 2005. Within three years, <strong>the</strong> <strong>com</strong>pany gained<br />
a market share of 41% (end 2007), with 11.1mn subscribers. Mobily has been targeting <strong>the</strong> data and internet<br />
segment aggressively.<br />
» In 2007, <strong>the</strong> <strong>com</strong>pany acquired a 99.9% stake of <strong>the</strong> local data provider Bayanat Al-Oula, and set up Mobily<br />
InfoTech, a fully owned subsidiary in India, which will provide IT and consulting services. In addition, it acquired<br />
96% of Zagel International Communication Network Company which is specialized in providing internet services<br />
in Saudi Arabia. We believe that Mobily’s latest acquisitions will streng<strong>the</strong>n its position in <strong>the</strong> wireless broadband<br />
internet segment.<br />
SRbn 2005* 2006 2007 2008(F) 2009(F) 2010(F) 2011(F)<br />
Sales Revenue 1.7 5.8 8.4 10.6 11.8 12.5 12.9<br />
Gross Profit 0.7 3.2 4.6 6.1 6.8 7.3 7.7<br />
EBITDA (0.1) 2.0 2.9 3.7 4.2 4.6 4.8<br />
Net Profit (1.2) 0.7 1.4 1.9 2.2 2.4 2.5<br />
Total Assets 16.2 17.7 19.9 26.5 28.2 28.9 29.2<br />
Total Shareholders’ Equity 3.8 4.5 5.9 9.8 11.7 13.4 14.5<br />
Ratios<br />
Current Ratio (x) 0.11 0.18 0.52 0.62 0.66 0.74 0.73<br />
Quick Ratio (x) 0.11 0.17 0.50 0.61 0.65 0.73 0.72<br />
Gross Profit Margin (%) 41.8 54.1 55.1 57.4 57.5 58.5 59.7<br />
EBITDA Margin (%) (6.8) 34.3 34.9 35.2 36.1 36.5 37.0<br />
Net Profit Margin (%) (70.3) 12.0 16.3 17.7 18.4 19.0 19.4<br />
Return on Average Assets (%) (7.2) 4.1 7.3 8.1 7.9 8.3 8.6<br />
Return on Average Equity (%) (30.5) 16.7 26.4 24.3 21.1 20.7 20.2<br />
EPS (SR) NA 1.0 2.0 2.7 3.1 3.4 3.6<br />
Book Value Per Share (SR) 5.5 6.5 8.4 14.0 16.7 19.1 20.7<br />
EV/EBITDA NA 18.8 16.6 6.2 5.5 4.9 4.6<br />
Market Price (SR) 110.5 41.1 58.0 28.8 28.8 28.8 28.8<br />
P/E Ratio (x) NA 41.0 29.4 10.8 9.3 8.5 8.1<br />
P/BV (x) - 6.3 6.9 2.1 1.7 1.5 1.4<br />
His<strong>to</strong>rical P / E & P / BV multiples pertain <strong>to</strong> respecitve year -end prices, while those for future years are based on closing prices on <strong>the</strong> TASI as of Dec 29, 2008. (*From 14/12/04 <strong>to</strong> 31/12/05)<br />
(Source: Company Reports & Global Research)<br />
Global Investment House 104 Saudi Arabia Economic Overview - January 2009
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