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1.39 MB
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Document Information
Type:
Financial research report / house oversight committee evidence
File Size:
1.39 MB
Summary
This document is page 43 of 'GEMs Paper #26', a financial research report produced by Merrill Lynch on June 30, 2016. The content analyzes the Saudi Arabian market valuation against Emerging Markets (EM) and Global Emerging Markets (GEM) peers, utilizing various charts (P/E, P/B, EV/EBITDA ratios). It discusses sector performance and the 'Earnings Revision Ratio' (ERR) in the context of a weakening economic outlook. The page bears the stamp 'HOUSE_OVERSIGHT_016153', indicating it was produced as evidence for a House Oversight Committee investigation.
Organizations (6)
| Name | Type | Context |
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| Merrill Lynch |
Logo in footer; cited as 'BofA Merrill Lynch Global Research' in sources.
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| BofA Merrill Lynch Global Research |
Cited as source for charts.
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| DataStream |
Cited as source for charts.
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| I/B/E/S |
Cited as source for charts.
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| Bloomberg |
Cited as source for charts.
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| House Oversight Committee |
Implied by the Bates stamp 'HOUSE_OVERSIGHT_016153'.
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Locations (1)
| Location | Context |
|---|---|
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Subject of the financial market analysis.
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Key Quotes (3)
"Interestingly, not all sectors within the Saudi market trade at a premium to GEM peers, with both consumer discretionary and consumer staples trading at a material discount."Source
HOUSE_OVERSIGHT_016153.jpg
Quote #1
"Weaker economic outlook largely priced in as ERR shows inflection"Source
HOUSE_OVERSIGHT_016153.jpg
Quote #2
"Consequently, we believe the relatively un-testing valuations of the Saudi market indicate that a high level of negativity is already being priced in."Source
HOUSE_OVERSIGHT_016153.jpg
Quote #3
Full Extracted Text
Complete text extracted from the document (2,264 characters)
Chart 45: Saudi 12m fwd. P/E vs. EM
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07 08 09 10 11 12 13 14 15 16
— MSCI Saudi 12m Fwd PE
— EM 12m Fwd PE
....... Average
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
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19
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13
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7
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07 08 09 10 11 12 13 14 15 16
— MSCI Saudi 12m Fwd PE
— EM 12m Fwd PE
....... Average
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
Chart 46: Saudi 12m fwd. P/B vs. EM
2.7
2.5
2.3
2.1
1.9
1.7
1.5
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1.1
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09 10 11 12 13 14 15 16
— MSCI Saudi 12m Fwd PB
— EM 12m Fwd PB
....... Average
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
2.7
2.5
2.3
2.1
1.9
1.7
1.5
1.3
1.1
0.9
09 10 11 12 13 14 15 16
— MSCI Saudi 12m Fwd PB
— EM 12m Fwd PB
....... Average
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
Chart 47: Saudi 12m fwd. EV/EBITDA
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— MSCI Saudi 12m Fwd EV-EBITDA
....... Average
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
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06 07 08 09 10 11 12 13 14 15 16
— MSCI Saudi 12m Fwd EV-EBITDA
....... Average
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
Interestingly, not all sectors within the Saudi market trade at a premium to GEM peers, with both consumer discretionary and consumer staples trading at a material discount. The remaining sectors all trade at a modest premium to their GEM counterparts, with the industrial and utility sectors trading at a substantial premium on 12mth FWD P/E
Chart 48: Consumer sectors trade at a discount relative to GEM averages. Industrials and Utilities are relatively expensive vs. GEM peers, other sectors trade at small premium
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Utilities
Health Care
Industrials
Telco
Consumer Stpls
Materials
Consumer Dscrt.
Financials
30.0
25.0
20.0
15.0
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Utilities
Health Care
Industrials
Telco
Consumer Stpls
Materials
Consumer Dscrt.
Financials
■ Saudi Arabia 12m fwd P/E
■ GEM 12m fwd P/E
■ GEM 12m fwd P/E
Source: DataStream, I/B/E/S, Bloomberg, BofA Merrill Lynch Global Research
Weaker economic outlook largely priced in as ERR shows inflection
A further consequence of the weakening economic outlook for Saudi Arabia has been the collapse in market expectations, with earnings estimates having posted their longest sustained period of downgrades on record. We note however, the Saudi Earnings Revision Ratio (ERR) has reached an inflection point, with a slowdown in the rate of earnings downgrades. (ERR is a ratio of number of companies enjoying earnings upgrades vs number of companies suffering downgrades. A ratio above one, therefore, indicates more upgrades than downgrades). Consequently, we believe the relatively un-testing valuations of the Saudi market indicate that a high level of negativity is already being priced in.
A further consequence of the weakening economic outlook for Saudi Arabia has been the collapse in market expectations, with earnings estimates having posted their longest sustained period of downgrades on record. We note however, the Saudi Earnings Revision Ratio (ERR) has reached an inflection point, with a slowdown in the rate of earnings downgrades. (ERR is a ratio of number of companies enjoying earnings upgrades vs number of companies suffering downgrades. A ratio above one, therefore, indicates more upgrades than downgrades). Consequently, we believe the relatively un-testing valuations of the Saudi market indicate that a high level of negativity is already being priced in.
Merrill Lynch
GEMs Paper #26 | 30 June 2016
43
HOUSE_OVERSIGHT_016153
GEMs Paper #26 | 30 June 2016
43
HOUSE_OVERSIGHT_016153
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