Yanbu National Petrochemical Company - YANSAB 21 October 2014

Yanbu National Petrochemical Company - YANSAB
21 October 2014
Recommendation
Fair Value (SR)
Overweight
74.00
Price as of 20 October 2014 (SR)
Expected return
63.00
17.5%
Company data
Tadawul symbol
52- week high (SR)
52-week low(SR)
YTD change
Average trading volume (thousand shares)
Market Cap (million SR)
Market Cap (million USD)
Number of shares issued (million)
Free float
Financial indicators
2011
2012
Revenues (million SR)
Net Income (million SR)
EPS (SAR)
PE ratio (x)
P/BV (x)
Dividend yield
Net Income growth
*Ending Q3 2014
9,659
3,174
5.64
11.16
3.37
0.0%
%.88.
9,299
2,428
4.32
14.59
2.73
0.0%
%5.81-
170
2290.SE
77.75
58.00
-15.7%
649
35,438
9,450
562.5
36.7%
3102
Yansab
Tadawul Petrochemicals Index
Tadawul Index
9,354
2,645
4.70
13.40
2.36
4.8%
%.88
LTM*
2,302
4.09
15.39
2.49
4.8%
%5.81-
Interim Financial Results for the Third Quarter 2014
Yanbu National Petrochemical Company (Yansab) released its KPIs for the
period ended September 30, 2014 unveiling a 20.06% annual drop in its Q3
2014 earnings to SAR 691.3 million down from SAR 864.8 million. Nevertheless,
the results outpaced our estimate of SAR 680 million as well as the market
consensus estimate of SAR 677 million reported by Bloomberg. The figure,
however, is 11.07% higher than Q2 2014.
Operational profit (OP) in Q3 2014 plunged 18.03% reaching SAR 784.5 million
down from SAR 957.1 million, however the figure is 11.98% higher than Q2
2014. In the same direction, gross profit (GP) dwindled 17.8% registering SAR
844.8 million, versus SAR 1,027.7 million in Q3 2013. However, Yansab
reported a 11.07% QoQ increase in GP versus the second quarter’s level of SAR
700.6 million.
On a 9M level, bottom line remarkably shrank 15.55% culminating at SAR 1,860
million versus SAR 2,202.4 million in 9M 2013, whereas GP retreated 12.2%
amounting to SAR 2,313.8 million. Meanwhile, OP totaled SAR 2,130.4 million
down from SAR 2,457.8 million, experiencing a 13.32% decline.
The YoY decrease in net profit in for Q3 2014 emanated from lower sales
volumes which more than offset decreases in financial and general &
administrative expenses, while the QoQ increase has been fueled by moderate
increases in average selling prices for certain products. On the other side, the
significant drop in 9M earnings resulted from higher COGS with the increase in
some feedstock prices, in addition to the effect of higher zakat provisions
despite lower financial costs.
160
150
140
130
120
Recently, as depicted in the chart below, prices of major petrochemical
products followed a downward sloping trend matching a similar movement in
oil price, coupled with the concerns over the growth in global economy and the
launch of new production capacities.
110
100
Latest Developments
90
80
In July, Yansab paid its shareholders a SAR 1.5 per share as dividends for the
first half of 2014.
Sources: Albilad Capital estimates, Tadawul
Our Comment
For more information you may contact:
Yansab’s financial results for Q3 2014 matched our expectations, accordingly
our fair value estimate will remain unchanged at SAR 74.
Turki Fadaak
Research & Advisory Manager
tfadaak@albilad-capital.com
Price Movements of Main Petrochemical Products (USD/Metric Ton)
1,700
1,600
Or Albilad Capital Head Office:
Tel :
+966 11 203 9892
Fax :
+966 1479 8453
P.O. Box 140
Riyadh 11411
1,500
1,400
1,300
1,200
1,100
Our website:
www.albilad-capital.com/en/research
1,000
Ethylene
Polyethylene
Benzene
Propylene
Polypropylene
1
Yanbu National Petrochemical Company - YANSAB
21 October 2014
Balance Sheet (million)
Current Assets
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Long Term Debt
Other Long Term Liabilities
Shareholders' Equity
Total Liabilities and Shareholders' Equity
2010
4,427
18,426
311
23,163
2,261
10,911
2,651
7,340
23,163
2011
5,121
17,588
267
22,975
3,555
6,542
2,362
10,515
22,975
2102
5,353
16,498
538
22,388
2,471
6,821
135
12,961
22,388
2102
6,782
15,623
495
22,901
2,174
5,523
161
15,043
22,901
Change
26.7%
-5.3%
-7.9%
2.3%
-12.0%
-19.0%
19.2%
16.1%
2.3%
Balance Sheet (million)
Current Assets
Fixed Assets
Other Assets
Total Assets
Current Liabilities
Long Term Debt
Other Long Term Liabilities
Shareholders' Equity
Total Liabilities and Shareholders' Equity
Income Statement (million)
Revenues
Cost of Revenues
Gross Profit
Selling, General, and Admin. Expenses
Net Interest Expense
Other Expenses/(Income)
Total Other Expenses/(Income)
Net Income Before Zakat
Zakat
Net Income
2010
5,822
3,652
2,170
123
376
(43)
456
1,713
40
1,673
2011
9,659
5,866
3,793
175
413
(62)
526
3,267
92
3,174
2102
9,299
6,190
3,109
234
361
(31)
563
2,546
118
2,428
2102
9,354
6,129
3,225
232
260
(29)
463
2,762
118
2,645
Change
0.6%
-1.0%
3.7%
-0.8%
-27.9%
-6.8%
-17.8%
8.5%
0.0%
8.9%
Income Statement (million)
Revenues
Cost of Revenues
Gross Profit
Selling, General, and Admin. Expenses
Net Interest Expense
Other Expenses/(Income)
Total Other Expenses/(Income)
Net Income Before Zakat
Zakat
Net Income
Cash Flow Statement (million)
Net Income Before Tax
Depreciation and Amortization
Inventory
Accounts Receivable
Accounts Payable
Other Changes in Cash Flow From
Operations
Change in Fixed Assets
Other Changes in Cash Flow From
Investing Activities
Change in Debt
Dividends Paid
Beginning Cash Balance
Ending Cash Balance
2010
1,713
835
(163)
(1,215)
510
2011
3,267
1,018
(269)
(503)
(204)
2102
2,546
1,018
43
(102)
(62)
2102
2,762
1,080
(8)
182
(109)
Change
8.5%
6.1%
-117.4%
17
(649)
(13)
(211)
(98)
(123)
(287)
(106)
193.3%
-13.6%
(663)
(201)
606
790
(37)
(3,238)
790
599
(219)
(3,073)
599
530
(98)
(1,279)
(561)
530
2,106
-55.1%
-58.4%
0.0%
-11.6%
297.6%
Cash Flow Statement (million)
Net Income Before Tax
Depreciation and Amortization
Inventory
Accounts Receivable
Accounts Payable
Other Changes in Cash Flow From
Operations
Change in Fixed Assets
Other Changes in Cash Flow From
Investing Activities
Change in Debt
Dividends Paid
Beginning Cash Balance
Ending Cash Balance
75.9%
9M
2013
9M
2014
-
Change
-
9M
2013
9M
2014
2,635.2
2,202.4
2,313.8
1,860.0
9M
2013
9M
2014
-
Change
-12.2%
-15.5%
Change
-
-
-
-
-
-
-
-
-
Source: YANSAB Filings
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Yanbu National Petrochemical Company - YANSAB
21 October 2014
Definitions

Earnings Per Share
It is an indicator of the company's profit in Saudi Riyals per each outstanding share. It is calculated by dividing the company’s net income of by the
number of outstanding shares.

Revenue
Is the amount of income that is brought into a company by its business activities.

Gross profit
A company’s profit after deducting the cost associated directly with its sales or production. Does not include indirect cost like depreciation, interest, tax
and non-operating expense.

Price-to-earnings (P/E) Ratio
It is the price paid by the company’ shareholders for the earnings of one of its shares. It is used to compare the prices of the company’s shares with that
of another company within the same sector. If the P/E is higher than the sector’s average, it indicates either the share is overpriced or that there is a
greater expectation for the company to generate more profits in the future, and vice versa. It is calculated by dividing the price of a share by the share’s
earnings in Saudi Riyals

Book value per share
The company's book value represents the value of the company in the event of liquidation or exit. Dividing the shareholders’ equity by the company’s
outstanding shares represents the book value per share.

Price-to-book (P/B) ratio
It represents the market price per share vis-à-vis its book value. It is used to compare between companies within the same sector and comparing them
to the sector’s average. If the number is higher than the average, it means that the company’s price is traded higher than its book value. This means
that either the share is overpriced or that the company is in a growth state; and vice versa. The number is calculated by dividing the share’s market
price by its book value.
Return on equity

It is a percentage representing the extent of the company's efficiency in achieving earnings from the shareholders’ investment. It is calculated by
dividing the company’s net income by Shareholders' equity. The higher the percentage, the higher the efficiency, and vice versa.

Net Debt
Total long-term debt after deducting cash on hand and in banks.

Enterprise Value
It is the market capitalization plus net debt.

Time horizon
We recommend using a Time horizon of 9 to 12 months, during which the current price might reach the Target price
Albilad Capital Rating Methodology
Al-Bilad Capital uses its own evaluation structure, and its recommendations are based on quantitative and qualitative data collected by the analysts. Moreover, the
evaluation system places covered shares under one of the next recommendation areas based on the closing price of the market, the fair value that we set and the
possibility of ascent/descent.
Overweight:
The Target share price exceeds the current share price by ≥ 10%. We expect the share price to reach the Target price over the next 9-12 months
Neutral:
The Target share price is either more or less than the current share price by < 10% We expect the share price to reach the Target price over the
next 9-12 months
Underweight:
The Target share price is less than the current share price by ≥ 10%. We expect the share price to reach the Target price over the next 9-12
months
To be Revised
No target price had been set for one or more of the following reasons: waiting for more analysis, waiting for detailed financials , waiting for
more data to be updated, major change in company`s performance, change in market conditions or any other reason from Albilad Capital
Research.
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Yanbu National Petrochemical Company - YANSAB
21 October 2014
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