JPMorgan sees scope for Saudi Aramco stock gains

Saudi Aramco’s assets, scale and profitability ‘dwarf just about any company globally,’ according to BofA. (AFP)
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Updated 16 January 2020

JPMorgan sees scope for Saudi Aramco stock gains

  • The Saudi Aramco IPO raised a record of $29.4 billion including a greenshoe allocation of extra shares

DUBAI: JPMorgan is the first major brokerage to initiate coverage of Saudi Aramco with an “overweight,” setting a price target of SR37 ($9.86) per share and saying it sees scope for an increase in the energy giant’s proposed $75 billion base dividend.

“Aramco is unique. In terms of quality of assets, scale and profitability it dwarfs just about any company globally,” BofA said in a note. “Yet, at current valuations, most of the outstanding fundamental factors are already priced in.”

Citigroup also gave Aramco neutral rating with a price target of SR34.1.

“Our bullish view is predicated on its dividend growth outlook, with scope to increase the $75 billion baseline as production scales up,” JPMorgan said in a note.

JPMorgan said that Aramco’s ability to sell its oil at a premium, capital expenditure flexibility and low debt to equity ratio would allow it to distribute a higher percentage of cashflow. The brokerage said Aramco is uniquely positioned to raise production with minimal incremental capital expenditure.

It said it could see Saudi production capacity rising to 15 million barrels per day from the current 12 million and production of 10 million citing increased appetite by the Kingdom to regain its share of global oil demand growth as oil markets tighten.

JPMorgan was one of nine global coordinators on Aramco’s IPO.


Lufthansa to freeze hiring, cut costs over coronavirus

Updated 26 February 2020

Lufthansa to freeze hiring, cut costs over coronavirus

  • ‘All new hires ... will be reassessed, suspended or deferred’
  • Lufthansa has also slashed connections with Hong Kong in the face of reduced demand

FRANKFURT AM MAIN: German airline Lufthansa said Wednesday it would freeze new hires and use unpaid leave and additional short-time work to cut costs to help cushion the economic impact of the novel coronavirus.
“To counteract the economic impact of the coronavirus of the early stage,” the group, which also owns carriers Austrian and Swiss, said in a statement that “all new hires ... will be reassessed, suspended or deferred.”
Employees would be offered unpaid leave and more part-time work and the group would also seek to cut administrative costs, it said.
“It is not yet possible to estimate the expected impact ... on earnings,” the group said, adding that it would provide more details at its annual results press conference on March 19.
The Frankfurt-based group said 13 of its aircraft were grounded, after it canceled all flights to and from mainland China by its flagship airline, as well as Austrian and Swiss until March 28.
Lufthansa has also slashed connections with Hong Kong in the face of reduced demand “and additional frequency adjustments to and from Frankfurt, Munich and Zurich are planned,” it said.