Funds expect Saudi Aramco to
be valued around $1-1.5 trillion: survey
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[March 06, 2017]
By Celine Aswad and Andrew Torchia
DUBAI
(Reuters) - Fund managers and institutional investors expect oil giant
Saudi Aramco to have a market capitalization of $1 trillion to $1.5
trillion when it sells shares to the public next year, a survey by
regional investment bank EFG Hermes showed on Monday.
The valuation of Aramco, the world's biggest oil firm, has been the
focus of intense speculation since the Saudi government last year
announced plans to sell up to 5 percent of it and list the shares in
Riyadh and at least one foreign stock exchange.
Deputy Crown Prince Mohammed bin Salman, who oversees the kingdom's
economic policy, has said the sale is expected to value Aramco at $2
trillion or more, making it by the far the world's largest initial
public offer.
The EFG Hermes survey, conducted at an investment conference organized
by the bank in Dubai, found 39 percent of respondents predicted the
market would value Aramco at between $1 trillion and $1.5 trillion.
Thirty-six percent expect a valuation below $1 trillion, and 24 percent
a figure above $1.5 trillion, the bank said.
EFG Hermes said it polled 510 international fund managers and investors
from 260 institutions at the conference, as well as 147 other companies.
It did not say how many of them had replied to the question on Aramco.
The company's ultimate valuation will depend on decisions that are
expected to be made by Saudi authorities in coming months, including the
tax rate that Aramco will pay as a public company, and the portion of
Aramco's huge and diverse array of assets that is included in the listed
entity.
Saudi officials have given no concrete indication of how they will
decide these questions, so any estimate of Aramco's value remains
tentative.
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Oil tanks seen at the Saudi Aramco headquarters during a media tour
at Damam city November 11, 2007. REUTERS/ Ali Jarekji/File Photo
The EFG Hermes survey suggests a higher valuation than some estimates by
private analysts. Last year Foreign Reports, a Washington-based oil
industry consultancy, calculated Aramco could have a market value of
$250-460 billion, excluding the value of refining assets and guaranteed
access to oil and gas.
Aramco's valuation is important for Saudi Arabia because it will
determine how much money the government makes from the IPO and the size
of foreign fund flows that are expected to enter the country to buy the
shares.
The huge IPO looks likely to strengthen the case for Saudi Arabia to
join the emerging markets indexes of international index compilers such
as MSCI, a step which could attract tens of billions of dollars of fresh
foreign money to the kingdom.
The EFG Hermes survey found 16 percent of respondents expected Saudi
Arabia to join MSCI's emerging markets index next year, 34 percent in
2019, 22 percent in 2020 and 27 percent at a later date.
(Editing by Louise Heavens)
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