Crown Prince Mohammed bin Salman al Saud raised eyebrows when, in an April interview on Rotana Khalejia TV, he said that the Kingdom was in talks to sell an additional 1% stake in oil giant Saudi Aramco. The buyer was a “leading global energy company” he said, which would pay upwards of $18 billion for the stake. The most likely suspects are Sinopec or Petrochina, the oil champions of China, which buys 3 million barrels of Saudi oil a day.
These things tend to chill investor appetite, and MbS dialed back the IPO. But investors have put aside their scruples. According to analyst Oswald Clint at Bernstein Research, Aramco is “trading in its own universe” at 21 times expected 2021 earnings of roughly $80 billion. That compares with a 13 p/e for the western majors like ExxonMobil and Chevron, 6 for the Chinese majors, and 6 for Russia’s Rosneft. Aramco also pays out $75 billion in annual dividends, for a 4% yield .
Existing MbS megaprojects include techno-resort-city on the Red Sea; planting 10 billion trees; sourcing half the Kingdom’s power from renewables within a decade. In his Rotana interview MbS said the Kingdom would power through a “V-shaped” recovery and that unemployment among Saudis would drop to 11% this year then down to 7% in 2030. AFP via Getty Images
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