SABIC AN announced a surprising cash dividend of SAR8.0/share for H2 22, taking the full year dividends to SAR12.0/share and reflecting a dividend yield of 8.8%. This is higher than our estimates of SAR7.0/share and compared to 2021 dividends of SAR4.3. The company said that the dividends consists of 1) SAR4.0/share related to H2 22 and 2) SAR4.0/share one-off dividends for the outstanding performance of the company in 2022. Following to our Petrochemicals sector update published yesterday, we are Overweight on the stock with a PT of SAR163.2, reflecting an upside of 20% from the current market levels.
SABIC AN announced a cash dividend of SAR8.0/share for H2 22, taking the full year dividends to SAR12.0/share and reflecting an outstanding dividends yield of 8.8%. The record and payment dates will be announced later.
This is the highest dividends since 2013. It is also substantially higher than our estimates and 2021 levels of SAR7.0/share and SAR4.3/share, respectively.
The company said that the dividends for consists of 1) SAR4.0/share related to H2 22 and 2) SAR4.0/share one-off dividends for the outstanding performance of the company in 2022. Adjusting for the one-off, we note the full year dividends would be SAR8.0/ share with a dividend yield of 5.9%.
We believe the increase in dividends reflects a link between profitability and dividends which we believe is a key positive. Moreover, this may limit the probability of substantial investment by the company going forward which reflects a level of dividends sustainability. We highlight that SABIC AN cash balance would decline to cSAR6.0bn-SAR7.0bn by the end of 2022.
We highlight that SABIC announced an increase in cash dividends for 2022. The company’s H2 22 DPS was SAR2.25, taking the full year dividends to SAR4.25, higher than 2021 levels of SAR4.0 and reflecting a dividend yield of 5.1%.
Given the higher than expected dividends by SABIC and SABIC AN, we expect Yansab to sustain its DPS of SAR3.0 ( Dividend yield of 7.6%).
In 2022f, we expect urea prices to average to US$722 (+38.7% yoy) and SABIC AN to report strong gross margins of 61.9% and a net income of SAR9.75bn (+86.4% yoy).
In 2023f , we expect urea prices to moderate to US$500 (-30.8% yoy) but remain higher than the LT average US$350, due to strong market fundamentals.
We have published our Petrochemicals update yesterday. We are Overweight on SABIC AN with a PT of SAR163.2. SABIC AN’s strengths include 1) fixed feedstock prices, 2) debt free balance sheet with sustainable dividends and 3) further potential synergies with SABIC.