Q Bahri Transport Sector. March 11, 2018 National Shipping Company of Saudi Arabia (Bahri) Neutral. Recommendation. Fair Value (SAR) 32.

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1 Recommendation Neutral Fair Value (SAR) Price as of March 8, Expected Return 6.90% Company Data Tadawul Symbol 4030.SE 52 Week High (SAR) Week Low (SAR) YTD Change % Month Average Volume (Thousand Shares) 601 Market Cap. (SAR Million) 11,801 Market Cap. (USD Million) 3,147 Outstanding Shares (Million Shares) Major Shareholders ( > 5% ) Public Investment Fund 22.55% Saudi Aramco Development Company 20.00% week Stock Price Movement Bahri Tadawul Index Quarterly Sales (SAR million) and ROS Sales ROS Source: Tadawul 35% 30% 25% 20% 15% 10% 5% 0% Source: Company Filings, Albilad Capital Research Estimates The financial statements of the unveiled a drop in the net profits of by 32% languishing at SAR 207 million versus SAR 302 million in Q4 2016, while leaping 242% from SAR 61 million in Q Therefore, the full-year bottom line hit SAR 800 million sliding 53% from SAR 1,718 million in The company's Q4 profit beat our forecast of SAR 132 million and the analysts mean estimate of SAR 131 million. The slump in the full-year net profits was triggered by the following factors; (i) the dip in global transport rates in general and the rates of crude oil and chemicals transport in specific; (ii) mounting bunker cost in tandem with improvement in oil prices; (iii) a nonrecurring tax reversal of SAR 150 million in 2016; (iv) higher financing expenses fueled by the fleet expansion and higher rates; and (v) increase in operating expenses. Bahri disclosed in November 2017 its plan to offload a portion of 30.3% stake in Petredec Ltd, which operates in the transportation and trade of liquefied petroleum gas. Bahri expects the deal to close in Q1 2018, however the selling value was not unveiled. The shipping company received 5 VLCCs from Hyundai Samho in 2017, which help soften the impact of transport prices. The company is expected to receive five other giant tankers in The investment cost of the ten tankers stands at USD 949 million. Moreover, Bahri Dry Bulk Company (a 60%-subsidiary) inked a contract with Hyundai in August to build four bulk cargo carriers. The four tankers will be delivered during the first half of 2020 with a total value of USD 120 million. The fleet expansion will help reduce the impacts of transport rates and reinforce the company's competitiveness in the market In February 2018, a giant oil tanker owned by Bahri sailed from Louisiana to China, the first time a supertanker is loaded from a US port thanks to the increase in US oil production, which surpassed the record level of 10 million barrels achieved in The company's performance in 2017 was significantly crimped by the decline in spot rates, especially in the oil sector, which accounted for 61.6% of consolidated revenues in 2017.Tanker spot rates were primarily dragged down by several factors, foremost of which is the reduction of production levels by OPEC and some other producers. It is worth mentioning that the commitment of OPEC countries to the agreed level of production hit135% in December 2017 mainly fueled by the deterioration of Venezuela's oil production. Furthermore, tanker spot rates were also impacted by the growth in the global tanker fleet and the rapid drawdown from global oil inventory, which reduced demand for tankers, coupled with higher bunker fuel costs in tandem with higher oil prices. Despite the improvement in tanker spot rates at the beginning of, the seasonal improvement was less than expected on lower oil production levels as well as a lack of winter weather delays. A recovery in transport freight rates in 2H 2018 is forecasted on higher scrapping, lower vessel delivery as well as the increase in global oil demand by 1.5 million barrels per day in Our valuation is maintained at SAR 32 per share. FY - Ending Dec- 2015A 2016A 2017A 2018F 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 EV/EBITDA EV/Sales P/E Dividend Yield % 8.4 % 8.4 % 5.0 % 8.4 P/Revenue Current Ratio % % % % Revenue Growth % % 9.0- % %

2 Operating sectors 2017 Oil Transportation Chemical Transportation Logistics Dry bulk Transportation Headquarter & Others Total Revenues 3, , ,046 Operating Cost 3, ,911 Bunker subsidy Gross Profit ,320 SG&A Expenses Others (net) - (28) 7 0 (3) (24) Interest Income Interest Expense Income from Associates EBIT (77) Revenues 4, ,789 Operating Cost 3, ,030 Bunker Subsidy Gross Profit 1, ,892 SG&A Expenses Others (net) (44) (2) Interest Income Interest Expense Income from Associates EBIT 1, ,707 Revenues of the crude oil transportation sector include SAR 2.5 billion for the year ended 31 December 2017 (2006: SAR 3.4 billion) from one customer (Saudi Aramco and its subsidiaries - Investor). Changes in the company's fleet Number of ships Q Q Q Q Q Q Q Oil Transportation Chemical Transportation Logistics Dry bulk Transportation Total Growth rate of global tanker fleet 8.0% 7.6% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 3.9% 5.8% 3.8% 1.7% 1.3% 3.2% 6.0% 4.8% 3.2% 1.8% 1.0% 0.0% Source:Teekay 2

3 Revenues Per Lines of Business (SAR mn) Oil Transportation Chemicals Transportation 1,541 1,370 1, Logistics Services Dry Bulk

4 Income Statement (SAR mn) 2014A 2015A 2016A 2017A 2018F Total Revenues 3,626 7,464 6,789 6,046 6,695 COGS 2,952 5,267 4,896 4,725 5,189 COGS/Sales 81.4% 70.6% 72.1% 78.2% 77.5% SG&A EBITDA 1,178 2,801 2,748 1,979 2,235 EBITDA Margin 32.5% 37.5% 40.5% 32.7% 33.4% Depreciation and Amortization EBIT 575 1,980 1,780 1,125 1,310 EBIT Margin 15.9% 26.5% 26.2% 18.6% 19.6% Net Financing Income (107) (132) (240) (308) (302) Equity Investment Income Others (Net) (1) Pre-Zakat Income 600 2,043 1, ,107 Tax and Zakat (44) Minority Net Income 534 1,817 1, ,011 ROS 14.7% 24.3% 25.3% 13.2% 15.1% Balance Sheet (SAR mn) 2014A 2015A 2016A 2017A 2018F Cash and Marketable securities 390 1,240 2,080 1, Accounts Receivables 663 1,029 1,116 1,532 1,529 Inventory Others Total ST Assets 1,817 2,841 3,813 3,629 3,225 Net Fixed Assets 12,980 12,798 13,662 14,747 15,752 Investments in Affiliated Companies 906 1,028 1, ,022 Others 1,420 2,430 2,239 1,812 1,201 Total LT Assets 15,306 16,256 17,024 17,553 17,975 Total Assets 17,123 19,097 20,837 21,183 21,200 Short Term Debt and CPLTD 4, ,001 1,075 1,067 Accounts Payable Others Total ST Liabilities 4,701 1,838 2,021 2,015 2,131 Total Long Term Debt 4,153 7,506 8,664 9,181 8,614 Other Noncurrent Liabilities Equity 8,185 9,700 10,087 9,918 10,380 Total Liabilities and Equity 17,123 19,097 20,837 21,183 21,200 *The Historical Financial Statements for 2014 and 2015 were prepared according to SOCPA standards Presentation of financial statements may differ from the company s presentation, with no impacts on the final results. Source: Company Filings, Albilad Capital Research Estimates 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