Sipchem Gih251008

Gl o b a l Re s e a r c h
Oc t obe r 2008
Eq u it ie s
Saudi International Petrochemical Co. (SIPCHEM)
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Crystallizing Growth
Global Investment House KSCC
Sharq, Global Tower
P.O. Box 28807 Safat
13149 Kuwait
Tel: (965) 2295 1000
Fax: (965) 2295 1005
E-mail: research@global.com.kw
http://www.globalinv.net
Global Investment House stock market indices can be accessed
from the Bloomberg page GLOH
and from Reuters Page GLOB
Omar M. El-Quqa, CFA
Executive Vice President
omar@global.com.kw
Phone No:(965) 2295 1110
Faisal Hasan, CFA
Head of Research
fhasan@global.com.kw
Phone No:(965) 22951270
Syed Taimure Akhtar
Financial Analyst
sakhtar@global.com.kw
Phone No:(965) 22951278
Hettish Kumar
Financial Analyst
hkumar@global.com.kw
Phone No:(965) 22951281
Global Research - Saudi Arabia t|cc+| laestaeat hcuse
1 Saudi International Petrochemical Company - SIPCHEM Octcce| !~
Tickers:
SIPCHEM AB (Bloomberg)
2310.SE (Reuters)
Listing:
Saudi Stock Exchange (Tadawul)
Current Price:
SR22.5 (18
th
October 2008)
October 2008
BUY
Saudi International Petrochemical Company (SIPCHEM)
Investment Summary
- Saudi International Petrochemical Company (SIPCHEM) was registered as a joint
stock company in the Kingdom of Saudi Arabia on 22
nd
December 1999 and got its
commercial license on 6
th
February, 2000. The principle activity of the Company is to
own, establish, operate and manage industrial projects in the petrochemical and chemical
fields. The Company had started its commercial operations with the manufacturing of
three products Methanol, Malice anhydride-Ma and Butanediol-BDO. However, the
Company is in the process of enhancing its manufacturing capabilities, mainly in chemical
products.
- SIPCHEM went public following an initial public offer (IPO) and got listed on Saudi
Stock Exchange (Tadawul) in November 2006. The Company, after approval from
Capital Market Authority (CMA), issued 45mn shares at SR55 per share. By the end of
2006, a major portion of the Companys shares were held by the general public, which
accounted for 47.2%.
- SIPCHEM has a total of 6 affiliates, out of which, at present, only two affiliates are under
operations. However, the remaining three are under developmental process while the other
one is related to the marketing and distribution of chemicals and petrochemical products.
Based on the current product range, methanol is the only petrochemical product of the
Company, which is categorized under oxygenate products. The remaining products of
the Company are (i) Butanediol-BDO and (ii) Maleic Anhydride-Ma. However, after the
completion of new production lines of its new affiliates; the product range of the Company
will expand to the other chemicals, which includes (i) Vinyl acetate monomer-VAM and
(ii) Acetic Acid-AA along with the other olefins products like ethylene, propylene and
polymers. Moreover, during 2007, the existing capacity of methanol production accounts
for 89.5%, while the remainder capacity is allocated for the production of BDO and Ma,
which comprise 4.5% and 6.1% of the total capacity respectively.
- According to the management of SIPCHEM, the completion of Acetyl complex is
expected in mid 2009 and we have taken the production commencement from 3Q2009. In
order to finance the project, the Company has issued 66.5% right shares at a premium of
SR5 per share. Acetyl complexes comprise of three companies i.e. (i) International Acetyl
Complex-IAC, from where SIPCHEM will get 400,000 tons of acetate acid-AA and
50,000 tons of AAn, (ii) International Vinyl Acetate Company-IVAC, which will produce
300,000 tons of vinyl acetate monomer-VAM & consume 80% production of IAC and
! Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
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SIPCHEM TASI
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(iii) International Gas Companies-IGC to produce carbon monoxide-CO. Furthermore,
these complexes are very well integrated with each other and with methanol producing
plant. This will result in an improvement in the gross margins (excluding depreciation) of
the Company, going forward.
- Upon the completion of the Acetyl complex in 3Q2009, the management has a plan to set
up polyolefin complex, which is designed to produce 1.3mn tins of ethylene and propylene
with the capacity to produce 800,000 tons of polymers. The status of the project is still
unclear.
- We expect the sales revenue of SIPCHEM to show a growth of 19.7% in 2008 over the
sales revenues of SR1.5bn in 2007. The growth in sale revenues is expected to continue
in 2009 and is forecasted to be up by 11.1% to reach at SR2.0bn in 2009, which is mainly
due to the expected commencement of production from Acetyl complex in 3Q2009.
Furthermore, the growth in 2008 & 2009 sales revenue will increase at a CAGR of 12.5%,
during 2007-11, while the bottom line is expected to increase at a CAGR of 10.1%,
during 2007-11.
- We valued SIPCHEM using the weighted average valuation approach, with an 80%
weight to the DCF technique and 20% to value derived from the relative valuation
technique. Based on the weighted average valuation approach, we have reached a fair
value for SIPCHEM of SR35.3. The current market price of SR22.5 per share as of 18
th

October 2008, offers a potential upside of 56.4%. We, therefore, initiate our coverage of
SPICHEM with a BUY recommendation.
Table 01: Investment Indicators
CMP (SR)
Shares in issue
(mn)
Market Cap
(SR mn)
52-week price range
(SR)
22.55* 333.3 7,517 50.99 / 19.75
Year
Revenues Net Profit EPS BVPS ROE P/E P/BV
(SR Mn) (SR Mn) (SR) (SR) (%) (x) (x)
2009E 2,031.1 658.0 2.0 16.1 10.7 11.4 1.4
2008E 1,828.3 611.2 1.8 15.5 12.3 12.3 1.5
2007A 1,527.7 594.0 1.8 15.7 17.3% 24.7 2.8
2006A 1,334.0 493.7 1.5 14.4 18.6% 15.9 1.6
Source: Annual Reports and Global Research
*Historical P/E & P/BV multiples pertain to respective year-end prices, while those for future years are based on
closing prices on the Tadawul as of 18
th
October, 2008.
Chart 01: Share Price Performance Chart
Source: Zawya & Global Research
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM |
Company Overview
Background
Saudi International Petrochemicals Company was registered as a joint stock company in
the Kingdom of Saudi Arabia on 22
nd
December 1999 and got its commercial license on 6
th

February, 2000. At present, the Company has a paid-up capital of SR3.3bn (US$880mn).
SIPCHEM actively develops and invests in petrochemical and chemical industries, both
basic and intermediate, to produce chemicals used to manufacture a multitude of products
that improve the lives of people worldwide. Moreover, the principle activity of the Company
is to own, establish, operate and manage industrial projects in the petrochemical and chemical
fields. The Company had started its commercial operation with the manufacturing of three
products Methanol, Malice anhydride-Ma and butanediol-BDO.
The Company has a total of 6 affiliates, out of which only two affiliates are under manufacturing
operations. At present, however, 3 are under developmental process while one is related
to the marketing and distribution of chemicals and petrochemical products. Based on the
current product range, methanol is the only petrochemical product of the Company, which is
categorized under oxygenate products. The remaining products of the Company are (i) BDO
and (ii) Ma. However, after the completion of new production facilities of it affiliates the
product range of the Company will expand to the other chemicals, to include (i) VAM and
(ii) AA and other olefins products.
Table 02: Designed Production Capacities
Tons 2006 2007 2008E 2009E 2010E 2011E
Methanol 691,600 691,600 650,000 650,000 650,000 650,000
Butanediol 24,899 34,619 40,433 40,433 40,433 40,433
Malice Anhydride 46,772 46,772 56,126 56,126 56,126 56,126
Acetic Acid + Acetic Anhydride - - - 187,500* 375,000 375,000
Vinyl Acetate Monomer - - - 123,750* 247,500 247,500
Carbon Monoxide - - - 127,500* 255,000 255,000
Total 763,270 772,990 746,558 1,185,308 1,624,058 1,624,058
Source: APPC & Global Research
*Six months production from Acetyl Complex
In order to attain sustainable growth, the Company, in 2H2006, started construction of a major
Acetyls Complex which consisted of an Acetic Acid plant (450,000 tons of AA & AAn),
Vinyl Acetate Monomer plant (300,000 tons) and Carbon Monoxide plant (330,000 tons).
The complex is expected to commence production by 3Q2008. In addition, the Company is
also developing an integrated olefins derivatives complex which will consist of nine plants
producing value-added performance chemicals with a production capacity of 1.3mn tons of
ethylene and propylene, which will be used to produce 800,000 tons of polymers. The SR 20
billion project is scheduled to start in 2013-14.
+ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
Chart 02: SIPCHEM Expansion (Investment in US$)
Source: SIPCHEM Management & Global Research
Management
The board of directors of the company is led by Mr. Abdulaziz Abdullah Hamad Al Zamil.
Mr. Abdulaziz Abdullah Hamad is the acting chairman of the Companys board.
Table 03: Board of Directors
Names Position in SIPCHEM
Mr. Abdulaziz Abdullah Hamad Al Zamil Chairman
Mr. Reyadh S. Ahmed Member
Mr. Abdullah S. Bahamdan Member
Mr. Abdulrahman A. Al-Turki Member
Dr. Abdulrahman A. Al-Zamil Member
Dr. Saleh H. Al-Humaidan Member
Mr. Mohammad A. Al-Ghurair Member
Mr. Ibrahim M. Al-Humaidan Member
Dr. Abdulaziz A. Al-Gwaiz Member
Mr. Fahad S. Al-Rajhi Member
Ahmed Al-Ohali Member
Source: Company Website
The senior management of the company is headed by Mr. Ahmed Abdul Aziz Al Ohali. Mr.
Ohalis career started with SABIC National Methanol Company (IBN SINA) in September
1981 and he took a two year assignment with Celanese Chemical Company, in Houston,
Texas, shortly afterwards. Mr. Al Ohali progressed within the company during his 15 years
service into technical and executive positions. Mr. Al Ohali left SABIC in early 1996 to join
the private industry world. He successfully started a medium sized private business in the
non-woven films called Saudi German Non-Woven Products and was its Managing Director.
During 1999, Mr. Al Ohali participated in setting up SIPCHEM, and became its president.
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Capital Increase
from SR500mn to
650mn
Methanol Start-Up
BDO start-up capital
increased to SR1.5bn
Initial Public Offering Bonus shares Issued 33%
Ri ght s hares
i ssued 65. 6%
Acetyl Start-up
Polyolefins
Complex
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM ]
Table 04: Senior Management
Names Position in SIPCHEM
Mr. Ahmad Abdulaziz Al Ohali President & CEO
Mr. Abdulrahman A. Al-Saif President IDC & IMC
Mr. Abdullah S. Al-Saadoon President Acetyl Complex
Mr. Mehdi Aftab V.P, Major Projects
Mr. Abdullatif M. Bhairi V.P, Planning & Development Projects
Mr. Kevin J. Hayes V.P, Corporate Finance
Mr. Alber E Biggs G.M, Maintenance & Technical Services
Rashid M. Al-Dossari G.M, Public Relations & Corporate Affairs
Khaled S. Al-Dossari G.M, Finance & Accounting
Abdullah N. Al-Jaber G.M, Administration & Human Resources
Source: Company Website
Shareholding and Liquidity
The Company went in public following an initial public offering (IPO) and got listed on
the Saudi Stock Exchange (Tadawul) in November 2006. The Company on the approval of
Capital Market Authority (CMA) had issued 45mn shares at SR55 per share.
Table 05: SIPCHEM Shareholders (By the Year End 2007)
Shareholder Holding
Zamil Group Holding-Saudi Arabia 10.2%
National Industries Group Holdings-Kuwait 8.3%
Olayan Financing Company-Saudi Arabia 6.8%
Public Pension Agency Saudi Arabia 6.5%
Al Ghurair Investment 3.7%
Sara Development Company 1.5%
Individuals, Corporate and Financial Institutions 14.9%
Public 47.2%
Source: Zawya
By the end of 2007, a major portion of the Companys shares were held by the general
public, which accounted for 47.2%. In addition, by the end of 2007, the Company had
further increased its issued number of shares from 150mn to 200mn through the issuance of
bonus shares. Furthermore, the Company has recently issued right shares, which are 66.5%
of the capital at the end of 2007, and it has raised the Companys share capital to 333mn
shares. The other notable shareholders are (i) Zamil Group Holding Company which owns
10.2% (ii) National Industries Group Holding, which owns 8.3% and (iii) Olayan Financing
Company, which owns 6.8% of the total paid-up capital. Rest of the shares are held by
several government and private owned corporations and agencies.
e Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
Table 06: Stock Liquidity
Year Volume Market Price (Year End) Market Cap (SR mn)
2006 9,446,097 23.6 3,540
2007 3,992,250 44.1 8,820
2008 2,351,851 22.5* 7,517
Source: TADAWUL, Global Research
* Market price as 18
th
October 2008
SPICHEM Affiliates / Subsidiaries
The Company, at present, has six affiliates / subsidiaries out of which five are manufacturing
units while one is used to carry out marketing & distribution activities of the Company.
Currently, only two manufacturing affiliates / subsidiaries of the Company are operational
alongwith the marketing affiliate / subsidiary.
International Methanol Company-IMC
IMC is a limited liability company established in 2003 in Saudi Arabia, owned 65% by
SPICHEM and 35% by Japan-Arabia Methanol Company Limited (JAMC), a special
purpose subsidiary owned by a consortium of Japanese companies including Mitsui &
Company Limited (Mitsui) (55%), Mitsubishi Corporation (Mitsubishi) (15%), Daicel
Chemical Industries Limited (Daicel) (15%) and Iino Kaiun Kaisha Limited (Iino) (15%).
IMC owns and operates a Methanol Plant in Jubail, Saudi Arabia. The Methanol plant at IMC
commenced its commercial production in 4Q2004. IMC produces 1mn tons of methanol by
using natural gas as a primary raw material, for which SIPCHEM signed a supply agreement
with Saudi Aramco.
IMC operates proven steam methane reforming and methanol synthesis technology licensed
by Jacobs Engineering UK Limited (Jacobs). The Plant also incorporates a range of process
proven proprietary technologies including Johnson Matthey catalyst systems (included in
approximately 60% of worldwide methanol production capacity) and a Methanol Casale S.A.
Axial Radial Converter (ARC). JAMC, which is a shareholder of IMC, markets about 80% of
the Company Methanol output outside the Middle East, whereas the Company is marketing
the remaining balance in the Middle East.
International Diol Company-IDC
International Diol Company is a limited liability company established in 2002 in Saudi
Arabia. SIPCHEM owns a majority of the shares of IDC, in a joint venture with the Public
Pension Agency GOSI, Huntsman Corp., Davy Process Technology, Sabih Tahir Darwish Al
Masri, and A.S. Albabtain & Company. IDC had successfully started it initial production in
4Q2005 and is now going on stream with a total capacity of 75,000 tons to meet the growing
demand for butanediol (BDO) and derivatives in the world and domestic markets.
International Diol Companys product line comprises of specialty chemicals such as
Butanediol (BDO), Tetrahydrofuran (THF) and Gamma-butyrolactone (GBL). The BDO
production technology is provided by Davy Process Technology Limited of the United
Kingdom. Upstream technology is provided by Huntsman Corporation and UOP LLC.
Vinmar International Limited, USA and Will & Co B.V., of the Netherlands are providing
the marketing services. The BDO and THF market have been very receptive of the new
product.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
International Acetyl Company IAC
IAC is a limited liability company registered in January, 2006, owned 87% by SIPCHEM,
10% by Helm Arabia and 3% by Ministry of Endowments. IAC is intended to build, own and
operate the Acetic Acid (AA) plant. Helm Arabia is a special purpose company established
in Hamburg, Germany between Helm AG of Germany, a leading multinational producer
and distributor of petrochemical products and Thales International Offsites, a subsidiary of
Thales Company of France, a leading international electronics and systems group, serving
government and business customers worldwide. The plant is designed to produce up to 400,000
tons of acetic acid and up to 50,000 tons of acetic anhydride, which will start commercial
operation in 3Q2009. The feedstock, namely methanol, carbon monoxide and hydrogen will
be provided internally by other SIPCHEM affiliates, viz. International Methanol Company
(IMC) and Industrial Gases Company (IGC), thus ensuring an uninterrupted supply of
feedstock.
International Vinyl Acetyl Company IVAC
SIPCHEM has 87% stakes in IVAC, which is a limited liability company registered in January
2006. Reminder shares are held by Helm Arabia (10%) and Ministry of Endowmens (3%).
IVAC is intended to build, own and operate the Vinyl Acetate Monomer (VAM) plant. Helm
Arabia is a special purpose company established in Hamburg, Germany between Helm AG
of Germany and Thales International Offsites. In addition, Helm AG of Germany is a leading
multinational producer and distributor of petrochemical products and Thales International
Offsite, a subsidiary of Thales Company of France, a leading international electronics and
systems group, serving government and business customers worldwide.
The IVAC plant is designed to produce up to 330,000 tons of VAM and will start commercial
operation in 3Q2009. The feedstock, Acetic Acid, will be provided internally from the
complex of IAC, thus ensuring an uninterrupted supply of feedstock. DuPont, a multinational
science and technology company, has agreed to supply technology.
International Gas Company-IGC
IGC was established as a joint venture between SIPCHEM, National Power Company-
NPC and Ministry of Endowments. The affiliate / subsidiary got registered in May2005.
SIPCHEM holds a 72% stakes in IGCL while the remaining stakes of 25% are held by NPC
and the remainder 3% by Ministry of Endowments. The plant is designed to produce 345,000
tons of Carbon Monoxide-CO, which is expected to start commercial operation in 3Q2009.
Saudi Aramco has agreed to supply SIPCHEM the natural gas, which will also be used as
feedstock for IGC plant.
~ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
Petrochemicals Overview
Petrochemical is an intermediate chemical derived from petroleum, hydrocarbon liquids or
natural gas, such as: Ethylene, Propylene, Benzene, Toluene and Xylene. Two important
sources of feed stock for petrochemical are petroleum (naphtha & gasoline) and natural gas,
which are cracked to produce ethylene and propylene. Generally, petroleum is a major source
for producing ethylene, propylene and benzene. While gas is mainly use to produce methane.
On the basis of chemical composition, basic chemicals are divided into three main classes:
1 Olefins are the petrochemical industrys most common building blocks, used in the
production of many petrochemicals and plastic products. The olefins products usually
include (i) Ethylene, (ii) Propylene and (iii) Butene -1
2 Aromatics are a group of hydrocarbon products that form the basis for commodity
chemicals used in the production of clothing, paints, packaging and other products. The
aromatic products include (i) Styrene, (ii) Benzene and (iii) Para-xylene.
3 Oxygenates are a group of chemicals comprising alcohols and ethers. The primary
oxygenate products are (i) Methyl Butyl Ether (MTBE), (ii) Methanol and (iii) crude
industrial Ethanol.
Chart 03: Natural Gas Composition Chart 04: Naphtha Composition
Source: NaturalGas.org Source: Adhesive Raw Material Fact Volume 2, Issue 4
General Production flow
The production process of petrochemical products starts from the cracking of liquid petroleum
(naphtha) and natural gas, the feedstock. The outcome of the cracking is a production of
various petrochemical products like ethylene, propylene, benzene and so on, which are used
as a feedstock for producing intermediates. Intermediate chemicals are those petrochemical
products, which are used to produce polymers and other industrial products
Ethylene
32%
Propelene
16%
Methane
17%
Others
35%
Hydrogen Sulphide
3%
Nitrogen
4%
Oxygen
2%
Ethane
10%
Propame
6%
Butane
4%
Methane
71%
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM )
Figure 01: Production Flow Diagram

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1 Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
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1.7%
-
2002 2003 2004 2005 2006 2007
0.0%
1.0%
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6.0%
World Petrochemical Demand Growth Rate
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80,000
100,000
120,000
140,000
2002 2003 2004 2005 2006 2007
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World Petrochemical Production Growth Rate
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1.7% 1.6%
5.3%
5.3%
2.5%
5.2%
90,000.0
100,000.0
110,000.0
120,000.0
130,000.0
2002 2003 2004 2005 2006 2007
0.0%
2.0%
4.0%
6.0%
World Petrochemical Capacity Growth
0
0
0

t
o
n
s
G
r
o
t
h

r
a
t
e
World Petrochemical Industry
Ease in capacity expansion
Global petrochemical capacity increased at a CAGR of 3.3% to 128.4mn tons, during 2002-
07. The major increase in petrochemical production capacity was witnessed in 2005 and
2006. However, in 2007 the growth was limited to 2.5% due to higher feedstock prices than
2005 and 2006.
Chart 05: World Petrochemical Capacity
Source: Global Research, Bloomberg & Industry Sources
Demand for petrochemical products
Demand is a driving force to increase capacity and improve capacity utilization, which
results in an increase in production. The demand of petrochemical products has increased at
a CAGR of 4% during 2002-07, with a sufficient world capacity to meet the existing demand.
The rising prices of ethylene, propylene, and other basic petrochemical products have limited
the demand growth between 4%-5% during the last 3-years.
Chart 06: World Petrochemical Demand (000 tons)
Higher capacity utilization leads to an increase in production
Over the last five years, the world capacity utilization has reached 90.3% in 2007, which is
3.3% higher than the capacity utilization in 2002. The improvement in capacity utilization
has led the world production to increase at a 5-year CAGR of 3.9% to 117.7mn tons in 2007.
The year-on-year production growth, during the last 3 years, remained at an average level of
4.5%-5%, as compared to a marginal growth of 1.1% in 2003.
Chart 07: World Petrochemical Production
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM 11
Capacity Expansion in China
China, the worlds third largest petrochemicals market, is currently undergoing extensive
expansions in ethylene capacities, adding almost 6.6mn tons of ethylene between 2008 and
2012. Ethylene capacities in China are planned to increase by 11.4mn to 11.6mn tons between
2008 and 2016.
Chinas ethylene output will go up from 9.6mn tons in 2006 to 14 -18 mn tons by 2010. It is
worth noting that most Chinese crackers will be naphtha based, which will result in a rapid
growth in the heavy feedstock consumption and consequently this will exert upward pressure
on the international naphtha prices.
Table 07: Chinese Ethylene Expansions
Company Location
Capacity
(1,000 mt)
Startup
Year
Projects Underway
Fujian Refining and Petrochemical Company Ltd
(JV with Exxon)
Quangzhou 800 1Q2009
PETROCHINA
PetroChina Dushanzi PetroChemical Dushanzi, Xinjiang 1,000 2008
PetroChina Fushun PetroChemical Fushun, Liaoning 800 2010
PetroChina Chengdu Ethylene Project (New plant) Chengdu, Sichuan 800 2012
SINOPEC
Sinopec Zhenhai Refining & Chemical Co. Ltd Zhenhai, Zhejiang 800 - 1000 2009
Sinopec Tianjin Petrochemical Tianjin 800 2010
Sinopec Wuhan Co. Wuhan, Hubei 800 2012
In Early Planning
Sinopec Shanghai Chemical Park Ethylene Project Shanghai 1,000 2014+
Dalian Ethylene Project Dalian, Liaoning 1,000 2015+
Formosa Ningbo Ethylene Project Ningbo, Zhejiang 1,000 2015+
MTO
China Shenhua Group MTO Plant * Erdos,Inner Mongolia 600 2012
Shaanxi Yulin MTO Project * Yulin, Shaanxi 1,000 2013
Shenhua Dow * Shaanxi 1,000 2013+
Total 11,400 11,600
* Production will be 50% ethylene and 50% propylene
Source: The Gulf Petrochemicals and Chemicals Directory, Volume I
Alternative Feedstock Experiments in China
Currently, China is undertaking extensive experiments to produce chemicals from coal in
an attempt to find alternative cheap feedstock post the naphtha price surge. Coal represents
almost 70% of the Chinese energy mix. Under this process, coal is converted to synthesis
gas syngas, which can be then converted to different chemicals, among which is methanol.
The methanol is converted to olefins (MTO) ethylene and propylene. Mostly in the planning
stage, there are 12 to 14 MTO projects, with some under construction, that are based on
coal.
1! Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
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2.00
3.00
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Feed Stock Prices
Gas prices
Crude oil prices are used as a benchmark to set gas-well head price in the international
markets. However, gas prices are highly subsidized in certain regions of the world, mainly
the Middle-East, North Africa, and South Asia. The gas-well head prices, in these regions,
are subject to have pre-determined discounts. At the same time, gas well head prices in the
international markets, have shot up by 44.2% from US$4.4 per mmbtu in 2001 to US$6.3 per
mmbtu in 2007.
Chart 08: Prices of Gas (US$ per mmbtu)
Source: EIA & Global Research
Crude oil prices
Over the period of the last 6 years, the basket price of OPEC crude oil has surged by 192.5%
from US$23.01 per barrel in 2002 to US$67.31 per barrel in 2007. The increase in crude oil
prices over the period of 5 years are mainly due to the following reasons:
Global political uncertainty
High global economic growth
Lack of refining capacity which caused a shortage of refined products.
Chart 09: OPEC Historical Crude Oil Prices (US$ per barrel)
Source: OPEC
The average basket prices of OPEC crude oil prices were recorded at US$113.5 per barrel, in
3Q2008. The recent upward rally in the price of crude oil, which was started in the 4Q2007,
has ended during the 3Q2008, which is mainly due to the ongoing global financial crisis.
Going forward, we expect crude oil prices to ease down from the current level (3Q2008) to
US$80.8 per barrel in 2011. This assumption is based on the following factors:
Recovery of the financial market from the ongoing financial crisis.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM 1|
-
20.00
40.00
60.00
80.00
100.00
120.00
2007 2008E 2009E 2010E 2011E
Crude Oil US / bbl
Slowdown in economic development and shifting towards gas base industries
New refining capacity will come online by 2011, which will fulfill the shortage of refined
products.
Chart 10: Forecasted OPEC Crude Oil Prices (US$ per barrels)
Source: OPEC& Global Research
Naphtha is a major feedstock for ethylene and propylene production. The natural gas, mainly
ethane and propane, is also used in the manufacturing of these petrochemicals, despite the
fact that the main component of the natural gas is the methane, which is primarily used for
energy. Naphtha is a direct outcome of crude oil refining, hence the prices of naphtha is much
correlated to the prices of crude oil.
World Petrochemical Outlook
Based on our expectations, crude oil price will remain on the high side. Even after an expected
relaxation, the average price is forecasted to remain in the range of US$80-US$90 per barrel
in 2011 as compared to 3Q2008 average prices of US$113.5 per barrel. Since the prices of
petroleum products and gas feedstock are derived from crude oil prices, we expect the price of
international feedstock to remain high as well. The higher feedstock prices will not allow the
global petrochemical industry to expand their margins, as the price of petrochemical products
is subject to feedstock prices. Consequently, we expect a major expansion in petrochemical
capacities will happen in those areas of the world where feedstock is available at cheap rates,
including the MENA region and China. The capacity expansion in MENA and China is
mainly due to the following:
Effort of economic diversification i.e. shifts from oil based economies to industrial based
economies.
Plenty of gas reserves, which accounted for 51.9% of the world reserves. This enables
these countries to supply gas at cheap rates. Moreover, the region has plenty of crude oil
reserves, which enables the government to supply petroleum products with some specific
discounts.
Extraction of petrochemical products from coal has encouraged China to consider massive
expansion in its petrochemical capacities. However, the effort is under process.
Prices of Methanol
The price of methanol has surged by 191.7% to US$472.6 pet ton in 2007 as compared to
US$162 per ton in 2001. The increase in the price of methanol during the period of 2001-
1+ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
0
100
200
300
400
500
600
2007 2008E 2009E 2010E 2011E
Methanol Prices
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07 is mainly because of higher gas prices, which have been increased due to higher crude
oil prices. Moreover, methanol is derived from methane which is mainly obtained from the
cracking of natural gas while sometime from naphtha. The availability of natural gas at
high subsidize price of US$0.75 per mmbtu has further strengthened the margin of Saudi
petrochemical units.
Chart 11: Historical Average Prices of Methanol (US$ per ton)
Source: Methanex
Goring forward, the expected future prices of methanol is based on the movement of our
expected crude oil prices, which will also affect the price of natural gas in international
market. Based on our expectations, the price of methanol will surge by 11.1% in 2008 to
reach at US$525.1 per tons as compared to the average prices in 2007. However, we expect
a gradual decline in the average prices of methanol to US$304.1 per ton in 2011, in line with
our expected prices of crude oil.
Chart 12: Forecasted Average Prices of Methanol (US$ per ton)
Source: Methanex & Global Research
Implications
Methanol is used in manufacturing a wide variety of chemical products such as formaldehyde
and Acetic Acid. Methanol, as a hydrogen carrier is being considered for fuel cell application
and as an alternate fuel. Methanol was once known as wood alcohol, because it was originally
produced as a by-product of the distillation of wood.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM 1]
MENA Petrochemical Industry
Petrochemical hub
As of 2007, the MENA regions combined petrochemical production capacity reached
84.7mn tons, which represents 66% of total world capacity. This indicates that the region is
the largest petrochemical producer in world.
Chart 13: Share of MENA in Worlds Capacity 2007
Saudi Arabia: The largest petrochemical player
In 2007, Saudi Arabia occupied 52.8% of the total MENA capacity, through SABIC.
SABIC is not only a major player in Saudi Arabia, but the company has a vital position in
the international market. In 2007, SABIC accounted for 53.9% of the total Saudi Arabias
capacity, 28.4% of MENA and 18.7% of the world. Next to Saudi Arabia, Iran, through
National Petrochemical Company, has claimed 20.2% and Qatar has 11.3% of MENA
capacity.
Table 08: Country-Wise MENA Capacity (000 tons)
Country 2007 Share
Saudi Arabia 44,686 52.8%
Iran 17,145 20.2%
Qatar 9,585 11.3%
Egypt 3,057 3.6%
Kuwait 2,133 2.5%
UAE 1,441 1.7%
Rest of MENA 6,628 7.8%
Total MENA Capacity 84,675 100%
Source: Zawya
Capacity Expansion in MENA
MENA region has planned for a massive expansion of petrochemical capacity of different
grades with an estimated cost of US$90.7bn (SR332.8bn). Based on the given expansion plans,
the production capacity in MENA region will increase to 90.9mn tons in 2008 and 104.1mn
tons in 2009. Going forward, we expect the production capacity will increase to 114.6mn
tons by 2011, at a 4-year CAGR of 8.2%. Major capacity expansion in petrochemicals of
different grades is expected in Saudi Arabia, which will account for 61.3% in 2008 followed
by Kuwait which is expected to contribute by 25.5%. In addition, after 2011, production
capacity in MENA region will further increase by 3.4mn tons in 2012, due to upcoming
capacity expansion in Saudi Arabia and Qatar.
MENA
66%
Rest of the world
34%
1e Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
14. 5%
7. 3%
4. 0%
7. 4%
-
20. 00
40. 00
60. 00
80. 00
100. 00
120. 00
140. 00
2008E 2009E 2010E 2011E
0. 0%
5. 0%
10. 0%
15. 0%
20. 0%
Total Capacity Expansion Growth In Capacity Expansion
Chart 14: MENA Capacity Expansion
Product-wise capacity expansion
The total expected increase of 31.2mn tons, till 2011, in the petrochemical products capacities
of different grades, in the MENA region, is based on the addition of (i) 16.9mn tons of basic
chemical-olefins, (ii) 5.6mn tons of basic chemical-Aromatics and (iii) 8.8mn tons of basic
chemical-oxygenates.
Table 09: Grade-Wise Capacity Expansion in MENA (Tons)
2008E 2009E 2010E 2011E
Basic-Olefins 2,982,500 6,837,500 3,629,250 3,409,750
Basic-Aromatic 1,848,750 2,566,250 1,200,000 -
Basic-Oxygenate 1,339,000 3,643,000 2,788,000 1,020,000
Expected Expansion 6,170,250 13,046,750 7,617,250 4,429,750
Country-wise capacity expansion
Saudi Arabia Capacity expansion
Saudi Arabia is expected to make an addition of 3.84mn tons of basic chemical of different
grades out of the total additions in regional capacities of 6.27mn tons in 2008. The contribution,
however, will increase to 6.54mn tons in 2009, and will taper down to 4.2mn tons in 2010.
Table 10: Saudi Arabia Additional Capacity (Tons)
2008E 2009E 2010E 2011E
Basic-Olefins 2,232,500 5,437,500 3,600,000 1,900,000
Basic-Aromatic 573,750 191,250 600,000 -
Basic-Oxygenate 1,039,000 913,000 - -
Expected Expansion 3,845,250 6,541,750 4,200,000 1,900,000

Total Expected Expansion 6,170,250 13,046,750 7,617,250 4,429,750
Contribution in Expansion 62.3% 50.1% 55.1% 42.9%
Kuwait Capacity expansion
Based on the given expansion plan, production capacities of basic chemicals in Kuwait will
increase by 1.5mn tons in 2008 and 2.7mn tons in 2009. This will increase the countrys
capacity from 2.1mn tons in 2007 to 6.3mn tons in 2009.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM 1
Table 11: Kuwait Additional Capacity (Tons)
2008E 2009E
Basic-Olefins 425,000 425,000
Basic-Aromatic 775,000 1,875,000
Basic-Oxygenate 300,000 300,000
Expected Expansion 1,500,000 2,600,000

Total Expected Expansion 6,170,250 13,046,750
Contribution in Expansion 24.3% 19.9%
Oman Capacity expansion
The additional capacity of Oman will come on-stream in 3Q2008 and will lead to an increase
in the countrys total capacity to 2.1mn tons in 2008. The capacity is expected to increase
further to reach at 2.6mn tons in 2009 and to 3.7mn tons in 2011. The increase in capacity is
mainly due to the full year impact of those capacities which come online in the middle of the
year and an addition of new capacities of oxygenates in 2Q2010.
Table 12: Oman Additional Capacity (Tons)
2008E 2009E 2010E 2011E
Basic-Olefins - - - -
Basic-Aromatic 500,000 500,000 - -
Basic-Oxygenate - - 810,000 270,000
Expected Expansion 500,000 500,000 810,000 270,000

Qatar Capacity expansion
Qatar is expected to contribute 5.2% in total upcoming production capacity in 2008. The
contribution is expected to increase to 25.9% in 2009, which is mainly due to another
additional capacity from QAFAC-II complex in 1Q2009. Consequently, the production
capacity is expected to reach at 13.3mn tons by 2009 and will reach at 14.8mn tons by the
end of 2011.
Table 13: Qatar Additional Capacity (Tons)
2008E 2009E 2010E 2011E
Basic-Olefins 325,000 975,000 - 1,500,000
Basic-Aromatic - - - -
Basic-Oxygenate - - 2,430,000 -
Expected Expansion 325,000 975,000 2,430,000 1,500,000

1~ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
Table 14: MENA Capacity Expansion (Tons)
Country Basic-Olefins Basic-Aromatic Basic-Oxygenate Expected Production
Saudi Arabia 252,000 2Q2008
Saudi Arabia 1,700,000 2010
Saudi Arabia 3,800,000 3Q2010
Saudi Arabia 230,000 715,000 2Q2008
Saudi Arabia 600,000 2010
Kuwait 850,000 450,000 600,000 3Q2008
Kuwait 1,100,000 3Q2008
Kuwait 1,100,000 1Q2009
UAE 600,000 2010
Egypt 350,000 4Q2009
Oman 1,080,000 2Q2010
Oman 1,000,000 3Q2008
Qatar 1,300,000 4Q2008
Qatar 2,430,000 1Q2010
Qatar 1,500,000 2011
Qatar 880000 600000 2012
Qatar 1,300,000 2012
Algeria 1,000,000 4Q2010
Algeria 1,400,000 2012
Bahrain 1,728,000 2010
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM 1)
Saudi Petrochemical Industry
Introduction
Saudi Arabia is a key player in the global petrochemical industry commanding a 34.8% and
52.8% of the world and MENA petrochemical production capacity in 2007, respectively. The
major part of Saudi Arabias petrochemical production is exported. The Saudi petrochemical
industry is mainly concentrated in the industrial cities of Jubail and Yanbu.
Chart 15: Saudi Arabia Share in World Chart 16: Saudi Arabia Share in Region
2007 2007
Source: Global Research
Feedstock a competitive edge
The Kingdoms petrochemical industry enjoys high profit margins, mainly due to a natural
competitive advantage of availability of low cost feedstock, on account of vast crude oil and
natural gas resources. The cost of natural gas for the Saudi Arabian petrochemical industry is
just US$0.75/mmbtu, which is far below than the international prices.
Table 15: Gross Margins on Petrochemical Products in Saudi Arabia
2008E 2009E 2010E 2011E
Ethylene Average High High High
Propylene Average High High High
MTBE Low Low Low Low
Styrene Average Average Average Average
Benzene High High High High
Paraxylene Low Low Low Low
Mono Ethylene Glycol Average Low Low Low
Di Ethylene Glycol Average Average Average Average
Teri Ethylene Glycol Average Average Average Average
Purified Terephthalic Acid - PTA Low High High High
Ethylene Di Chloride High High High High
Caustic Soda Low Average High High
Vinyl Chloride Monomer - VCM Average Average Average Average
Polyethylene Average Average Average Average
Polypropylene Average Average Average Average
Polyvinyl Chloride - PVC High High High High
Polyethylene Terephthalate Resin - PET High Average Average Low
Polystyrene - PS Low Low Low Low
Note: High Return = 50%, Average Return = 20%-50%, Low Return = Below 20%
MENA
47% Saudi Arabia
53%
Rest of the World
65%
Saudi Arabia
35%
! Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
The WTO agreement confirmed Saudi Arabia has the right to retain low feedstock prices
on the grounds that its hydrocarbon resources are a natural advantage and low prices are not
classed as a subsidy. The agreement also allows a dual pricing system, where domestic users
pay less than the export price for feedstock, under the reasoning that domestic customers do
not require export infrastructure or export marketing.
Major Players
Saudi Arabian Basic Industries (SABIC)
SABIC is the worlds leading petrochemical producing company and was established by
the Saudi government in 1976 in furtherance of a government policy to diversify the Saudi
industrial base outside the oil sector and in order to make use of crude oil-associated gases
at well-heads which had, until that point, been flared off. The intention was to build a chain
of basic, large-scale industries located close to or with easy access to gas resources and to
develop export-oriented non-oil businesses of strategic importance to Saudi Arabia, including
hydrocarbon-based chemicals and basic metal industries.
Now SABIC has a total 21 petrochemical affiliates and YANSAB is one of them. The affiliates
of SABIC are distinguished in six strategic business units (SBUs), organized by products.
These are: Basic Chemicals, Intermediates, Polymers, Specialized Products, Fertilizers, and
Metals. Each of these is headed by a Vice-President. These six business units make four
different kinds of products:
1 Chemicals Basic Chemicals, Intermediates and Specialized Products (three SBUs)
2 Plastics Polymers (one SBU)
3 Fertilizers (one SBU)
4 Metals (one SBU)
Table 16: SABICs Affiliates
Name of Affiliates Location
Holding of
SABIC
Arabian Petrochemical Company Saudi Arabia 100.00%
SABIC Asia Pacific Singapore Singapore 100.00%
SABIC Industries Investments Company Saudi Arabia 100.00%
SABIC Innovative Plastics United States 100.00%
SABIC Luxembourg Luxembourg 100.00%
SABIC Sukuk Company Saudi Arabia 100.00%
SABIC UK Petrochemicals UK 100.00%
Saudi Iron and Steel Company Saudi Arabia 100.00%
Saudi European Petrochemical Company Saudi Arabia 80.00%
Jubail United Petrochemical Company Saudi Arabia 75.00%
National Industrial Gases Company Saudi Arabia 70.00%
Yanbu National Petrochemicals Company Saudi Arabia 56.00%
Arabian Industrial Fibers Company Saudi Arabia 53.90%
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM !1
Al Jubail Fertilizer Company Saudi Arabia 50.00%
Al Jubail Petrochemical Company Saudi Arabia 50.00%
Eastern Petrochemical Company Saudi Arabia 50.00%
National Chemical Fertilizer Company Saudi Arabia 50.00%
National Methanol Company Saudi Arabia 50.00%
Saudi Methanol Company Saudi Arabia 50.00%
Saudi Petrochemical Company Saudi Arabia 50.00%
Saudi Yanbu Petrochemical Company Saudi Arabia 50.00%
Saudi Arabian Fertilizer Company Saudi Arabia 42.99%
Saudi Kayan Petrochemical Company Saudi Arabia 35.00%
Gulf Petrochemical Industries Company Bahrain 33.33%
Gulf Aluminum Rolling Mill Company Bahrain 30.28%
Maaden Phosphate Company Saudi Arabia 30.00%
Power and Water Utility Company for Jubail and Yanbu Saudi Arabia 24.81%
Aluminum Bahrain [Via SABIC Industries Investments Company] Bahrain 20.00%
National Chemical Carriers Saudi Arabia 20.00%
Source: Zawya
Saudi Chemical Company
Saudi Chemicals line of production includes the latest generation, safest, and world wide
commonly used civil explosives and non-electrical detonators, which are KEMULEX,
PRILLEX, and SANEL, respectively. KEMULEX is an emulsion type explosive characterized
by its high detonation velocity and good waterproof properties and packaged in special plastic
cartridges with different sizes that meet the clients needs. PRILLEX is a dry blasting agent,
which is composed of Ammonium Nitrates and Fuel Oil (ANFO).
Saudi Chemical Company also manufactures non-electric detonators SANEL that provide
the precious control and accuracy that reduces blasting vibration and improves fragmentation
for all kind of blasting. SANEL is produced in a wide range of delay times, lengths, and
models for different types of use. In addition, the company offers wide variety of Electrical
Detonators, and Detonating Cords, in addition to all accessories for rock blasting and oil
exploration shooting.
Progress continues and Saudi Chemical proceeds along the path of ongoing improvement,
advancing in all aspects that go beyond expectation to provide domestic and global supplies
of most modern explosives. This resulted in new production line for ENVIROSEIS, the latest
in seismic explosives specially designed for seismic exploration. Proudly, ENVIROSEIS
is now used for oil and gas exploration in Saudi Arabia. It is worth mentioning that the
companys activity is not limited to production of civil explosives only, but also will be
extended to include military explosives in manufacturing and demilitarization processes.

Sahara Petrochemical Company
Since its establishment in 2004, Saharas management team has been successfully working
on two projects, Al Waha Petrochemical Company, its first majority owned subsidiary and
on its affiliated participation in Saudi Olefins and Polyolefins Company (SEPC), both of
which are expected to become operational by the fourth quarter of 2008.
!! Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
8. 3%
5. 2%
5. 5%
12. 3%
-
2008E 2009E 2010E 2011E
0. 0%
5. 0%
10. 0%
15. 0%

Capacity Expansion Growth
Al Waha Petrochemical Company (Al-Waha) is located in the Industrial City of Jubail in the
Eastern Province of the Kingdom of Saudi Arabia. The affiliate (Al-Waha) was established in
September of 2006, as Saharas first majority owned industrial project subsidiary. Al Waha
is a limited liability joint venture company, which is to construct, own and operate a world
scale petrochemical complex for the production of 460,000 tons of propylene that will serve
as feedstock for the production of 450,000 tons of polypropylene. The polypropylene will be
sold both within the region and into international markets.
Sahara, together with Tasnee Petrochemical Company (Tasnee) 50.6% stake owner and the
Basell group of companies (Basell) holding 25% stake, formed a new company to develop,
finance, construct, commission, own, manage and operate a world-scale petrochemical
complex for the production of some 1,000,000 tons of ethylene, 80% of which will be used as
the primary feedstock for the production of approximately 800,000 tons of polyethylene. The
Saudi Ethylene and Polyethylene Company (SEPC) is also located in Al-Jubail Industrial
City, Saudi Arabia with commercial operations set to begin in the fourth quarter of 2008.
Capacity expansion
During the last 4 years, the growth in Saudi Arabias economy is mainly due to higher crude
oil prices. This depicts a serious threat for the country in case of ease in crude oil prices. In
order to minimize this risk the government of Saudi Arabia has promoted non-oil industries.
Consequently, a massive expansion in petrochemical has been taken into account, which will
increase at a CAGR of 7.8% during the period from 2007 to 2011.
Chart 17: Saudi Arabia Capacity Expansion
Source: Zawya and Global Research
Major new capacities in Saudi Arabia are expected to locate in Jubail industrial area.
In our valuations, we have not incorporated the upcoming capacity of SIPCHEMs
olefins complex, as it will come online in 2012 with a designed capacity of 2.1mn
tons.
Major capacity expansion Company Wise
Major additional petrochemical capacity in Saudi Arabia is expected from Saudi Kayan
Petrochemical Company (KAYAN), which will come on line on 3Q2010. KAYAN is
expected to contribute by 23% in the total Saudi Arabia expansion of 16.5mn tons. However,
the capacity from Eastern Petrochemical (SHARQ) and YANSAB will contribute to 24.3%,
with a combined capacity of 4mn tons.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM !|
Table 17: Capacity Expansion by Company
Name Basic-Olefins Basic-Aromatic Basic-Oxygenate Expected Production
Saudi European-IBN ZAHR 950,000 - - 4Q2008
Sino-Saudi Petrochemical Project 1,700,000 - - 2010
Saudi Kayan 3,800,000 - - 3Q2010
Sharq-Eastern Petrochemical 2,000,000 - - 3Q2008
YANSAB 2,005,000 - - 4Q2008
SIPCHEM-Olefins 2,100,000 - - 2012
Sahara/Tanesse-Saudi Ethylene &
Propylene Plant
1,285,000 4Q2008
Petrokemya-PVC and Offsite - - - 2010
Sadaf-Styrene Plant-Saudi
Petrochemical
- 600,000 - 2010
Delta Oil 1,200,000 - - 2009
!+ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
SIPCHEM Competitors Profle
Based on the, current, production mix of the Company, we have identified the
following potential competitors in local and regional market.
Saudi Methanol Company (Ar-Razi)
Egyptian Methanex Methanol Company (EMETHANEX)
National Methanol Company (Ibn Sina)
Oman Methanol Company (OMC)
Salalah Methanol Company (SMC)
Saudi Methanol Company-Ar Razi
The company was formed in 1979 in Saudi Arabia under a 50-50 joint venture between
SABIC and Japanese companies (led by Japan Saudi Arabia Methanol Company). This was
the first joint venture of SABIC. The basic activity of Ar Razi is to produce chemical grade
methanol with a designed capacity of 3.3mn tons. However, the additional capacity of 1.7mn
tons of methanol will lead the overall production capacity of the complex to 5mn tons by the
end of 2008. Moreover, the expansion cost was estimated at SR2.2bn (US$600mn) for the
complex.

Egyptian Methanex Methanol Company-EMETHANEX
EMETHANEX was established as a limited liability company in 2005. The plant of the
company is under developmental stage and is designed to produce 1.3mn tons of Methanol
per year. The majority of the shareholding is held by Methanex Corporation, which accounts
for 60% of the total stakes. The remainder stakes are held by (i) Egyptian Natural Gas
Holding Company (12%), (ii) Egyptian Petrochemicals Holding Limited (12%), Egyptian
Natural Gas Company (9%) and Arab Petroleum Investments Corporation (7%). The present
shareholding structure shows an undisrupted supply of gas to the plant at subsidize rate of
US$2.5-US$2.75 pet mmbtu.
National Methanol Company-Ibn Sina
Ibn Sina is a joint venture of (i) SABIC, which holds 50% stakes, (ii) Duke Energy Corporation,
holds 25% stakes and (iii) Hoechst Celanese Chemicals, holds 25% stakes. The company has
a designed capacity to produce 2.1mn tons of Methanol and MTBE.
Oman Methanol Company-OMC
OMC is a joint venture between Methanol Holding International Limited-MHIL of Trinidad,
Oman Methanol Holding Company, which is a division of Omar Zawawi Establishment
(OMZEST) Group & MAN Ferrostaal Methanol Holding Limited. The project has the
backing of MHIL, which already has four methanol plants in Trinidad and Tobago and is in
the process of constructing the worlds largest methanol plant with a production capacity of
1.9mn tons.
OMC has constructed a methanol producing complex with a design producing capacity
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM !]
of 1.1mn tons in the Sohar Industrial Port area, which will use Johnson Matthey LPM
technology as originally developed by ICI. The complex is managed and operated by Oman
Plants Services Company-OPSC, which is a joint venture between Oman Mechanical
Services Company, a part of The OMZEST Group and Industrial Plant Services Limited,
a Trinidadian company which manages and operates Methanol Holding Trinidad Limiteds
methanol plants in Trinidad.

Salalah Methanol Company-SMC
SMC is a subsidiary of Oman Oil Company-OOC and was established in 2006 with the
principle activities (i) to produce 1.2mn tons of methanol, (ii) water desalination and (iii)
waste water treatment. Currently, the petrochemical complex of SMC is under developmental
phase and is expected to start commercial production of by the end of 2009.
!e Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
-
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
2004 2005 2006 2007
-
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0

Longtermloans - LHS Assetbase _ LHS Depriciation - RHS Financial Cost - RHS
72.4%
72.7%
77.6%
71.5%
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2004 2005 2006 2007
68.0%
70.0%
72.0%
74.0%
76.0%
78.0%
80.0%

Gross Prot (excluding depriciation Cost) Gross Prot Margins
SIPCHEM Financial Overview
Growth in sales revenue
Since inception, the sale revenues of the Company have increased at a CAGR of 274%,
during 2004-07. The increase in the sale revenues of the Company during the last 3 years are
mainly due to (i) commencement of production of methanol, through IMC in mid 2004, (ii)
start-up of BDO in late 2005, through its affiliates IDL. Moreover, the increase in the average
prices of methanol and BDO, on account of higher crude oil prices, has also fueled the sales
revenue of the Company.
High gross margins
Historically, the gross margins (excluding depreciation cost) of the Company remained
higher since inception, at an average level of 73.5%. The major reason of high gross margins
is the availability of feed stock gas at highly subsidize rate of US$0.75 per mmbtu and butane
(from naphtha) at 30%-35% lower than the average prices in international market.
Chart 18: Gross Profit (SR mn) & Gross Margins (Excluding Depreciation Cost)
Source: Company Reports & Global Research
Increase in asset-base inflates financial & depreciation charges
The consistent efforts to expand the manufacturing operation of the Company through (i)
establishment of IMC and IDL in 2005 and 2006 respectively and (ii) planned development of
Acetyl complex by 2009 have led the management to go for long-term loans. Consequently,
the asset base of the Company has been increased from SR2.2bn in 2004 to SR5.4bn in 2007
which has led the depreciation cost to reach at SR164.1bn in 2007.
Chart 19: Long-Term Loans, Asset Base, Depreciation & Financial Cost (SR mn)
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM !
71.1%
73.1%
79.2%
100.6%
44.8%
78.3%
37.0%
38.9%
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
2004 2005 2006 2007
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%

EBITDA EBITDA Margin Protability Protability Margin
Surge in profitability
Rapid increase in the sale revenues of the Company has eliminated the impact of higher
depreciation and financial cost, which has led profitability to increase at a CAGR of 359.8%,
during 2004-07, and reached at SR593.9mn in 2007. However, the net profit margin has
declined to 38.9% in 2007 as compared to 78.3% in 2004. Furthermore, the EBITDA of
the Company has surged to SR1,087mn in 2007 as compared to SR7.8mn in 2004, with the
average EBITDA margins 81% during the same period.
Chart 20: Profitability & EBITDA (SR mn)
Major concerns
The prime risk of the company is on the supply of feedstock, which includes naphtha (propane)
and natural gas. As Saudi Aramco is the only supplier of feedstock to the Company, the risk
of constant supplies of raw material from Saudi Aramco is associated with the Company.
SIPCHEM is enjoying the benefit of getting Naphtha and natural gas, as a feed stock at
subsidized rates like other Saudi Arabian petrochemical complexes. This provides the
competitive edge to the Company on regional competitors.
SIPCHEM has to face stiff competition within the country with Ar-Razi and Ibn-Sina
methanol producing complexes, as both of these complexes are the affiliates / subsidiaries
of SABIC. Thus, the Company has to face stiff competition with SABIC on a local, regional
and international basis. The Company is enjoying the benefit of having a BDO producing
complex, and is one of the few petrochemical companies in Saudi Arabia.
Production growth
By the end of 2007, the production of the Company had reached 772,990 tons out of which
methanol production accounted for 89.5%, while BDO production recorded at 34,619 tons and
the remainder is Ma production. The production in 2008 is expected to decline by 3.4% due
to the expectations of lower capacity utilization i.e. at 100% with the domination of methanol
production. The completion of the Acetyl complex in 3Q2009 will lead production to grow
at a CAGR of 20.4%, during 2007-11. Furthermore, by the end of 2011, the Company will
be able to expand its product-line by adding AA, AAn, VAM and CO. Despite the, expected
commencement of production from Acetyl complex, methanol is expected to remain the
Companys main product till 2011, though the share of methanol is expected to dilute and
reach at 40% in overall production of the Company.
!~ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
-3.5%
25.0%
11.1%
19.7%
14.5%
83.7%
-
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
2006 2007 2008E 2009E 2010E 2011E
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%

Sales Revenue Sales Growth
3.6%
-26.0%
1.3%
-3.4%
58.8%
37.0%
0.0%
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2005 2006 2007 2008E 2009E 2010E 2011E
-30.0%
-10.0%
10.0%
30.0%
50.0%
70.0%
90.0%

Methanol-IMC
Carbon Monoxide
BDO-Beutaidiol-IDL
Acetic Acid & Acetic Anhydride
Malice anhydride
Vinyl Actate Monomer
Production Growth
Chart 21: Production Growth (Tons)
Sale revenues growth
The price of crude oil is expected to remain on the higher side, despite an expected relaxation
in prices in 2009, which will force the price of methanol, VAM and BDO to remain on
the higher side as compared to the average prices by the end of 2007. While the prices of
methanol is expected to relax down to US$304.1 per ton by 2011 as compared to US$472.6
per ton in 2007. However, YoY basis, our expected average prices of methanol is expected to
depict a decline of 34.2% in 2009, 7.1% in 2010 and 5.2% in 2011. Moreover, the completion
of Acetyl Complex by 3Q2009, will help the Company to register a growth in sales revenue,
which is expected to increase at a CAGR of 12.5%, during 2007-11.
Chart 22: Sales Revenues (SR mn)
Source: Company Annual Reports & Global Research
Sales revenue mix
Currently, the sales revenue of the Company is mainly composed on the sales of methanol,
which constitute 68.3% in 2007, which is mainly due to the higher contribution in the
overall production of the Company. The contribution in 2008 is expected to remain at same
level as it recorded in 2007, since no new production is expected to come online during the
year. However, upon the completion of acetyl complex, in 3Q2009, the product line of the
Company will expand and utilize 70% production of methanol as a feed stock for IAC. Thus,
the contribution from methanol will decline to 35.2% in 2009, which will further get diluted
in 2010 and reach 21.2% in 2011 with an increasing contribution of VAM in total sales.
Furthermore, we expect 80% of AA production will use as the feed stock for the production
of VAM.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM !)
9.1%
9.7%
6.8%
7.0%
9.1%
10.2%
9.2%
-
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1,000.0
2005 2006 2007 2008E 2009E 2010E 2011E
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%

Protability ROAA
19.0%
18.6%
17.3%
12.3%
10.7%
14.3%
12.6%
-
200.0
400.0
600.0
800.0
1,000.0
2005 2006 2007 2008E 2009E 2010E 2011E
0.0%
5.0%
10.0%
15.0%
20.0%
Protability ROAA
62.7%
70.2%
57.8%
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
2007 2008E 2009E 2010E 2011E
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%

58.3%
60.0%
Growth Prot Growth Margins
Chart 23: Sales Revenue Mix 2008E Chart 24: Sales Revenue Mix 2011E
Improving gross profit margins
The gross margin of the Company is expected to shown an improvement and will reach
70.5% by the end of 2008 from 62.7% in 2007. This is mainly due to the expected increase in
methanol prices in international market with the feedstock availability at US$0.75 per mmbtu
in Saudi Arabia. Furthermore, the completion of acetyl complex in 3Q2009 will increase the
depreciation cost, which will result in a contraction in gross profit margins for the Company
and limited GP margins in the range of 57%-60%.
Chart 25: Improving Gross Profit (SR mn) & Margins
Improving Profitability
The Company is expected to register after tax profit of SR611.2mn (translating into EPS
of SR1.8) in 2008 as compared to SR593.9mn in 2007. The increase in 2008 profitability
is mainly due to the improvement in gross margins. Furthermore, we expect the return on
average assets (ROAA) of the Company will remain at 7.0% in 2008 as compared to 9.1%
in 2007. This is mainly due to a higher CAPEX on account of Acetyl Complex. The return
on average equity (ROAE), on the other hand, is expected to dilute from 17.3% in 2007 to
12.3% in 2008, which is mainly due to higher equity-base following rights issue. However,
the completion of Acetyl Complex will lead the profitability of the Company to increase at a
CAGR of 10.2%, during 2007-11.
Chart 26: Profitability (SR mn) & ROA Chart 27: Profitability (SR mn) & ROE
Malice Anhydride
23.4%
Methano-IMC
68.3%
BDO-Beutaidiol-IDL
8.3%

Methano-IMC 21.2%
BDO-Beutaidiol-IDL
5.0%
Malice Anhydride
15.3%
Carbon Monoxide 15.3%
Vinyl Acetate Monomer
34.5%
| Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
Acetyl Complex & Impact On Proftability
The future growth of SIPCHEM is based on the timely completion of the Acetyl
Complex. The complex comprises of three plants which are vertically integrated
with each other and also the methanol plant as well. Hence, the feedstock of the
additional capacity is internal generated, which will help the Company to reduce
costs (excluding depreciation).
Figure 02: Acetyl Complex Production Flow
Source: SIPCHEM Prospectus & Global Research
We have conducted a sensitivity analysis of the commencement of production from acetyl
complex by using different time scenario.
Table 18: Acetyl Complex Commissioning (EPS in SR)-Scenario Analysis
Base
Assumption*
Commencement
in 1Q2010
Commencement
in 3Q2010
Commencement
in 1Q2011
Commencement
in 3Q2011
2008E 1.8 1.8 1.8 1.8 1.8
2009E 2.0 0.9 0.9 0.9 0.9
2010E 2.8 2.8 1.7 0.6 0.6
2011E 2.6 2.6 2.6 2.6 1.6
* Expected commencement of production from acetyl complex in 3Q2009
Complexes
Feed Stocks
CO Plant 300,000 tons AA plant 450,000 tons VAM 300,000 tons
Methanol
Ethylene Oxygen
Natural Gas
Common Utilities
Port Facilities
H2 65,000
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM |1
Polyolefns Complex
The next expansion plan of the Company is the establishment of envisaged olefins
complex, which will comprise a world scale ethane/propane cracker manufacturing
facilities for producing various derivatives including polymers, speciality chemicals,
engineering plastics, fabricated plastics and value added downstream products. The
project was initially expected to come online by the end of 2012 and now the status
of this project is unclear, so we have not taken the impact of this project in our
valuation.
Figure 03: SIPCHEM Polyolefins Complex Production Flow
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|! Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
9M-2008 Financial Results
SIPCHEM has reported a net profit of SR502.1mn in 9M-2008, against the net profit of
SR339.9mn in corresponding period last year. The improvement in profitability is mainly
due to the increase in methanol prices from US$401.0 per ton to US$579.0 per ton, with
the subsidized prices of feedstock gas at US$0.75 per mmbtu. Consequently, the Company
has shown an improvement in gross margins, which had recorded at 61.6%, in 9M-2008, as
compared to 58.0% in the corresponding period last year.
Table 19: 9M-2008 Income Statement
SR 000 9M-2007 9M-2008 Change
Net Sales 1,025,648 1,472,076 43.5%
Cost of Sales (430,772) (565,603) 31.3%
Gross Profit 594,876 906,473 52.4%
Selling, General & Administrative Expenses (37,359) (45,055) 20.6%
Operating Income 557,516 861,417 54.5%
Financial Charges (71,766) (62,779) -12.5%
Other Income 5,335 11,388 113.5%
Investment Income 25,829 31,049 20.2%
Net Expenses of pre-operating expenses + Provision for project
developmental cost
(623) (54,639) 8670.3%
Minority Interest (160,168) (259,742) 62.2%
Net Profit Before Zakat 356,123 526,694 47.9%
Zakat (16,229) (24,636) 51.8%
Net Profit After Zakat 339,893 502,058 47.7%
Source: Company Accounts
The balance sheet size of the company, during 9M-2008, has increased by 23.4% from the
reported size of SR7.8bn by the end of 2007. During the period, share capital of the company
has increased from SR2bn to SR3.3bn, which is mainly due to issuance of right shares at
SR15 per share with SR5 per share as a premium to finance the acetyl project. On the other
hand, the obligation of the Company has shown a decline of 9.1%, during the period under
review, to SR3.5bn from SR3.8bn by the end of 2007, thus improving the current ratio to
2.4x, in 9M-2008, as compared to 0.92x by the end of 2007.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM ||
Table 20: 9M-2008 Balance Sheet
SR 000 2007 9M-2008
Assets
Total Current Assets 1,995,522 2,215,316
Total Fixed Assets 5,755,300 7,076,267
Other Assets - 273,699
Total Assets 7,750,822 9,565,282
Liabilities & Equity
Total Current Liabilities 2,164,335 905,812
Total Non-Current Liabilities 1,694,328 2,602,643
Provisions - -
Total Liabilities & Provisions 3,858,663 3,508,454
Minority Interest 895,292 926,416
Shareholders Equity
Share Capital 2,000,000 3,333,333
Statutory Reserves 176,947 860,828
General Reserves 275,000 275,000
Retained Earnings 544,920 661,249
Total Shareholders Equity 2,996,867 5,130,410
Total Liabilities & Shareholders> Equity 7,750,822 9,565,282
Source: Company Accounts
|+ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
Valuation and Recommendation
Discounted Cash Flows Methodology
Our DCF model is based on a 4-year (FY2008-FY2011) explicit forecast period for the Free
Cash Flow (FCF). The terminal value is estimated using the constant growth Gordon Growth
Model (GGM). The forecasted cash flow and the terminal value is then discounted at the
company Weighted Average Cost of Capital (WACC). In our DCF valuation, we have used
the following assumptions:
1. Risk Free Rate (RFR) of 5.4%.
2. Equity risk premium of 5.5%.
3. Beta of 1.05.
4. A terminal growth rate of 3.0%.
5. A target cost of debt of 7%.
Using the above assumptions, we have derived a cost of equity for the Company at 11.4%,
by using Capital Assets Pricing Model, and a WACC of 10.0%, resulting in a fair value of
SR35.9 per share.
Table 21: DCF Calculations
(SR Mn) 2008 (E) 2009 (E) 2010 (E) 2011 (E)
FCF (713) 910 399 1,095
Discounted Cash Flow (679) 789 314 784
Terminal Value 15,083
Primary Value 1,209
Terminal Value (discounted) 11,185
Total Enterprise Value 12,375
Debt (2365) (As of 2008E)
Add: Investments & cash equivalents 1,960 (As of 2008E)
Total Equity Value 11,970
Shares Outstanding (000) 333,333
Fair Value Per Share 35.9
Sensitivity Analysis
We provide below a sensitivity analysis table, which shows the probable value given
different growth rate assumption and WACC. The shaded area represents the most probable
outcomes.
Table 22: Sensitivity Analysis
Terminal Growth Rates
1.50% 2.50% 3.00% 3.50% 4.50%

W
A
C
C
8.48% 40.0 46.7 51.0 56.1 70.2
9.48% 34.3 39.3 42.3 45.8 55.0
10.48% 29.9 33.7 35.9 38.5 44.9
11.48% 26.4 29.3 31.1 33.0 37.8
12.48% 23.5 25.8 27.2 28.7 32.4
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM |]
Relative Valuation
For relative valuation, we have made a comparison of SIPCHEM with selected regional and
international players.
Table 23: Relative Comparison
Company Name Country Name
Market
Price
(Local)
Adjusted
Market
Price
(US$)
Adjusted
Market
Cap
(US$mn)
EV/
EBITDA
2008
Mitsui Chemicals Inc JAPAN 352.0 3.6 2,814.2 7.3
FMC Corp UNITED STATES 36.3 37.3 2,786.9 8.4
JSR Corp JAPAN 1,055.0 10.6 2,725.0 6.2
Teijin Ltd JAPAN 266.0 2.7 2,644.1 6.4
Lubrizol Corp UNITED STATES 37.0 37.9 2,567.6 5.6
Umicore BELGIUM 14.8 20.4 2,551.3 9.9
Fertilizantes Fosfatados SA BRAZIL 11.8 5.7 2,434.4 13.4
Braskem SA BRAZIL 9.9 4.8 2,312.2 7.3
Sinofert Holdings Ltd HONG KONG 2.5 0.3 2,336.7 11.1
Albemarle Corp UNITED STATES 23.5 24.1 2,202.2 8.6
Hitachi Chemical Co Ltd JAPAN 1,013.0 10.2 2,130.6 4.2
China BlueChemical Ltd CHINA 3.4 0.5 2,086.5 6.6
Hercules Inc UNITED STATES 17.8 18.2 2,056.8 5.9
Showa Denko KK JAPAN 160.0 1.6 2,016.0 5.7
Yantai Wanhua Polyurethanes C CHINA 8.1 1.2 2,018.0 18.6
Valspar Corp UNITED STATES 19.5 20.0 1,997.2 7.9
RPM International Inc UNITED STATES 14.8 15.2 1,961.1 7.3
Terra Industries Inc UNITED STATES 20.5 21.1 1,934.2 3.7
Ube Industries Ltd/Japan JAPAN 181.0 1.8 1,843.5 6.9
Makhteshim-Agan Industries Lt ISRAEL 1,620.0 4.4 1,925.6 8.6
Mitsubishi Gas Chemical Co In JAPAN 367.0 3.7 1,791.1 6.7
Symrise AG GERMANY 10.7 14.7 1,732.1 9.0
IRPC PCL THAILAND 2.9 0.1 1,690.8 7.7
Ashland Inc UNITED STATES 25.4 26.1 1,642.5 3.4
Nufarm Ltd AUSTRALIA 12.3 8.7 1,624.9 11.7
PTT Chemical PCL THAILAND 36.5 1.1 1,639.1 6.8
Altana AG GERMANY 8.5 11.6 1,632.8 6.7
Huabao International Holdings HONG KONG 4.0 0.5 1,628.7 11.9
Clariant AG SWITZERLAND 7.8 7.0 1,622.4 5.5
Lanxess AG GERMANY 14.1 19.4 1,613.4 4.8
Arkema SA FRANCE 19.0 26.2 1,602.4 5.8
Cabot Corp UNITED STATES 24.3 24.9 1,602.2 5.7
Air Water Inc JAPAN 847.0 8.5 1,583.5 5.6
Kaneka Corp JAPAN 443.0 4.5 1,565.1 4.8
Saudi International Petrochem SAUDI ARABIA 22.3 6.1 2,020.9
Source: Bloomberg
* As on 19
th
October 2008
|e Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
The comparison is made on sector EV/EBITDA of 2008, which is calculated at 7.4. By
employing the sector EV/EBITDA on the Companys EBITDA, our fair value of the
Company arrives at SR32.7.
Consolidated Fair Value
In order to arrive at a consolidated fair value for the Company, we have assigned 80%
weightage to the value arrived from DCF base valuation and 20% to the relative value. On
the basis of this, our consolidated value for the Company comes at SR35.3.
Table 24: Consolidated Fair Value
Valuation Techniques Value per Share (SR) Weights Weighted Value per share (SR)
DCF Method 35.9 80% 28.7
Relative Valuation 32.7 20% 6.5
Consolidated Fair Vale 35.3
Based on our consolidated valuation techniques, the stock offers a potential upside of 56.4%
over the market price of SR22.5 per share. We, therefore, initiate our coverage of SIPCHEM
with a BUY recommendation.
Octcce| !~ Saudi International Petrochemical Company - SIPCHEM |
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S
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t
|~ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
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Octcce| !~ Saudi International Petrochemical Company - SIPCHEM |)

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+ Octcce| !~ Saudi International Petrochemical Company - SIPCHEM
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This m a teria l wa s prod u ced by Globa l In vestm en t Hou se KSCC ( Globa l) ,a firm regu la ted by the Cen tra l Ba n k of
Ku wa it. This d ocu m en t is n ot to be u sed or con sid ered a s a n offer to sell or a solicita tion of a n offer to bu y a n y
secu ri ti es. Globa l m a y, from ti m e to ti m e,to the ex ten t perm i tted by la w, pa rti ci pa te or i n vest i n other fi n a n ci n g
tra n sa ction s with the issu ers of the secu rities ( secu rities) , perform services for or solicit bu sin ess from su ch issu er,
a n d/or ha ve a position or effect tra n sa ction s in the secu rities or option s thereof. Globa l m a y, to the exten t perm itted
by a pplica ble Ku wa iti la w or other a pplica ble la ws or regu la tion s, effect tra n sa ction s in the secu rities before this
m a teria l is pu blished to recipien ts.
In form a ti on a n d opi n i on s con ta i n ed herei n ha ve been com pi led or a rri ved by Globa l from sou rces beli eved to
be relia ble, bu t Globa l ha s n ot in depen den tly verified the con ten ts of this docu m en t. Accordin gly, n o represen ta tion
or w a r r a n ty, ex pr ess or i m pli ed , i s m a d e a s to a n d n o r eli a n ce shou ld be pla ced on the fa i r n ess, a ccu r a cy,
com pleten ess or correctn ess of the in form a tion a n d opin ion s con ta in ed in this docu m en t. Globa l a ccepts n o lia bility
for a n y loss a ri si n g from the u se of thi s d ocu m en t or i ts con ten ts or otherwi se a ri si n g i n con n ecti on therewi th.
This d ocu m en t is n ot to be relied u pon or u sed in su bstitu tion for the ex ercise of in d epen d en t ju d gem en t. Globa l
sha ll ha ve n o respon si bi li ty or li a bi li ty w ha tsoever i n respect of a n y i n a c cu ra cy i n or om m i ssi on from thi s or
a n y other d ocu m en t pr epa r ed by Globa l for , or sen t by Globa l to a n y per son a n d a n y su ch per son sha ll be
respon sible for con d u ctin g his own in vestiga tion a n d a n a lysis of the in form a tion con ta in ed or referred to in this
d ocu m en t a n d of eva lu a ti n g the m eri ts a n d ri sk s i n volved i n the secu ri ti es form i n g the su bject m a tter of thi s or
other su ch d ocu m en t.
Opin ion s a n d estim a tes con stitu te ou r ju d gm en t a n d a re su bject to cha n ge withou t prior n otice.Pa st perform a n ce
i s n ot i n d i ca ti v e of fu tu re resu lts. Thi s d ocu m en t d oes n ot con sti tu te a n offer or i n v i ta ti on to su bscri be for or
pu rcha se a n y secu ri ti es, a n d n ei ther thi s d ocu m en t n or a n ythi n g con ta i n ed herei n sha ll form the ba si s of a n y
con tra ct or com m i tm en t wha t so ever. It i s bei n g fu rn i shed to you solely for you r i n form a ti on a n d m a y n ot be
reprod u ced or red istribu ted to a n y other person .
Neither this report n or a n y copy hereof m a y be distribu ted in a n y ju risdiction ou tside Ku wa it where its distribu tion
m a y be restri cted by la w. Person s who recei ve thi s report shou ld m a k e them selves a wa re of a n d a d here to a n y
su ch restriction s. By a cceptin g this report you a gree to be bou n d by the foregoin g lim ita tion s.
Company
Saudi International
Petrochemical Co.
SIPCHEM
Recommendation
Buy
Ticker
SIPCHEM AB
(Bloomberg)
2310.SE (Reuters)
Price
SR22.5
Disclosure
1,10
Disclosure Checklist
1. Global Investment House did not receive and will not receive any compensation from the company
or anyone else for the preparation of this report.
2. The company being researched holds more than 5% stake in Global Investment House.
3. Global Investment House makes a market in securities issued by this company.
4. Global Investment House acts as a corporate broker or sponsor to this company.
5. The author of or an individual who assisted in the preparation of this report (or a member of his/her
household) has a direct ownership position in securities issued by this company.
6. An employee of Global Investment House serves on the board of directors of this company.
7. Within the past year , Global Investment House has managed or co-managed a public offering for
this company, for which it received fees.
8. Global Investment House has received compensation from this company for the provision of
investment banking or financial advisory services within the past year.
9. Global Investment House expects to receive or intends to seek compensation for investment banking
services from this company in the next three months.
10. Please see special footnote below for other relevant disclosures.
The following is a comprehensive list of disclosures which may or may not apply to all our researches.
Only the relevant disclosures which apply to this particular research has been mentioned in the table
below under the heading of disclosure.
Global Rating
Buy
Global Research: Equity Ratings Definitions
Hold
Reduce
Sell
Definition
Fair value of the stock is >10% from the current market price
Fair value of the stock is between +10% and -10% from the current market price
Fair value of the stock is between -10% and -20% from the current market price
Fair value of the stock is < -20% from the current market price
Global Invest ment House
Tel: ( 965) 2295 1000 - Fax: ( 965) 2295 1005
research @ global.com.kw
www.globalinv.net
Gl o b a l Research

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