Initiate at Underweight; Premium to higher-yielding GCC peers unjustified
Petrochem offers exposure to a diversified chemicals portfolio, but our price outlook is negative. National Petrochemical Company (Petrochem) is a 50%-owned subsidiary of [SIIG AB | OW | 12M TP SAR46]. Since its IPO in 2009, the company has been on a heavy capex schedule, and in 2012 started operations from 65%-owned Saudi Polymer Company (Saudi Polymers), Petrochem’s sole operating arm. We assume a 14% y-o-y drop in oil prices to USD90/bbl in 2015—to account for the ongoing demonstration for low price rationalization by major OPEC members as the US brings on new supply. We expect EBITDA margins will soften over our forecast horizon on easing polyethylene (PE) and polypropylene (PP) price assumptions on the back of: (i) a new wave of low-cost ethane-based capacity additions in the US by 2016, with recent additions in this market having already lowered ethylene cash costs to USD211/t, 25% lower than the same producers’ cash cost in 4Q12, (ii) the introduction of PDH technology (propylene production via propane dehydrogenation) in other markets, helping distressed producers swing back into profitability, and in turn weighing down on PP prices.
National Petrochemical Co SJSC (Petrochem), is a Saudi Arabia-based joint stock company that operates in the petrochemical sector. The Company is engaged in the development, establishment, operation, management and maintenance of petrochemical, gas, petroleum and other industrial plants; wholesale and retail trading in petrochemical materials and products, and owning land, real estate and building for the Company's benefits. The Company invests in its subsidiaries: Saudi Polymers Company, which is focused on the production of petrochemical products, such as Ethylene, High Density Polyethylene (HDPE), Low Density Linear Polyethylene (LDLPE), Hexene, Polypropylene (PP) and General Purpose Poly Styrene (GPPS) and High Impact Poly Styrene (HIPS) in its plants in Jubail Industrial City, and Gulf Polymers Distribution Company FZCO. The Company is a subsidiary of Saudi Industrial Investment Group (SIIG).
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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