Saudi Arabian Mining Company (Ma'aden)

Transcription

1 Saudi Arabian Mining Company (Ma'aden) Recommendation Neutral Fair Value (SAR) Price as of May 14, Expected Return 4.9% Company Data Tadawul Symbol 1211.SE 52 Week High (SAR) Week Low (SAR) YTD Change 2.3% 3-Month Average Volume (Thousand Shares) 460 Market Cap. (SAR Million) 46,845 Market Cap. (USD Million) 12,492 Outstanding Shares (Million Shares) 1,168.5 Major Shareholders ( > 5% ) Public Investment Fund 49.99% General Organization for Social Insurance 7.98% Public Pension Agency 7.45% , 3,000 2, 2,000 1, 1, week Stock Price Movement Maaden Tadawul Index Quarterly Sales (SAR mn) and ROS Sales Ros Source: Tadawul 13% 8% 3% -2% -7% -12% -17% Source: Company Filings, Albilad Capital Research Estimates Q Ma'aden unveiled a significant improvement in bottom line in Q with net earnings skyrocketing by 42% to SAR million compared to SAR 194 million in Q1 2016, and shifted from a net loss of SAR 484 million in Q The net earnings beat our estimate of SAR 85 million and market consensus of SAR 113 million. Ma'aden had earlier disclosed a net profit of SAR 16 million for Q4 2016, however, the IFRS application triggered an impairment charge of SAR 566 million, which predominantly explains the staggering adjusted loss of Q The total value of the write-off to determine the opening value of the company's financial position as of January 1, 2016, in accordance with IFRS, amounted to SAR 2,172 million, including the impairment of Ma'aden's aluminium rolling assets, automotive rolling sheets assets and the investment in Sahara Ma'aden Petrochemical Company. The YoY pickup in profits mainly stemmed from revenues growth of 20% triggered by the increase of selling volume. Furthermore, the average realized price of aluminium leapt by 18%, while gold price climbed by 3%. The top line growth concealed the dip in average price in the fertilizer sector, and the escalation of the financing expenses (net) from SAR 130 million to SAR 341 million due to lower income from short term deposits, the increase in SIBOR/LIBOR as well as expensing the interest pertaining to the expansions that launched commercial production such as Al- Duweihi gold mine, bauxite and alumina mine, alumina refinery in 2016, and the ammonia plant of Waad El Shamaal project in Ras Al Khair in Compared to Q4 2016, sales leapt by 14% on increased quantities of ammonia, alumina and gold as well as higher prices for all products. Ma'aden trimmed COGSby 8%, sale and distribution expenses by 50% in addition to the drop in exploration and technical expenses by 37%, however financing costs surged by 26%. The phosphate sector contributed 46% of total revenues; unchanged from Q Fertilizers sales amounted to SAR 1,259 million compared to SAR 1,053 million in Q boosted by higher selling volume in the aftermath of the launch of commercial production in the ammonia plant in Waad El shamaal project. The revenues contribution of the aluminium segment shrank to 42% from 46% in Q1 2016, despite the increase in the segment revenues from SAR 1,036 million to SAR 1,131 million. On the other hand, gold sales were augmented from SAR 181 million to SAR 327 million as Al Dewaihi mine commercially launched operations in April 1, The segment accounted for 12% of revenues compared to 4% in Q Positive indicators have emerged in the phosphate fertilizer market compared to last year as ammonia and phosphate fertilizer prices have improved due to lower Chinese exports and increased demand in some markets. Aluminium prices have also recovered due to a reduction in production rates in China to implement new environmental policies and disruption in the production of Australian smelters. The Chinese market is heading towards balance. The commercial operation of the ammonia plant of Waad El-Shamaal project started on January 1, 2017 and the remaining units of the project are expected to be operational in Q Consequently, with the recovery of selling prices, this will be reflected positively on the company's revenues, however expensing the cost of financing new projects rather than capitalising it, will impact the income statement. The launch of operations will also trigger a significant increase in depreciation charges. Our cash flow model yield a fair value estimate at SAR 44 per share. Ahmed A. Hindawy, CFA Senior Financial Analyst AA.hindawy@albilad-capital.com For more information, please contact:: Turki Fadaak Research & Advisory Manager TFadaak@albilad-capital.com FY - Ending December 2013A 2014A 5402A 5402A EV/EBITDA EV/Sales P/E Dividend yield 0.0% 0.0% 0.0% 0.0% P/BV P/Revenue Revenue Growth 8.4% 78.5% 1.5% -13.3% 1

2 Production and Sales Summary ( 000 ton) Q Q YoY Q QoQ FY 2016 FY 2015 YoY Diammonium Phosphate (DAP) Production % 687 5% 2,724 2,656 3% Sales % 700 (9%) 2,676 2,633 2% Ammonia Production % % 1, % Sales % % % Aluminum Production % 219 4% % Sales % 216 6% % Copper Production % 8 (13%) Sales % 5 44% % Gold (000 Ounces) Production % 64 11% % Sales % 64 10% % Business segments (SAR mn) Phosphate Aluminum Gold and base metals Headquarters Total Q Sales 1,259 1, ,717 EBITDA (50) 1,437 EBIT (55) 722 Net income (83) 276 Total asset 44,810 41,043 4,222 4, 94,575 Q Phosphate Aluminum Gold and base metals Headquarters Total Sales 1,053 1, ,270 EBITDA (16) 944 EBIT (21) 337 Net income (26) 194 Total asset 44,250 41,491 4,170 5,481 95,392 2

3 Prices of Ma'aden's Products Diammonium Phosphate (DAP) Price (USD / Ton) Ammonia Price (USD / ton) Aluminum Price (USD / Ton) Gold - USD / Ounce 1,975 1,900 1,825 1,750 1,675 1,600 1,525 1,450 1,375 1,400 1,350 1,300 1,250 1,200 1,150 1,100 1,050 1,000 Copper (USD / Ton) 6,250 6,000 5,750 5, 5,250 5,000 4,750 4, 4,250 Source: Bloomberg 3

4 Income Statement (SAR mn) 2013A 2014A 2015A 2016A* Sales 6,047 10,792 10,956 9,504 COGS 3,491 6,153 6,250 4,991 OPEX 890 1,079 1,063 1,374 EBITDA 1,667 3,560 3,643 3,139 EBITDA Margin 27.6% 33.0% 33.2% 33.0% Depreciation, Amortization & Depletion 1,063 1,563 2,320 2,519 EBIT 604 1,997 1, EBIT Margin 10.0% 18.5% 11.9% 6.4% Net Interest Income Investment Income Others 1, Pre-Tax Income 1,872 1, Tax and Zakat Net Income 1,816 1, Minority NAI 1,682 1, ROS 27.8% 12.6% 5.5% -0.1% Balance Sheet (SAR mn) 2013A 2014A 2015A 2016A* Cash and Marketable Securities 4,337 12,497 5,207 7,081 Accounts Receivables 763 1,245 1,252 1,273 Inventory 1,883 2,441 2,942 3,093 Others Total ST Assets 7,130 16,416 10,370 11,587 Net Fixed Assets 18,130 38,376 36,682 51,706 Projects Under Implementation 37,140 27,259 40,636 29,185 Intangible Assets Others 1,244 2,032 1,273 1,291 Total LT Assets 56,821 68,125 79,008 82,555 Total Assets 63,951 84,541 89,378 94,143 Short Term Debt and CPLTD 1,198 1,574 2,131 2,753 Accounts Payable 2,051 2,035 1,810 2,202 Accrued Expenses 3,261 2,558 4,521 2,629 Others Total ST Liabilities 6,611 6,267 8,541 7,711 Total Long Term Debt 31,545 43,338 43,268 50,779 Other Noncurrent Liabilities 704 1,289 2,015 2,247 Minority 5,248 6,824 8,097 7,794 Equity 19,760 26,693 27,298 25,342 Total Liabilities and Equity 63,951 84,541 89,378 94,143 Cash Flow (SAR mn) 2013A 2014A 2015A 2016A* Cash flow from Operations 1,846 2,751 2,214 2,142 Cash flow from Investing (10,361) (14,221) (11,207) (10,159) Cash flow from Financing 6,626 19,051 1,273 8,613 *IFRS Source: Company Filings, Albilad Capital Research Estimates Presentation of financial statements may differ from the company s presentation. However, there is no impact on the final results. 4

5 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%. Neutral: The Target share price is either more or less than the current share price by < 10%. Underweight: The Target share price is less than the current share price by 10%. 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. Albilad Capital Client Services Tel: Toll-free: Asset Management Tel: Custody Tel: Research & Advisory Tel: Website: Brokerage Tel: Investment Banking Tel: Disclaimer AlBilad Capital exerted utmost efforts to ensure that the information included in this report is accurate and correct. However, AlBilad Capital Co., its managers, and staff bear no liability whether explicitly or implicitly for the content of the report and no legal responsibility, whether directly or indirectly, for any results based on it. This report should not be reproduced, redistributed, or sent directly or indirectly to any other party or published in full or in part for any purpose whatsoever without a prior written permission from AlBilad Capital. We would also like to note that this information in no way constitutes a recommendation to buy or sell banknotes or make any investment decisions. Any investment act taken by an investor based fully or partially on this report is the complete responsibility of the investor. This report is not meant to be used or seen as advice or an option or any other measure to be taken in the future. We recommend consulting a qualified investment advisor before investing in these investment tools. AlBilad Capital preserves all rights associated with this report. CMA Authorization Number