Chart 44: Summary of sectors and companies with exposure to key NTP themes (companies highlighted in green are rated Buy and represent our top picks) Theme 1 Theme 2 Theme 3 Theme 4 Theme 5 Theme 6
Growth in Affordable Telco infrastructure Increase in none-oil housing growth commodity exports Travel & Tourism Consumer staples Private Hospitals Real Estate Telecoms Petrchemicals Transport Consumer Disc. Insurance co's Construction Training & Education Metals & Mining
Religious Tourism Downtrading Healthcare provision
Sectors to
Consumer staples Training & Education Pharma Banks Industrials
Training & Education Training & Education Training & Education Training & Education STC Savola Al Hammadi Dar al Arkan STC SABIC ZAIN KSA Almarai Dallah Zain KSA Maaden Savola Al Othaim Yansab Almarai Al Hokair Saico
Al Othaim Jarir
coverage with exposure
Mobily Sadafco Mouwasat Emaar Economic city Mobily Petrorabigh Sadafco Halwani Brothers Care Saudi Banks Al Khaleej Training Zamil
Al Tayyar Nadec MEAHCO Al Khaleej Training Al Khaleej Training Dur Hospitality Saudi Marketing Spimaco
Saudi Ground Serv. Al Khaleej Training Bupa
Saudi Catering Tawuniya
Al Khaleej Training Med Gulf
Other Companies with exposure
Source: BofA Merrill Lynch Global Research
Saudi market valuation not testing
The Saudi market has been one of the poorest performing emerging markets year-to- date, underperforming the MSCI EM indices by approximately 10% (and c20% since August 2015). A combination of weak oil prices and their inevitable impact on the Saudi economy including slowing economic growth, rising operational risks and fiscal consolidation (including subsidy removals) have been the key drivers. The underperformance has left the market trading on a 12mth P/E of c.13x, an 11% discount to its long term average and its lowest premium to GEMs since 2010 (Saudi trades on a 7% percent premium vs long run average of c. 30%). Furthermore, Saudi trades on 12mth FWD P/B ratio of 1.5x, a 20% discount to long run averages, but a 15% premium to GEMs on 1.3x, justified by the market’s higher ROE’s (Saudi’s long term P/B premium has been c.25%). Finally, Saudi trades on 12mth FWD EV/EBITDA multiples of 9x, a c.11% discount to long run averages.
42 GEMs Paper #26 | 30 June 2016 3S Merrill Lynch
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