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PETROCHEMICAL INDUSTRIESSaudi Arabia FertilizersAlsoknownasSAFCOPriceSR110.3Pricing / Valuation as on May 27, 2009Mkt capSR27.6bn ($7,359.8mn)Sh. outstanding250.0mnKey statistics52 week range H/L (SR) 272.5/63.0Avg daily turnover (mn) SR US$3m 58.04 15.5012m 126.32 33.73Raw Beta 6m 3yr1.04 1.09Reuters2020.SEBloombergSAFCO ABPrice perform (%) 1M 3M 12MAbsolute (%) 3 22 (54)Market (%) 6 32 (39)Sector (%) 27 59 (52)Website: www safco.com.saValuation multiples2006 2007 2008P/E (x) 19.8 18.0 5.0P/B (x) 4.8 6.6 2.8P/Sales (x) 12.5 11.3 4.3Div yield (%) 4.8 2.5 14.5Weightage (%)TASI (free float weight) 2.46MSCI Saudi (domestic – large cap) 7.36Free float (%)Free float 39.96Relative share price perf.11,0003009,0002007,0005,0001003,000-M ay-08 Aug-08 Nov-08 Feb-09 M ay-09TASISAFCO (RHS)Top 5 shareholders (%)Saudi Basic Industries Corporation 42.9General Org. for Social Insurance 13.9Source: NCBC ResearchSaudi Arabia Fertilizers Company (SAFCO), established in 1965 is engaged inproducing ammonia and urea. The company markets its products in Asia, America,Australia, Africa and other middle-east countries apart from domestic market. SaudiBasic Industries Corp. (SABIC) holds 42.9% stake in SAFCO.Company financials2005 2006 2007 2008YoY(%)CAGR(%)(05-08)Net Revenues SRmn 1,824 1,831 3,516 5,243 49.1 42.2EBITDA SRmn 1,178 1,183 2,471 4,594 85.9 57.4Net Income SRmn 1,100 1,151 2,209 4,530 105.1 60.3Assets SRmn 6,207 6,674 8,153 9,850 20.8 16.6Equity SRmn 4,788 4,739 6,014 8,034 33.6 18.8Total Debt SRmn 695 1,240 975 826 (15.2) 5.9Cash & Equiv SRmn 304 594 1,572 3,918 149.2 134.4EBITDA Mgn % 64.6 64.6 70.3 87.6 - -Net Mgn % 60.3 62.9 62.8 86.4 - -ROE % 24.4 24.2 41.1 64.5 - -ROA % 19.2 17.9 29.8 50.3 - -Div Payout % 76.4 95.5 45.3 71.7 - -EPS SR 27.5 5.8 11.0 18.1 N/M N/MBVPS SR 119.7 23.7 30.1 32.1 N/M N/MSource: Company, NCBC ResearchSegment-wise business analysisProduct segment 2008 Geographic 2008%Rev % Net Inc Breakup %Rev % Net IncAmmonia & Urea 100 N/A Asia 34Melamine & Sulfuric Acid N/A N/A America 26Australia 21Saudi Arabia 13Africa/Middle East 6Source: Company, NCBC Research• Business brief: SAFCO has a urea production capacity over 2.27mn tons per annum(tpa), majority of which is exported. Urea is a key material used in nitrogen fertilizersacross the globe. The company also manufactures 2.1mn tpa of ammonia as anintermediate raw material for producing urea. SAFCO has a sulphuric acid productioncapacity of 130,000 tpa. The company is also constructing SAFCO V, a new fertilizerplant in Jubail, which is expected to increase its urea capacity by 1.5mn tpa andammonia capacity by 1.2mn tpa in 2011.• Financials: In 2008, SAFCO reported a robust year-on-year growth of 49.1% in itstop line to SR5,242.6mn benefiting from higher fertilizer prices during the year.Furthermore, its net income grew 105.1% y-o-y to SR4,530.3mn.• Recent developments: SAFCO declared its 1Q-09 results on April 11, 2009. Netincome declined 27.4% y-o-y to SR525.0mn in 1Q-09 due to lower fertilizer prizes. InAugust 2008, SAFCO stopped production at its Dammam plant to comply with theRoyal decree enforcing environmental regulations. In July 2008, SAFCO signed adeal with Hadeed (SABIC’s wholly owned subsidiary) to establish a steel plant with acapacity of 1.7mn tpa.JUNE 2009SAUDI ARABIA FERTIZERS CO125