initial public offer (ipo) research notefincorp.org/reports/special reports/010855sembcorp ipo...

INITIAL PUBLIC OFFER (IPO)

RESEARCH NOTE

IPO NOTE

September 2013

ANALYST

Nandakumar Chenicheri

Asst. Vice President - AMD

Email: [email protected]

Tel: (+968) 24822300 Ext. 353

Gaurav Ramaiya

Asst. Vice President - Research


Tel: (+968) 24822300 Ext. 348

Mable C. Pereira

Asst. Vice President - Research


Tel: (+968) 24822300 Ext. 342

SEMBCORP SALALAH POWER & WATER CO.

INVESTMENT CASE

Sembcorp Salalah Power & Water Company SAOG (Sembcorp Salalah) is the

largest and most energy efficient power and water plant in Dhofar, supplying

approximately 72% of the power dispatch and 100% of the net installed water

capacity of Dhofar.

The company is backed by a strong and experienced group of promoters,

including Sembcorp Utilities and Oman Investment Corporation.

The company has a stable business model with predictable cash flows and

earnings as well as limited operating risk supported by a 15-year power and

water purchase agreement with Oman Power and Water Procurement

Company.

The issue offers investors an attractive dividend yield of 9.9% in 2014 and

average forecasted yield of 8.6% between 2015-2018, which is in line or above

the yields offered by comparable power companies listed in Oman.

The absence of a mandatory cash sweep mechanism in the company’s financing

agreements implies that its ability to pay dividends will not be constrained in

the same manner as if a cash sweep was imposed.

Valuation: We estimate a fair value target price of around RO 2.000 for

Sembcorp Salalah based on a weighted average of multiple valuation

approaches.

We expect strong demand for the IPO from institutions (category II investors),

leading to high oversubscription. This scenario can drive this stock higher on

listing due to high demand in the secondary market.

Risk Factors: (1) Unexpected breakdowns can adversely affect the Company’s

operations and its financial performance; (2) Adverse ruling in the ongoing

litigation with OPWP and the EPC contractor (SEPCO III) can have a negative

impact on its financial performance and the dividends expected to be paid by

the company.

High dividend yield of around 9.0% and a stable business model with good earnings and cash flow visibility make the Sembcorp Salalah IPO very attractive for investors.

WEALTH MANAGEMENT

Recommendation

BUY

ISSUE PRICE (RO) : 1.590

TARGET PRICE (RO) : 1.998

EXPECTED RETURN (%): 26%

OMAN

POWER SECTOR

F I N C O R P W E A L T H M A N A G E M E N T

Page 2

SEMBCORP SALALAH POWER & WATER CO. – IPO NOTE

Issuer Sembcorp Salalah Power & Water Company SAOG (Under Transformation)

Authorized share capital OMR 100,000,000 divided into 100,000,000 Shares with a nominal value of OMR 1 per Share.

Issued and Paid up Capital OMR 95,457,195 divided into 95,457,195 Shares with a nominal value of OMR 1 per Share.

Offered shares 33,410,019 Shares representing 35 per cent of total issued and paid-up share capital.

Face value RO 1.000 per share

Offer price OMR 1.590 per Offer Share (comprising a nominal value of OMR 1, a premium of Bzs 570 and the Offer Expenses of Bzs 20 per Offer Share).

Offer period and listing

Issue Opens on: August 28, 2013

Issue closes on: September 26, 2013 Approval of CMA of allotment: October 8, 2013

Refund process will start by October 9, 2013

Shares would be listed for trading on the Muscat Securities Market from October 10, 2013

Limit for the subscription under one application

Minimum Limit

Category I: 100 shares and in multiples of 100 thereafter.

Category II: 50,100 shares and in multiples of 100 thereafter

Maximum Limit

Category I: 50,000 shares

Category II: 3,341,000 Shares, representing 10% of the Offer.

Proposed allocation of shares

In case of over-subscription, the Offer of 33,410,019 shares shall be split among the eligible investor groups, in the following portions: Category I Investors: 20,046,012 Shares, being 60% of the Offer, on a pro-rata basis. Category II Investors: 13,364,007 Shares, being 40% of the Offer, on a pro-rata basis. A minimum number of Offer Shares may be distributed equally among subscribers, taking into consideration small subscribers and the remaining Offer Shares shall be allocated on a pro-rata basis. Any under subscription in any Category shall be carried to the other category.

Eligibility Omani and non-Omani individuals and juristic persons. All GCC individuals and juristic persons are treated as Omani individuals and juristic persons.

Basis for under subscription

In case of shortfall in subscription and non-subscription by Electricity Holding Co. SAOC (EHC) under Project Founders Agreement (PFA), the promoters are committed to re-offer the unsubscribed shares after one year, for three consecutive years.

Person prohibited from subscribing

The following applicants shall not be permitted to participate in the subscription: 1.) Sole proprietorship establishments: The owners of sole proprietorship establishments

may only submit applications in their personal names. 2.) Trust Accounts: Customers registered under trust accounts may only submit

Applications in their personal names. 3.) Multiple applications for the subscription: An applicant may not submit more than one

Application. 4.) Joint Applications (i.e. applications made in the name of more than one individual)

including applications made on behalf of legal heirs: These applications should only be made in their personal names.

All other applications by prohibited persons defined above will be rejected without contacting the applicant.

Financial Advisor & Issue manager

HSBC Bank Oman SAOG

Subscription Banks Bank Muscat, Oman Arab Bank, National Bank of Oman, Bank Dhofar


Page 3


COMPANY OVERVIEW

Sembcorp Salalah was incorporated and registered as a SAOC on the Ministry of Commerce & Industry

Commercial Register on 29 September 2009. At an EGM held on 7 July 2013, it was resolved to transform

Sembcorp Salalah into a SAOG. Sembcorp Salalah was incorporated for an unlimited duration.

Sembcorp Salalah’s core business activity is to develop, own and operate an electricity generation and seawater

desalination plant located between the towns of Taqah and Mirbat, approximately 50 km from the regional

town of Salalah, home to over 200,000 residents. The Plant has been in full commercial operation since 25 May

2012 and has a contracted power capacity of 445 MW and a contracted water capacity of 15 MiGD. Presently,

Sembcorp Salalah supplies approximately 72 per cent of the power dispatch and 100 per cent of the net

installed water capacity of the Dhofar Governorate. As the largest and most energy-efficient power and water

plant in the Dhofar Governorate, the Plant is expected to play a major role in meeting the growing power and

water demand of the region over the short, medium and long-term.

SHAREHOLDING PATTERN

Sembcorp Industries (a Singapore based energy, water and marine group operating across six continents) owns

60% in Sembcorp Salalah Power and Water Co. It owns this stake through its subsidiaries - Sembcorp Oman First

Investment Holding Company Ltd (SOFIH) and Sembcorp Oman IPO Holding Company Ltd (SOIHL). Other

shareholders include Inma Power & Water Company LLC (IPWC), a subsidiary of Oman Investment Corporation

SAOC and BDCC Investment Company (managed by Instrata, a Bahrain based asset management firm) with 35%

and 5% stakes respectively. Three out of the four shareholders – SOIHL, IPWC and BDCC together are offering

33,410,019 shares to the public, representing 35% of Sembcorp Salalah’s issued share capital. Out of the

holding in Sembcorp Salalah, SOIHL is divesting its entire 20% stake, IPWC is divesting 13.125% stake and BDCC

is offering 1.875% stake so as to offer 35% stake to public.

Shareholding Pattern - Pre & Post IPO

Shareholders Pre-IPO Post-IPO Holding % being

offered through IPO Sembcorp Industries:

SOFIH 40% 40% -

SOIHL 20% - -20.00%

Total - Sembcorp Industries 60% 40% -20.00%

IPWC 35% 21.875% -13.125%

BDCC (managed by Instrata) 5% 3.125% -1.875%

Public Nil 35.00% -


Page 4


POWER SECTOR OVERVIEW

The electricity and related water sector in Oman is divided into three regional systems: the Main

Interconnected System, the Salalah System and the Rural Areas Electricity System.

The Salalah System caters to approximately 70,000 electricity customers within the city of Salalah and

surrounding areas in the Governorate of Dhofar. The system currently comprises the power generation and the

water desalination capabilities of:

Sembcorp Salalah, contracted for 445 MW electricity generation capacity and 15 MiGD desalinated

water capacity;

New Power Station located in Raysut, operated by Dhofar Power Company and Dhofar Generating

Company SAOC pursuant to a concession agreement with the Government and comprising eight Open

cycle gas turbine (OCGT) units with a total net capacity of 276 MW; and

The transmission and distribution system owned and operated by Dhofar Power Company and its

subsidiary, Dhofar Generating Company SAOC, pursuant to a concession agreement signed with the

Government in 2001.

OPWP has also announced plans for a new IPP in Raysut with electricity generation capacity of 300-400

MW alongside restructuring of the existing DPC.

The Salalah System also has contingency reserves via the interconnection with the 132 kV link between

Thumrait and Harweel, owned by PDO and completed in 2012 which support reserve sharing between the two

systems. The transfer capacity of the interconnection is currently 100 MW of import/export capability with

scope for expansion in the future.

Oman Power and Water Procurement Company SAOC (OPWP) is the single buyer of power and water for all

IPP/IWPP projects within Oman. OPWP procures the required power and desalinated water in bulk from

generation and production facilities connected to the Salalah System and PDO interconnected system.

OPWP’s present portfolio of contracted capacity in Oman comprises long-term contracts with twelve

operational plants, eleven of which are in the MIS and one of which (being Sembcorp Salalah) is in the Salalah

System having a total contracted capacity of 7,681 MW and 131 MiGD.

ELECTRICITY AND WATER DEMAND OUTLOOK

OPWP expects peak demand for electricity in the Salalah System to grow at a CAGR of 12% per annum from 424

MW in 2013 to 848 MW by 2019 driven by growth in population arising from infrastructure development, new

tourism projects, and industrial growth in designated economic zones.


Page 5


Source: IPO Prospectus

The Omani government represented by the Office of the Minister for State and the Governor of Dhofar, which

is responsible for the water system in the Dhofar Governorate, projects water demand in the Salalah / Taqah /

Mirbat area to increase at a CAGR of 6% per annum driven by increasing population and economic

development.

Source: IPO Prospectus

Traditionally, demand for potable water in the Dhofar Governorate has been met exclusively from groundwater

resources. Following the commencement of operations of Sembcorp Salalah, the Plant has sufficient capacity

to meet current requirements for desalinated water in the Dhofar Governorate. OPWP has indicated that

current Government policy is to minimize the use of groundwater, under normal circumstances, and reserve

groundwater resources for contingency purposes implying additional water desalination capacity will be needed

in the near future.

Source: OPWP, IPO Prospectus


Page 6


POWER AND WATER PURCHASE AGREEMENT

Sembcorp Salalah generates its revenues pursuant to a 15-year term power and water purchase agreement

(PWPA) entered with OPWP on 23 November 2009 and expiring on 3 April, 2027. The terms of the PWPA

provide that the Plant’s contracted power and water capacity is sold exclusively to OPWP on a long-term take-

or-pay basis. The power and desalinated water that Sembcorp Salalah produces from the Plant is used as the

sole supplier of desalinated water to the Dhofar Governorate. PWPA provides the basis upon which Sembcorp

Salalah receives capacity charges, electrical energy charges,water output charges and fuel charges.

Capacity charges are designed to cover fixed costs, including debt service and return on capital; electrical

energy charges are designed to cover variable operating costs of generation, excluding fuel costs. The water

output charge is designed to cover variable operating costs of desalination, excluding fuel costs. The fuel charge

is a pass-through of the gas price under the NGSA and is recoverable prior to payment under the NGSA.

Payments under the PWPA are denominated in Omani Rials and Sembcorp Salalah is safeguarded under the

PWPA against OMR/US$ exchange rate adjustments and also against inflation for the component of the tariff

that covers fixed operation costs.

Under the PWPA, adjustments will be made to the capacity charges, electrical energy charge and the water

output charge for changes in the OMR/US$ exchange rate. In addition, adjustments will be made for inflation in

respect of the fixed operation and maintenance charge, the electrical energy charge and the water output

charge.

The PWPA contains provisions to allow for refinancing and to share refinancing gains as between OPWP and

Sembcorp Salalah. OPWP is entitled to 80 per cent of any refinancing gain, up to a threshold amount of around

OMR 58 million. The consent of OPWP is required before Sembcorp Salalah enters into any financing

arrangements. The share of any refinancing gains due to OPWP may be paid as a reduction in the capacity

charges over the remaining term of the PWPA, or, if OPWP and Sembcorp Salalah are unable to agree how the

capacity charges are to be reduced, as a single payment, or a combination of a single payment or a reduction in

the capacity charges.

Sembcorp Salalah has no right to terminate the PWPA. In the event of breach of the PWPA by OPWP, Sembcorp

Salalah needs to bring a claim for direct loss under an indemnity contained in the PWPA. This would allow

Sembcorp Salalah to claim lost electrical energy charges, water output charges, fuel charges and capacity

charges.

Company believes that its Plant will operate well beyond the term of the PWPA, and will be well-placed to meet

the forecast long-term demand for power and water in the Dhofar Governorate. After the expiry of the term of

the PWPA, the PWPA will either be extended or, if the power and water market in Oman is liberalised during

this period, the power and water produced by the Plant will be sold into a merchant market. According to an

analysis carried out by an economic consultancy IPA based in london, the capacity of existing plants and firm

new builds in the Salalah System will not be sufficient to cover demand after the PWPA. Therefore, IPA

forecasts that the Plant will have value after the PWPA expires.


Page 7


FINANCING AGREEMENTS

Sembcorp Salalah has entered into financing agreements for the purpose of financing its project with a

consortium of international and local banks, amounting to an aggregate of approximately OMR 284 million. The

absence of a mandatory cash sweep mechanism in Sembcorp Salalah’s financing arrangements means that

Sembcorp Salalah’s ability to pay dividends will not be constrained in the same manner as if a cash sweep was

imposed.

Sembcorp Salalah is required to maintain a cash balance equivalent to six months’ debt service in a separate

bank account pledged in favour of the lenders. The lenders are entitled to withdraw amounts from this account

if certain events occur, such as a default under the Finance Documents. As an alternative to maintaining the

debt service reserve amount as cash, Sembcorp Salalah has the option of procuring letters of credit, from

creditworthy institutions, in respect of some or all of the debt service reserve amount. The providers of such

letters of credit are not permitted to share in the security package.

The aggregate amount of drawdowns under each of Sembcorp Salalah’s term facilities is repayable in full by 29

half-yearly instalments commencing from 30 September 2012, with the final instalment being due on 30

September 2026.

RISKS & CONCERNS

Disputes with OPWP and SEPCOIII pose concerns

Sembcorp Salalah is undergoing a litigation against OPWP, who has filed a case against the Company claiming

liquidated damages of around RO 17 million (USD 44 million) relating to the delay in achieving construction

milestone dates set out in PWPA. Sembcorp Salalah is seeking contractual relief from OPWP and has claimed

liquidated damages of RO 38 million (USD 99 million) from EPC contractor, SEPCOIII Electric Power Construction

Corporation. In turn, the contractor has filed a counterclaim against the Company for payment of increased

costs of approximately RO 49 million (USD 127 million).

While the dispute is undergoing, OPWP has withheld RO 10 million (USD 27 million) from Sembcorp Salalah. In

turn, Sembcorp Salalah has withheld around RO 14 million (USD 36 million) from SEPCOIII from amounts owing

under the EPC Contract. In addition, Sembcorp Salalah has received a bank guarantee amounting to RO 27

million (USD 70 million) as a performance bond from SEPCOIII, which expires on 31 December 2013.

If the final outcome of the disputes, expected to be settled in 2013/2014, is not favourable for Sembcorp

Salalah, then it will have a negative impact on its financial performance and the dividends expected to be paid

by the company. However, in the event that the final outcome is positive, Sembcorp Salalah may consider

paying a one-time special dividend to its shareholders.

Unexpected breakdowns can adversely affect the Company’s operations and its financial performance

Unexpected breakdowns can result in production loss, increase operational and maintenance costs and

adversely affect the financial performance of the Company.


Page 8


VALUATION

Relative Valuation

Sector

Average

ACWA Power Barka

SAOG

United Power Co

Al Kamil Power Co

Sohar Power Co

SMN Power Holding SAOG

SEMBCORP

Contract type

BOO BOOT BOO BOO BOO BOO

P(W)PA Expiry

2018 2020 2017 2022 2022/2024 2027

Mkt Cap 53.22 92.00 9.54 24.78 50.61 114.67 151.78*

3Yr Avg ROE 24.56% 31.33% 6.08% 16.21% 44.64% - -

Dividend Yield FY2012 9.80% 5.85% 19.05% 4.55% 6.15% 13.38% -

Dividend Yield FY2011 8.66% 8.41% 13.97% 6.98% 4.75% 9.20% -

Dividend Yield FY2010 7.49% 7.31% 12.81% 4.62% 5.23% - -

Dividend Yield FY2009 5.09% - 8.42% 6.86% - - -

Dividend Yield FY2008 6.60% - 13.11% 7.50% 5.79% - -

P/E Current 13.08x 11.81x 18.82x 8.41x 10.97x 15.37x 13.50x*

* Note: Market Cap. Of SEMBCORP calculated at issue price of RO 1.590 and Current P/E on FY 2013 est. EPS of 117 baizas.

7.31

13.1 14.4

12.8 14.4

19.0

10.9

8.6 7.2 7.0 7.0

5.8 6.5 5.2 5.4 6.2

9.9

16.7

0.82

9.75

-

5.00

10.00

15.00

20.00

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 (e) FY 2014 (e)

Highest Annual Dividend Yield

ACWA Power Barka SAOG United Power Co Al Kamil Power Co

Sohar Power Co SMN Power Holding SAOG SEMBCORP

Average sector Yield


Page 9


Based on the average lowest dividend yield of 8.0% for peers, we have valued Sembcorp Salalah at RO 1.938 per

share on its estimated 2014 dividend per share of 155 baizas.

Dividend Discount Model

Utilizing the dividend discount model to value the expected stream of dividends to equity investors over the

project term and thereafter, we have arrived at an estimated fair value of RO 1.751 for Sembcorp Salalah,

assuming the company maintains dividend payouts at 90% till 2026 (till outstanding debt is fully repaid) and

increasing to 95% from 2027 onwards as free cash flows increase.

10.2 8.4 7.8

10.0 10.8

7.5 6.9

4.6 4.6 4.5 5.8

4.9 5.2 4.6 4.8

8.8

13.4

0.82

9.75

-

5.00

10.00

15.00

20.00

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 (e) FY 2014 (e)

Lowest Annual Dividend Yield

ACWA Power Barka SAOG United Power Co Al Kamil Power Co Sohar Power Co SMN Power Holding SAOG SEMBCORP Average sector Yield

Dividend Discount Model(RO'million) FY'13 e FY'14 e FY'15 e FY'16 e FY'17 e FY'18 e FY'19 e FY'20 e FY'21 e FY'22 e FY'23 e FY'24 e FY'25 e FY'26 e FY'27 e

Net Income 11.1 10.9 13.0 14.1 14.3 15.3 15.6 15.9 16.2 16.5 16.9 17.2 17.5 17.9 18.2

Dividends 1.2 14.8 12.5 12.7 12.8 13.5 14.0 14.3 14.6 14.9 15.2 15.5 15.8 16.1 17.3

Payout Ratio (%) 11% 135% 97% 90% 89% 88% 90% 90% 90% 90% 90% 90% 90% 90% 95%

Dividend Per Share (RO) 0.013 0.155 0.131 0.133 0.134 0.141 0.147 0.150 0.153 0.156 0.159 0.162 0.165 0.169 0.182

PV of Dividends 1.2 13.5 10.4 9.7 9.0 8.7 8.3 7.7 7.2 6.8 6.3 5.9 5.5 5.2 5.1

Terminal Value of Dividends 192

Discounted Terminal Value 57

Total Value of Dividends 167

Value / Share (RO) 1.751

Source: Company Disclosure, FINCORP Research


Page 10


Discounted Cash Flow Model

Utilizing the discounted cash flow model to value the free cash flows to

equity investors over the project term and thereafter, we have arrived at

an estimated fair value of RO 2.411 for Sembcorp Salalah. This is notably

higher than the fair value arrived at using the dividend discount model as

the company’s free cash flows are likely to increase post 2026 once

outstanding debt is fully repaid.

Our Fair Value Estimate for Sembcorp Salalah

Discounted Cash Flow Valuation(RO'million) FY'13 e FY'14 e FY'15 e FY'16 e FY'17 e FY'18 e FY'19 e FY'20 e FY'21 e FY'22 e FY'23 e FY'24 e FY'25 e FY'26 e FY'27 e

Cash Flow From Operations 34.0 43.4 43.7 44.0 43.1 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6

Less: Capex (10.4) (1.2) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow to Firm (FCFF) 23.6 42.3 43.7 44.0 43.1 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6 43.6

Less: Debt Repayment (48.4) (31.1) (30.5) (30.0) (29.1) (31.1) (30.8) (31.6) (32.3) (32.8) (33.1) (33.4) (33.4) (33.3) 0.0

Free Cash Flow to Equity (FCFE) (24.8) 11.2 13.3 14.0 14.0 12.5 12.8 12.0 11.3 10.8 10.5 10.2 10.2 10.3 43.6

PV of FCFF (24.6) 10.2 11.1 10.7 9.8 8.0 7.5 6.5 5.6 4.9 4.4 3.9 3.6 3.3 12.9

Terminal Value 482

Discounted Terminal Value 142

Total Equity Value 220

Value / Share (RO) 2.305

Note: Cash flow from operations in 2013 is considered net of movement in net liquidated damages of RO 10.17 million.

Source: Company Disclosure, FINCORP Research

Value Per Share Estimate(RO per share) Weight Value/Share

Discounted Cash Flow 33% 2.305

Dividend Discount Model 33% 1.751

Relative Valuation 33% 1.938

Weighted Average Value Per Share 1.998

Source: FINCORP Research

Valuation Assumptions

Beta 0.70

Rf 4.5%

Rm-Rf 6.5%

Cost of Equity (Ke) 9.1%

Cost of Debt (Kd) 7.0%

Kd*(1-tax rate) 6.2%

WACC 7.0%

Terminal Growth (%) 0.0%

Source: FINCORP Research, Bloomberg


Page 11


FINANCIAL SUMMARY

FY ended Dec 31 2013E 2014E 2015E 2016E 2017E 2018E

(Values in RO'mn except per share data)

PER SHARE DATA

Basic EPS 0.117 0.115 0.136 0.148 0.150 0.160

Dividend Per Share 0.013 0.155 0.131 0.133 0.134 0.141

Book Value Per Share 1.104 1.063 1.068 1.083 1.099 1.118

VALUATION DATA

Price/Sales (x) 2.5 2.4 2.3 2.4 2.4 2.3

P/E (x) 13.6 13.9 11.7 10.7 10.6 9.9

P/BV (x) 1.4 1.5 1.5 1.5 1.4 1.4

EV/EBITDA (x) 9.0 9.0 8.6 8.3 8.1 7.7

Free Cash Flow Yield (%) 5.9% 10.8% 11.6% 12.1% 12.3% 13.0%

Dividend Yield (%)* 9.8% 9.7% 8.2% 8.4% 8.4% 8.9%

INCOME STATEMENT DATA

Revenue 61.7 62.1 65.8 64.5 63.6 64.7

EBITDA 44.1 43.5 43.9 43.9 43.0 43.7

EBIT 32.8 32.6 33.1 33.1 32.3 33.0

Finance Charges -17.9 -20.0 -18.2 -16.9 -15.9 -15.5

Net Income 11.1 10.9 13.0 14.1 14.3 15.3

BALANCE SHEET DATA

Cash & Near Cash 14.2 10.6 11.3 11.3 12.4 11.4

Net Fixed Assets 339.7 330.0 319.2 308.4 297.7 287.0

Total Assets 391.7 365.5 355.2 344.1 334.1 323.5

Total Debt 259.9 248.7 236.5 223.4 209.9 195.4

Total Liabilities 391.7 365.5 355.2 344.1 344.1 323.5

Share Capital 95.5 95.5 95.5 95.5 95.5 95.5

Total Equity 105.4 101.5 102.0 103.4 104.9 106.8

Net Debt 245.7 238.1 225.2 212.2 197.5 184.0

CASH FLOW DATA

Operating Cash Flows 34.0 43.4 43.7 44.0 43.1 43.6

Capital Expenditures -10.4 -1.2 - - - -

Free Cash Flows 23.6 42.3 43.7 44.0 43.1 43.6

Investing Cash Flows -10.4 -1.2 - - - -

Financing Cash Flows -47.0 -32.3 -30.5 -31.3 -29.1 -31.1

GROWTH AND MARGINS

Sales Growth (%) 32.2% 0.7% 5.9% -1.9% -1.5% 1.8%

EPS Growth (%) 1134.1% -1.8% 18.4% 9.1% 1.5% 6.5%

EBITDA Margin (%) 71.5% 70.0% 66.7% 68.1% 67.7% 67.5%

Net Margin (%) 18.1% 17.6% 19.7% 21.9% 22.6% 23.6%

SHAREHOLDER RETURNS

Return on Equity (%) 10.6% 10.8% 12.7% 13.7% 13.7% 14.3%

Return on Assets (%) 2.8% 3.0% 3.6% 4.1% 4.3% 4.7%

Return on Invested Capital (%) 3.2% 3.2% 4.0% 4.5% 4.7% 5.3%

Payout Ratio (%) 11.1% 135.2% 96.6% 89.9% 89.2% 88.1%

LEVERAGE AND SOLVENCY

Net Debt / Equity (%) 233.2% 234.5% 220.9% 205.2% 188.2% 172.3%

EBIT / Interest Expense (x) 1.8 1.6 1.8 2.0 2.0 2.1

*For FY 2013, dividend yield is annualized and dividend of RO 0.013 is considered for dividend payout ratio. Source: IPO Prospectus, FINCORP Research


Page 12


RESEARCH

CONTACT DETAILS

Nandakumar Chenicheri (+968) 24822300 Ext: 353 [email protected]

Gaurav Ramaiya (+968) 24822300 Ext: 348 [email protected]

Mable C Pereira (+968) 24822300 Ext: 342 [email protected]

BROKERAGE

CONTACT DETAILS

Mohammad Al Ghalayini (+968) 24822300 Ext: 333 [email protected]

Deena Omeir (+968) 24822300 Ext: 334 [email protected]

The Financial Corporation Co SAOG (FINCORP)

PO Box 782, PC 131, Sultanate of Oman

Tel: +968 24822300 | Fax: +968 24812925

Disclaimer

The research team of The Financial Corporation, SAOG (hereto referred as FINCORP) has prepared the information, analysis and expressed its opinion on the subject matter

of this report. The information contained has been obtained from sources believed to be reliable and in good faith, but which may not be verified independently. While

utmost care has been taken in preparing the above report, FINCORP makes no guarantee, representation or warranty, whether express or implied, and accepts no

responsibility or liability as to its accuracy or completeness of the data, being provided. All investment information and opinions are subject to change without notice. The

investor will indemnify FINCORP and its directors, officers, and employees against any loss or damage or other liabilities (including costs), which they may suffer as a result of

reliance on this report. This report is not to be relied upon in substitution for the exercise of independent judgment.

Also, not all customers may receive the material at the same time. This document is for private circulation and information purposes only. It does not and should not be

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