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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
HOUSE_OVERSIGHT_016152