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This document is page 42 of a BofA Merrill Lynch Global Research report (GEMs Paper #26) dated June 30, 2016. It contains a chart analyzing Saudi Arabian market sectors and companies exposed to key National Transformation Program (NTP) themes, alongside a textual analysis of Saudi market valuations compared to emerging market indices. The document bears a 'HOUSE_OVERSIGHT_016152' stamp, indicating it was part of a document production for a congressional investigation.
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Chart 44: Summary of sectors and companies with exposure to key NTP themes (companies highlighted in green are rated Buy and represent our top picks)
Theme 1 Theme 2 Theme 3 Theme 4 Theme 5 Theme 6
Religious Tourism Downtrading Healthcare provision Growth in Affordable housing Telco infrastructure growth Increase in none-oil commodity exports
Religious Tourism Downtrading Healthcare provision Growth in Affordable housing Telco infrastructure growth Increase in none-oil commodity exports
Sectors to benefit
Travel & Tourism Consumer staples Private Hospitals Real Estate Telecoms Petrochemicals
Transport Consumer Disc. Insurance co's Construction Training & Education Metals & Mining
Consumer staples Training & Education Pharma Banks Industrials
Training & Education Training & Education Training & Education Training & Education
Travel & Tourism Consumer staples Private Hospitals Real Estate Telecoms Petrochemicals
Transport Consumer Disc. Insurance co's Construction Training & Education Metals & Mining
Consumer staples Training & Education Pharma Banks Industrials
Training & Education Training & Education Training & Education Training & Education
BofA ML coverage with exposure
STC Savola Al Hammadi Dar al Arkan STC SABIC
ZAIN KSA Almarai Dallah Zain KSA Maaden
Savola Al Othaim Yansab
Almarai Al Hokair Safco
Al Othaim Jarir
STC Savola Al Hammadi Dar al Arkan STC SABIC
ZAIN KSA Almarai Dallah Zain KSA Maaden
Savola Al Othaim Yansab
Almarai Al Hokair Safco
Al Othaim Jarir
Other Companies with exposure
Mobily Sadafco Mouwasat Emaar Economic city Mobily Petrorabigh
Sadafco Halwani Brothers Care Saudi Banks Al Khaleej Training Zamil
Al Tayyar Nadec MEAHCO Al Khaleej Training Al Khaleej Training
Dur Hospitality Saudi Marketing Spimaco
Saudi Ground Serv. Al Khaleej Training Bupa
Saudi Catering Tawuniya
Al Khaleej Training Med Gulf
Mobily Sadafco Mouwasat Emaar Economic city Mobily Petrorabigh
Sadafco Halwani Brothers Care Saudi Banks Al Khaleej Training Zamil
Al Tayyar Nadec MEAHCO Al Khaleej Training Al Khaleej Training
Dur Hospitality Saudi Marketing Spimaco
Saudi Ground Serv. Al Khaleej Training Bupa
Saudi Catering Tawuniya
Al Khaleej Training Med Gulf
Source: BofA Merrill Lynch Global Research
Saudi market valuation not testing
The Saudi market has been one of the poorest performing emerging markets year-to-date, underperforming the MSCI EM indices by approximately 10% (and c20% since August 2015). A combination of weak oil prices and their inevitable impact on the Saudi economy including slowing economic growth, rising operational risks and fiscal consolidation (including subsidy removals) have been the key drivers. The underperformance has left the market trading on a 12mth P/E of c.13x, an 11% discount to its long term average and its lowest premium to GEMs since 2010 (Saudi trades on a 7% percent premium vs long run average of c. 30%). Furthermore, Saudi trades on 12mth FWD P/B ratio of 1.5x, a 20% discount to long run averages, but a 15% premium to GEMs on 1.3x, justified by the market’s higher ROE’s (Saudi’s long term P/B premium has been c.25%). Finally, Saudi trades on 12mth FWD EV/EBITDA multiples of 9x, a c.11% discount to long run averages.
The Saudi market has been one of the poorest performing emerging markets year-to-date, underperforming the MSCI EM indices by approximately 10% (and c20% since August 2015). A combination of weak oil prices and their inevitable impact on the Saudi economy including slowing economic growth, rising operational risks and fiscal consolidation (including subsidy removals) have been the key drivers. The underperformance has left the market trading on a 12mth P/E of c.13x, an 11% discount to its long term average and its lowest premium to GEMs since 2010 (Saudi trades on a 7% percent premium vs long run average of c. 30%). Furthermore, Saudi trades on 12mth FWD P/B ratio of 1.5x, a 20% discount to long run averages, but a 15% premium to GEMs on 1.3x, justified by the market’s higher ROE’s (Saudi’s long term P/B premium has been c.25%). Finally, Saudi trades on 12mth FWD EV/EBITDA multiples of 9x, a c.11% discount to long run averages.
42 GEMs Paper #26 | 30 June 2016 Merrill Lynch
HOUSE_OVERSIGHT_016152
HOUSE_OVERSIGHT_016152
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