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Should You Buy the Saudi Aramco IPO?
...This “land of the future,” called Neom, is to be built on a Massachusetts-size area of barren desert along the Saudi kingdom’s northwest coastline. Its goal is not only to attract “the world’s greatest minds and best talents,” but also to lure international tourists and luxury travelers. As ambitious (crazy?) as bin Salman’s plan sounds, it’s already moving forward. Bloomberg reports that the kingdom has awarded two Saudi construction firms with contracts to begin building housing for workers. Altogether, the cost to bring Neom to fruition will run an estimated $500 billion—which has some investors sweating. This year the oil-rich kingdom’s budget deficit has widened further to around 7 percent of its gross domestic product (GDP), according to the International Monetary Fund (IMF). ...
...It may be no coincidence that at the same time that construction starts on Neom, Saudi Arabia is finally set to sell shares of its national oil company, Saudi Aramco. Coincidence or not, the timing is interesting. Early last week, the kingdom’s Capital Market Authority announced that, after years of speculation, Aramco will at long last begin trading on the Saudi Stock Exchange, or Tadawul, sometime next month. The energy giant is the world’s most profitable company—in 2018 it generated a mind-boggling $111 billion in net income and some $86 billion in free cash flow. And with a valuation of between $1 trillion and $2 trillion, it’s worth more than the entire $550 billion Saudi equity market. In fact, at the low end of that valuation, Aramco “will still be worth more than all Brazilian stocks, and the top valuation would make it worth more than Korean, Australian, Swiss or German stocks,” writes the Wall Street Journal’s James Mackintosh. ...
...In the past, the monarchy has used Aramco as a piggy bank, dipping into its vast coffers to finance any number of pursuits and projects. As Ellen Wald puts it in a recent New York Times op-ed: “The money raised from the Aramco IPO, and any subsequent offerings, will not go to the company. It will go to Saudi Arabia—to the king and his government. And every subsequent purchase of Aramco shares will raise the value of the company just a little, further enriching the king.” And getting him closer to realizing the futuristic city of Neom. ...
...According to reports, Aramco’s growth assumptions and basis for such a generous dividend package are predicated on Brent crude prices at or above $65 a barrel, a level last seen in September. The average price for a barrel of oil for the three-year period through November 8 is just shy of $63. In an attempt to prop up prices before its IPO, Aramco has been making production cuts for the better part of a year, and at next month’s OPEC meeting, Saudi Arabia is expected to push for additional cuts from fellow oil-exporting members. Output could collectively be lowered by some 1.2 million barrels a day. ...
https://www.forbes.com/sites/greatspecul...5f41af1c51
Should You Buy the Saudi Aramco IPO?
...This “land of the future,” called Neom, is to be built on a Massachusetts-size area of barren desert along the Saudi kingdom’s northwest coastline. Its goal is not only to attract “the world’s greatest minds and best talents,” but also to lure international tourists and luxury travelers. As ambitious (crazy?) as bin Salman’s plan sounds, it’s already moving forward. Bloomberg reports that the kingdom has awarded two Saudi construction firms with contracts to begin building housing for workers. Altogether, the cost to bring Neom to fruition will run an estimated $500 billion—which has some investors sweating. This year the oil-rich kingdom’s budget deficit has widened further to around 7 percent of its gross domestic product (GDP), according to the International Monetary Fund (IMF). ...
...It may be no coincidence that at the same time that construction starts on Neom, Saudi Arabia is finally set to sell shares of its national oil company, Saudi Aramco. Coincidence or not, the timing is interesting. Early last week, the kingdom’s Capital Market Authority announced that, after years of speculation, Aramco will at long last begin trading on the Saudi Stock Exchange, or Tadawul, sometime next month. The energy giant is the world’s most profitable company—in 2018 it generated a mind-boggling $111 billion in net income and some $86 billion in free cash flow. And with a valuation of between $1 trillion and $2 trillion, it’s worth more than the entire $550 billion Saudi equity market. In fact, at the low end of that valuation, Aramco “will still be worth more than all Brazilian stocks, and the top valuation would make it worth more than Korean, Australian, Swiss or German stocks,” writes the Wall Street Journal’s James Mackintosh. ...
...In the past, the monarchy has used Aramco as a piggy bank, dipping into its vast coffers to finance any number of pursuits and projects. As Ellen Wald puts it in a recent New York Times op-ed: “The money raised from the Aramco IPO, and any subsequent offerings, will not go to the company. It will go to Saudi Arabia—to the king and his government. And every subsequent purchase of Aramco shares will raise the value of the company just a little, further enriching the king.” And getting him closer to realizing the futuristic city of Neom. ...
...According to reports, Aramco’s growth assumptions and basis for such a generous dividend package are predicated on Brent crude prices at or above $65 a barrel, a level last seen in September. The average price for a barrel of oil for the three-year period through November 8 is just shy of $63. In an attempt to prop up prices before its IPO, Aramco has been making production cuts for the better part of a year, and at next month’s OPEC meeting, Saudi Arabia is expected to push for additional cuts from fellow oil-exporting members. Output could collectively be lowered by some 1.2 million barrels a day. ...
https://www.forbes.com/sites/greatspecul...5f41af1c51
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