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pharmaceuticals manufactured locally. We thus see potentially strong
opportunities for the private hospital operators, the health insurance providers
and local pharmaceutical manufacturers.
4. Animprovement in the availability of affordable housing for Saudi
nationals: The Saudi housing shortage has been a persistent issue for the
country; with the shortfall currently standing at an estimated 1.2mn units, in
our view. Looking forward, we believe this shortfall will likely intensify given
strong demand formation. The NTP is seeking to introduce greater numbers of
affordable housing units and greater availability of financing. Indeed, the
ministry of housing is looking to invest cUS$16bn in achieving these aims by
2020. Whilst we do not believe these measures go far enough to fully resolve
the housing shortage, we nevertheless see material opportunities for Saudi real
estate developers.
5. Growth in telecom/fibre infrastructure: The NTP is seeking to greatly
enhance connectivity in the country, largely through increased usage of
internet. Reflecting that, the government has pledged approximately USS$2bnn
to significantly increase the availability of high speed FTTH networks in remote
areas, increase mobile broadband coverage and density in urban centres
(3G/4G) and allocate an increased amount of bandwidth to the mobile service
providers. We thus see significant volume growth potential for the telecom
service providers (particularly with regards to mobile data, where we see scope
for price increases). Furthermore, we expect much of the capital expenditure
required to expand the FTTH and Mobile networks to be provided by the
private sector, which in our view will accelerate the case to spin off their tower
portfolios (as a method of funding capex expansions).
6. Significant growth in downstream petrochemicals capacity and metals &
mining: The NTP’s drive to diversify revenues away from the oil sector has
seen it focusing on exports of non-oil commodities. In particular, we highlight
the significant investment it has earmarked for the downstream industries
including petrochemicals and oil refining, as well as aggressively growing the
country’s metal and mining operations (likely through national champion,
Maaden). Examples include the expansion of the country’s base metals
production (e.g. bauxite and phosphates) and the construction of an oils-to-
olefins project. The further development of capital intensive industries also
provides some scope for Saudi Arabia to develop service industries and
increase local content provisions, in our view. These could be facilitated
through joint-ventures with global service providers, who may consider
manufacturing plants in Saudi Arabia.
How to gain exposure to NTP themes
In reflection of the themes articulated above (and in the sections that follow), we
highlight the sectors and companies which have exposure to each of these themes in
the table below. The companies highlighted in green represent the companies which are
currently Buy rated by our fundamental analysts and also fit in with our theme of
gaining exposure to the NTP.
OS merrill Lynch GEMs Paper #26|30June 2016 41
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