1 Output: Top-25 Yield Stocks in MSM Source: The picture's are sourced from shutterstock .comand canstock.com Research Team Joice Mathew Santhosh Balakrishnan Key Target: Identifying Yield stocks above the Country Risk Free rate Yield Portfolio Setting Required Return/Yield Stock Screening using Required rate Quality of fundamentals Others screens including size, track record and liquidity Mechanism: The Screening criteria United Securities Dividend Strategy Oman Top-25 Yield Picks: A Review of our Model Portfolio
Transcript
1
Output: Top-25
Yield Stocks in MSM
Source: The picture's are sourced from shutterstock .comand canstock.com
Research Team
Joice Mathew
Santhosh Balakrishnan
Key Target: Identifying
Yield stocks above the
Country Risk Free rate
Yield Portfolio
Setting Required Return/Yield
Stock Screening using Required
rate
Quality of fundamentals
Others screens including size,
track record and liquidity
Mechanism: The
Screening criteria
United Securities Dividend Strategy
Oman Top-25 Yield Picks:
A Review of our Model Portfolio
2
Rationale
The start of 2013 witnessed price spikes across all stocks in MSM on the back of robust
corporate earnings and incremental payouts from MSM stocks. The same resulted in MSM
rallying by 4% on a YTD basis and volumes rebounding by 92% YoY in the first two months
of the year with RO 300 million vs RO 157 million in 2012 (End of feb). With Oman based
investors focusing to rebalance returns for rest of 2013, we believe including stocks with
consistency in dividends alongside quality fundamentals would be the right strategy to
implement. Hence to initiate such strategy and take rebalancing to full effect, we assigned a
top-down methodology and screened top-25 stocks in Oman, which additionally offers
reasonable valuations. The rationale for the stock selection are based on the following
criteria:
Criteria for Payout strategy
Dividend yields in excess of 4.5% are selected, whilst excluding companies with special
payouts over the past five years.
The picks are selected from companies with market capitalization in excess of RO 20
million, a diversified portfolio of Emerging small caps and blue chips.
Stocks with consistent track record of dividend payout, with average payout ratio in
excess of 30%
Key changes to our Model Portfolio since our last report on January 13th, 2013
The exclusions post our screening criteria are Bank Sohar, OIFC, Oman Chlorine,Al
Maha Petroleum, Shell Oman due to lowering yields and payouts, while OHI, Oman
Flour Mills has are advised to have a longer holding period from the next dividend
ex:date. Additionally, we have removed Oman Cables due to the miss in cut-off date.
The inclusions are Al Jazeira Services Co, Dhofar Cattle feed, Voltamp Energy, Salalah
Port Services, Muscat Finance, National Finance and Raysut Cement to the list due to
effect of increase in payouts and yields.
Investment Strategy: Summary
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
Source: Company data and Bloomberg. Data as of March 5th ,2013 1) For AGM date, CMA regulations require companies to conduct AGM within 3 months of completion of financial year. 2)
Al Kamil, Omantel, SMN Power and Acwa Power has interim dividend payouts, hence yields are annualized. For leasing companies, CBO is still reviewing the dividend and may change,
which is a risk to our model portfolio and applies to other stocks as well.
3
Salient features of the model portfolio
DPS growth rate: Out of the 25 picks in the model portfolio, 12 stocks had dividend growth rate (CAGR) in excess of 10% during the past five years, while 5
of them had growth rate between 0% to 5% and the rest had de-growth in dividends offered from the base year. On a YoY basis in 2012, 13 stocks
witnessed a growth in dividends in excess of 10%, while 9 of them had either maintained or grown at a rate less than 10%. Al Jazeira Services, ONIC
Holding and Dhofar Cattle feed coupled with leasing companies, had almost doubled the dividends.
Yield: The portfolio provides average yield of 7.0% vs 4.6% for the MSM currently, with 19 companies witnessed dividend growth and 6 of them maintained
the same DPS making all the 25 companies showing a greenish dividend growth rate trend. Out of 25 companies, 6 stocks have yield above 8% while 9
stocks have yield ranging 6% to 8% with Al Kamil topping the list with 11.6% yield.
EPS growth rate: 12 stocks had EPS growth rate (CAGR) in excess of 5% over the past five years, while 2 of them had growth rate ranging between 0% to
5% and 11 of them had de-growth in EPS during 2007-12. However in 2012, 19 stocks had growth rate exceeding 10%.
Payout : The portfolio provides an average payout in excess of 58% during 2007-12. Out of the total,16 stocks has good track record of consistently paying
dividends over the past five years, while only 5 of them missed the 5 years track record with the exception of Sohar Power, SMN Power and Nawras which
was listed post 2007-08 period. There are 4 stocks which had a payout range exceeding 80%, while 13 stocks falling in the 50% to 70% range.
Return on Equity: (ROE) The portfolio provided an average ROE of 19% over the past five years with most of the stocks falling in the ROE range of 13%-
20% range. We have noticed only 4 stocks having an ROE range of 20-30% with the exception of Jazeera Steel which is operating at 6% ROE due to
nature of its cyclicality in operations. Acwa Power has the highest ROE exceeding 40% due to its lower retention ratio’s.
Sector Concentration: The portfolio has 6 stocks from the leasing sector which commands the highest concentration due to high payouts followed by Power
sector. The other sectors include telecom, cement, banks and investment holding. Utilities were the highest yield players with average of 9.5% yield,
followed by investment holding.
Index Weights: The model portfolio have relatively better trading liquidity with 5 of them Index heavy weights and has a minimum of 5% weightage in the
MSM 30 index. Additionally, the re are 8 stocks in the MSM30 and six stocks from Bloomberg GCC 200 Index
Market Cap: The combined market cap of the portfolio is RO 3.6 billion, c. 62% of the MSM30 market cap and 44% of the MSM listed stocks, which is at RO
8.09 billion. The top five companies account for 65% of total portfolio market cap which mainly contributed by Omantel, Nawras, NBO, Raysut Cement and
Shell Oman Marketing which has a combined market cap of 28% of the MSM market cap.
Investment Strategy: Summary
Oman Equity Strategy
March 6 , 2013
Oman Top-25 Yield Picks
4
Key Metrics
Key P&L, Balance sheet and Ratio trends
Per share trends-EPS, DPS and BVPS
Dividends Summary: Track record
ROE and growth ratio’s
Earnings and Book value trends
Weightages and Portfolio Composition
Sector based yield trends
Disclaimer
Exhibits: Model Portfolio
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
5
Exhibit 1: Key Metrics
Source: Company data and Bloomberg. Data as of March 5t,2013 Note: 1) DPS is dividend per share 2) Enterprise Value do not apply for financial sector, hence has provided NA or NM 3) Stocks sorted (column 4) by
current yields and does not indicate any investment or weighting preference
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
6
Exhibit 2: Key Ratio’s and Growth rate
Source: Company data and Bloomberg Note: 1) For companies with non availability of data during preceding years, the CAGR is calculated from the available latest years. 2)LCL means Local or Domestic currency in
respective countries. 4) DPS is dividend per share, BVPS is Book Value per share 5)Cash and Total debt do not apply for financial sector, hence has provided NA
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
7
Exhibit 3: Per Share Trends for Earnings, Dividends and Book Value for 2007-12
Source: Company data and Bloomberg.
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
8
Exhibit 4:Dividend Track record for 2007-12
Source: Company data and Bloomberg.
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
9
Exhibit 5: Trends for Payout Ratio, ROE, DPS and EPS growth during 2007-12
Source: Company data and Bloomberg
Note: 1) For companies with no data during preceding years, the growth is calculated from the available latest years or mentioned NM. 2)DPS is dividend per share
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
10
Exhibit 6: Growth trends for Net Profit and Book value growth during 2007-12
Source: Company data and Bloomberg
Note: 1) For companies with no data during preceding years, the CAGR is calculated from the available latest years. 2) The forward estimates are reported as per our estimates .3)LCL means Local or Domestic currency
in respective countries. 4) DPS is dividend per share
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
11
Exhibit 7:Weightage and composition of the portfolio
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
12
Exhibit 8: Key Dividend Yield Trends
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
Source: Company data and Bloomberg
13
Exhibit 9: Key Dividend Yield Trends
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
0
2
4
6
8
10
12
Jun-1
0Ju
l-10
Aug-1
0A
ug-1
0S
ep-1
0O
ct-10
Nov-
10D
ec-
10Ja
n-1
1F
eb-1
1M
ar-
11
Apr-
11
Mar-
12
Apr-
12
May-
12
May-
12
Jun-1
2Ju
l-12
Aug-1
2S
ep-1
2O
ct-12
Nov-
12D
ec-
12Ja
n-1
3Ja
n-1
3F
eb-1
3
Oman Orix Leasing
ORXL OM Equity 3 Yr Avg
3
3.5
4
4.5
5
5.5
6
6.5
7
Jun-1
0Ju
l-10
Aug-1
0S
ep-1
0N
ov-
10D
ec-
10Ja
n-1
1M
ar-
11
Apr-
11
May-
11
Jun-1
1Ju
l-11
Sep-1
1O
ct-11
Nov-
11D
ec-
11F
eb-1
2M
ar-
12
Apr-
12
May-
12
Jun-1
2Ju
l-12
Sep-1
2O
ct-12
Nov-
12Ja
n-1
3F
eb-1
3
National Bank of Oman
NBOB OM Equity 3 Yr Avg
0
2
4
6
8
10
12
Jun-1
0Ju
l-10
Aug-1
0S
ep-1
0N
ov-
10D
ec-
10Ja
n-1
1M
ar-
11
Apr-
11
May-
11
Jun-1
1Ju
l-11
Aug-1
1O
ct-11
Nov-
11D
ec-
11Ja
n-1
2M
ar-
12
Apr-
12
May-
12
Jun-1
2Ju
l-12
Sep-1
2O
ct-12
Nov-
12D
ec-
12F
eb-1
3
Voltamp Energy
VOES OM Equity 3 Yr Avg
0
1
2
3
4
5
6
7
Feb
-11
Mar-
11
Apr-
11
May-
11
Jun-1
1Ju
l-11
Aug-1
1S
ep-1
1O
ct-11
Dec-
11Ja
n-1
2Ja
n-1
2M
ar-
12
Apr-
12
Apr-
12
May-
12
Jun-1
2Ju
l-12
Sep-1
2O
ct-12
Nov-
12D
ec-
12Ja
n-1
3F
eb-1
3
Jazeera Steel
ATMI OM Equity 3 Yr Avg
0
2
4
6
8
10
12
14
16
18
20
Jun-1
0Ju
l-10
Aug-1
0S
ep-1
0N
ov-
10D
ec-
10Ja
n-1
1M
ar-
11
Apr-
11
May-
11
Jun-1
1Ju
l-11
Sep-1
1O
ct-11
Nov-
11D
ec-
11F
eb-1
2M
ar-
12
Apr-
12
May-
12
Jun-1
2Ju
l-12
Sep-1
2O
ct-12
Nov-
12Ja
n-1
3F
eb-1
3
ONIC
ONIC OM Equity 3 Yr Avg
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
Jun-1
0Ju
l-10
Aug-1
0O
ct-10
Nov-
10D
ec-
10F
eb-1
1M
ar-
11
Apr-
11
May-
11
Jul-11
Aug-1
1S
ep-1
1O
ct-11
Dec-
11Ja
n-1
2F
eb-1
2A
pr-
12
May-
12
Jun-1
2Ju
l-12
Sep-1
2O
ct-12
Nov-
12D
ec-
12F
eb-1
3
Omantel
OTEL OM Equity 3 Yr Avg
Source: Company data and Bloomberg
14
Exhibit 10: Key Dividend Yield Trends
Oman Top-25 Yield Picks
Oman Equity Strategy
March 6 , 2013
0
2
4
6
8
10
12
14
16
Jun-1
0Ju
l-10
Aug-1
0O
ct-10
Nov-
10Ja
n-1
1F
eb-1
1A
pr-
11
May-
11
Jun-1
1A
ug-1
1S
ep-1
1O
ct-11
Dec-
11Ja
n-1
2F
eb-1
2A
pr-
12
May-
12
Jun-1
2A
ug-1
2S
ep-1
2N
ov-
12D
ec-
12Ja
n-1
3
Raysut Cement
RCCI OM Equity 3 Yr Avg
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Jun-1
0Ju
l-10
Aug-1
0S
ep-1
0O
ct-10
Nov-
10D
ec-
10Ja
n-1
1F
eb-1
1M
ar-
11
Apr-
11
May-
11
Jun-1
1Ju
l-11
Aug-1
1S
ep-1
1O
ct-11
Dec-
11Ja
n-1
2F
eb-1
2M
ar-
12
Apr-
12
May-
12
May-
12
Jul-12
Sohar Power
SHPS OM Equity 3 Yr Avg
0
1
2
3
4
5
6
7
8
Jun-1
0Ju
l-10
Sep-1
0O
ct-10
Dec-
10Ja
n-1
1M
ar-
11
Apr-
11
May-
11
Jul-11
Aug-1
1S
ep-1
1N
ov-
11D
ec-
11F
eb-1
2M
ar-
12
May-
12
Jun-1
2Ju
l-12
Sep-1
2O
ct-12
Dec-
12Ja
n-1
3F
eb-1
3
Salalah Port Services
SPSI OM Equity 3 Yr Avg
0
1
2
3
4
5
6
7
8
9Ja
n-1
1F
eb-1
1M
ar-
11
Apr-
11
May-
11
Jun-1
1Ju
l-11
Aug-1
1S
ep-1
1O
ct-11
Dec-
11Ja
n-1
2F
eb-1
2M
ar-
12
Apr-
12
May-
12
Jun-1
2Ju
l-12
Aug-1
2S
ep-1
2O
ct-12
Nov-
12D
ec-
12Ja
n-1
3F
eb-1
3
National Finance
NFCI OM Equity 3 Yr Avg
0
2
4
6
8
10
12
Jun-1
0
0
1
2
3
4
5
6
0
1
2
3
4
5
6
7
8
9
Jun-1
0Ju
l-10
Aug-1
0S
ep-1
0N
ov-
10D
ec-
10Ja
n-1
1M
ar-
11
Apr-
11
May-
11
Jul-11
Aug-1
1S
ep-1
1O
ct-11
Dec-
11Ja
n-1
2F
eb-1
2M
ar-
12
Apr-
12
May-
12
Jul-12
Aug-1
2S
ep-1
2N
ov-
12D
ec-
12Ja
n-1
3F
eb-1
3
Tageer Finance
TFCI OM Equity 3 Yr Avg
0
5
10
15
20
25
Jun-1
0Ju
l-10
Aug-1
0O
ct-10
Nov-
10Ja
n-1
1F
eb-1
1M
ar-
11
May-
11
Jun-1
1Ju
l-11
Aug-1
1O
ct-11
Nov-
11Ja
n-1
2F
eb-1
2M
ar-
12
Apr-
12
Jun-1
2Ju
l-12
Aug-1
2O
ct-12
Nov-
12D
ec-
12F
eb-1
3
ACWA Power Barka
APBS OM Equity 3 Yr Avg
Source: Company data and Bloomberg
DISCLAIMER: This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any
other person. Persons into whose possession this document may come are required to observe these restrictions. Opinion expressed is our current opinion as of the
date appearing on this material only. We do not undertake to advise you as to any change of our views expressed in this document. While we endeavor to update on a
reasonable basis the information discussed in this material, United Securities, its subsidiaries and associated companies, their directors and employees are under no
obligation to update or keep the information current. Also, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors
and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading and investment
businesses may make investment decisions that are inconsistent with the recommendations expressed herein. The information in this document has been printed on
the basis of publicly available information, internal data and other reliable sources believed to be true and are for general guidance only. While every effort is made to
ensure the accuracy and completeness of information contained, the company takes no guarantee and assumes no liability for any errors or omissions of the
information. No one can use the information as the basis for any claim, demand or cause of action. Recipients of this material should rely on their own investigations
and take their own professional advice. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation
of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult their own advisors to
determine the merits and risks of such an investment. Price and value of the investments referred to in this material may go up or down. Past performance is not a
guide for future performance. United Securities LLC, and affiliates, including the analyst who has issued this report, may, on the date of this report, and from time to
time, have long or short positions in, and buy or sell the securities of the companies mentioned herein or engage in any other transaction involving such securities and
earn brokerage or compensation or act as advisor or have other potential conflict of interest with respect to company/ies mentioned herein or inconsistent with any
recommendation and related information and opinions. United Securities LLC and affiliates may seek to provide or have engaged in providing corporate finance,
investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past.
Joice Mathew Santhosh Balakrishnan Head Office
Senior Manager - Research Research Analyst P.O.BOX 2566, PC 112
![PETROLEUM DEVELOPMENT OMAN (PDO) [Elmech] Development Oman - PDO [Elmec… · Petroleum Development Oman L.L.C. ... Postal Address : P.O.BOX 505- PC 114- SULTANATE OF OMAN Is registered](https://static.documents.pub/doc/80x56/5ac633c57f8b9a5c558dcb76/petroleum-development-oman-pdo-elmech-development-oman-pdo-elmecpetroleum.jpg)
