Page 17 - DMEA Week 28 2020

DMEA PETROCHEMICALS DMEA
Saudi petchem firm secures $400mn credit facility for expansion
SAUDI ARABIA
Advanced’s target price has also been raised by Al Rajhi Capital.
SAUDI petrochemicals producer Advanced Pet- rochemical has secured a SAR1.5bn ($400mn) credit facility, in order to nance its expansion projects, it said in a stock exchange ling on July 12.
e facility was agreed with Riyadh Bank, Samba Financial Group, and Al Rajhi Bank. Its term is ve and a half years, and it is guaranteed by a promissory note. Advanced said it obtained the facility thanks to lenders’ con dence in its capabilities, despite di cult market conditions.
Advanced produces around 455,000 tonnes per year of propylene and 450,000 tpy of poly- propylene (PP) at its production facilities in Jubail, on Saudi Arabia’s east coast. It signed a deal earlier this year with South Korea’s SK Gas to build and operate new plants for propane dehy- drogenation and PP – a project valued at $1.8bn.
The expansion will boost Advanced’s PP output by 750,000 tpy, starting in late 2024. Advanced is the lead partner in the venture with an 85% stake, meaning it will cover the lion’s share of nancing.
Al Rajhi Capital raised its target price for Advanced this week to SAR58 per share, citing the group’s improved outlook. e nancial rm pointed to an expected recovery in PP prices, rising
dividends and Advanced’s organic growth path. Advanced also achieved strong second-quar- ter results, Al Rajhi said, posting SAR519mn in revenues and SAR155mn in net income. e company’s utilisation rates are expected to remain high, thanks to its ability to shi towards higher netback markets when necessary, as well as rising PP demand as economies are reopened. PP prices were under pressure even before the coronavirus (COVID-19) pandemic, owing to weaker economic growth. ey have, how- ever, already surged by 13% so far in the current quarter, compared with the average in the three
months ending June 30.
Al Rajhi sees Advanced maintaining its div-
idends at SAR2.6 per share in 2020, and poten- tially increasing them in future years. It remains “positive on the company’s medium to long-term growth prospects, given the strong utilisation rates, consistent operating performance, free cash flow generation ability, healthy balance sheet, and excellent management quality.”
“ e key upside trigger might be attributed to sustained improvements in spreads while fur- ther weakness in product spreads, a dividend cut, and/or any unplanned shutdown may act as the downside triggers,” it said. ™
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