National Shipping Company of Saudi Arabia (Bahri)

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1 Recommendation Overweight Fair Value (SAR) Price as of Expected Return 10.50% Company Data Tadawul Symbol 4030.SE 52 Week High (SAR) Week Low (SAR) YTD Change -7.15% 3-Month Average Volume (Thousand Shares) 753 Market Cap. (SAR Million) 11,407 Market Cap. (USD Million) 3,042 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 30% 25% 20% 15% 10% 5% 0% Source: Company Filings, Albilad Capital Research Estimates reported a net profit of SAR 123 for the quarter ended March 31, 2018, thus the bottom line slid 68% YoY and 41% QoQ from SAR 379 million and SAR 207 million in Q and Q4 2017, respectively. The net profit beat our estimate of SAR 91 million and the market consensus of SAR 98.5 million. The YoY slump in the company's profits emanated from lower tanker spot rates and mounting bunker cost as well as an investment loss of SAR 21 million from the company s 30.3% stake in Petredec Ltd compared to an investment income of SAR 19 million in Q Financing expenses amounted to SAR 24 million fueled by the expansion of the company's fleet, which also resulted in a leap of SAR 17 million in SG&A expenses. Compared to Q4 2017, despite lower rates of transport and higher financing expenses, the biggest impact arose from the loss of SAR 21 million from investment in Petredec compared to a staggering profit of SAR 35 million in Q Total revenues for the first quarter of this year hit SAR 1,457 million compared to SAR 1,938 million in Q1 2017, thus tumbling 25% YoY as the lower tanker rates offset the positive impact of the growth in the company's fleet to 91 carriers up from 84 carriers in March Nevertheless, the top line edged up 2% QoQ driven by the fleet expansion. The tankers operator received 4 new oil tankers YTD, the last of which was on April 10, A new tanker is expected to be delivered before the end of H1 2018, therefore it will be the last out of 10 carriers built in South Korea for delivery in 2017 and 2018 at an investment cost of USD 949 million. Moreover, Bahri Dry Bulk Company (a 60%-subsidiary) inked a contract with Hyundai in August 2017 to build four bulk cargo carriers. The tankers will be delivered in H 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 a record US oil production. As stated in our previous report, the performance in has been crimped by low spot rates, especially in the oil sector, which accounted for 57% of consolidated revenues in. Tanker spot rates were primarily dragged down by reduction of production by OPEC and some other producers, 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. A recovery in spot 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 2018E 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 8.6% 8.6% 5.2% 5.2% P/Revenue Current Ratio 154.5% 188.6% 180.2% 150% Revenue Growth 105.8% -9.0% -10.9% 6.2% 1

2 Operating sectors (SAR mn) Oil Transportation Chemical Transportation Logistics Dry bulk Transportation Total Revenues ,457 Operating Cost (701) (178) 240) (90) (1,208) Gross Profit before fuel subsidy Fuel Subsidy Gross Profit Q Revenues 1, ,938 Operating Cost (1,021) (173) (208) (92) (1,494) Gross Profit Fuel Subsidy Gross Profit Changes in the company's fleet Number of ships Q Q Q Q Q Q Q Q Oil Transportation Chemical Transportation Logistics Dry bulk Transportation Total Growth in Global Tankers 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 1,370 1, Logistics Services Dry Bulk

4 Income Statement (SAR mn) 2014A 2015A 2016A 2017A 2018E Total Revenues 3,626 7,464 6,789 6,046 6,419 COGS 2,952 5,267 4,896 4,725 5,025 COGS/Sales 81.4% 70.6% 72.1% 78.2% 78.3% SG&A EBITDA 1,178 2,801 2,748 1,979 2,127 EBITDA Margin 32.5% 37.5% 40.5% 32.7% 33.1% Depreciation and Amortization EBIT 575 1,980 1,799 1,134 1,211 EBIT Margin 15.9% 26.5% 26.5% 18.7% 18.9% Net Financing Income (107) (132) (240) (308) (332) Equity Investment Income Others (Net) (1) Pre-Zakat Income 600 2,043 1, Tax and Zakat (44) Minority Net Income 534 1,817 1, ROS 14.7% 24.3% 25.3% 13.2% 13.4% Balance Sheet (SAR mn) 2014A 2015A 2016A 2017A 2018E Cash and Marketable securities 390 1,240 2,080 1, Accounts Receivables 663 1,029 1,116 1,532 1,468 Inventory Others Total ST Assets 1,817 2,841 3,813 3,629 3,105 Net Fixed Assets 12,980 12,798 13,662 14,747 15,748 Investments in Affiliated Companies 906 1,028 1, ,015 Others 1,420 2,430 2,239 1,812 1,201 Total LT Assets 15,306 16,256 17,024 17,553 17,964 Total Assets 17,123 19,097 20,837 21,183 21,069 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 2,070 Total Long Term Debt 4,153 7,506 8,664 9,181 8,714 Other Noncurrent Liabilities Equity 8,185 9,700 10,087 9,918 10,210 Total Liabilities and Equity 17,123 19,097 20,837 21,183 21,069 The financial statements for the period ( ) are presented according to IFRS. 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