ACICO Industries Company Exchange

Kuwait Stock

ACICO Industries Company
Reuters Code:
ACIC.KW

Fair Value:
552 fils

Current Price: (As on December 6,2011) Recommendation:
234 Fils Strong Buy

Kuwait Economic Overview:

Subject Descriptor GDP - Current Prices GDP - Constant Prices Real GDP growth GDP per capita, current prices Inflation, average consumer

Units KWD Billons KWD Billons % change KWD % change

2007 32.58 18.15 4.40% 9,583 7.50%

2008 39.99 19.23 6.00% 11,762 9.00%

2009 30.48 18.35 4.60% 8,708 2.10%

2010 35.63 18.92 3.10% 9,898 6.00%

2011 44.85 19.75 4.40% 12,120 5.20%

2012 45.68 20.82 5.40% 11,712 4.70%

December 18, 2011

Page | 1

ACICO Industries Company Exchange
prices Population growth % change 6.30% 0.00% 2.90%

Kuwait Stock

2.90%

2.80%

5.40%

Kuwait is an oil based economy with the fifth largest proven crude oil reserves in the world. Consequently, Kuwait’s economy was structured around the production and refining of hydrocarbons. According to preliminary data from Kuwait’s Central Statistical Office, nominal GDP grew 16.9% YoY (Year on Year) in 2010 to reach KWD 35.6 billion, up from KWD 30.5 billion the previous year. Growth was driven largely by the oil sector, which contributed KD18.3 billion to GDP, an increase of 22% YoY due to higher oil prices in 2010. During the year 2010, Kuwait reported a budget surplus of KWD 6.3 billion. Oil revenues for the year reached KWD 18.8 billion and accounted for approximately 94% of total government revenues. The Economist Intelligence Unit (EIU) expects the non-oil sector to remain relatively small, despite efforts to diversify the economy. Looking forward, EIU forecasts real GDP to grow at an average rate of 4.9% over the 2011–2016 periods.1
Source: Economist Intelligence Unit, International Monetary Fund

Industry Sector: ACICO is listed in the industry sector. It contains 29 companies. They have 7 competitors and they are: 1. 2. 3. 4. 5. 6. 7.
Name ACICO Sector
1

Kuwait Cement Company (KCC) National Industries Company (NIC) Kuwait Portland Cement Company(KPCC) Hilal Cement Company(HCC) Salbookh Trading Company(STC) Gulf Rocks Company Kuwait Building Materials(KBMMC)
EPS 0.02 DPS 0.01 0.02 Payout 0.62 0.39 Div Yld (%) 4.31 2.93 ROE (%) 4.85 6.06 P/Book 0.70 1.06 P/Sales 1.42 2.39 Market Cap. (KWD)* 55,089,671.17

PE

24.07

0.04

KMEFIC research on Kuwait Cement Industry Report of October 2011

December 18, 2011

Page | 2

01 0.01 0.83 1. Kuwait is estimated to spend more than $63 billion over the next three years alone.913.63 35.00 0. as well as power and water plants.00 0.01 0.90 7.126.00 0.70 0.52 105.33 1.7 which is a good indicator that their stock will probably rise. infrastructure.50 -8. Considering the data.10 0.25 0.17 15.813. Their P/B is 0.27 4.70 1.29 4.96 2.85% which is higher than the sector median (4.28 2. Currently.139. ACICO's EPS is about 20 fils which is less than the sector average by 50%. it is considered a medium cap stock.298.59 9.00 0.95 0. is calculated for 09/12/2011.910.32 Source : Reuters 3000 Xtra .539.ACICO Industries Company Exchange average (Mean) Sector median Competitors KCC NIC KPCC ACICO HCC STC Gulf Rocks KBMMC 22.13 325. with a significant focus on the development of educational facilities.107. Kuwait has a dynamic construction sector that has seen significant expansion with the new millennium. 2011 Page | 3 .66 14.464.42 0. *Market Cap.23 4.01 0.71 35.00 0. commercial and residential buildings.15 22.671.17 6. This indicates that ACICO's ROE is in the normal range when compared to the sector.09 0.01 0.00 1.43 0.743.01 0.07 1. ACICO'S ROE is about 4.63 0. But its payout ratio is 62% which is more than the sector average (39%). They are ranked 4th among the competitors in terms of market cap. there are over 200 planned construction projects with a total value exceeding $155 billion.29 2.01 0.01 0.89 0.17 11. October 2011 December 18.62 0.984.02 0.47 3.15 29.450.52 5.63 10.00 0. This gives ACICO a competitive advantage which attracts long term investors.46 0.913.02 0.820.00 0.68 0. ACICO's market cap is about 55 million KD.31 4.85 4.67%) by a little bit.823.490.98 0.46 1.01 0.00 0.744.59 83.00 8.67 1.2 2 KMEFIC research on Kuwait Cement Industry Report.42 2.88 4.089.58 1. This is good for speculators because of the high opportunity for the stock price to increase.89 36.71 0. And it is less than the sector average by 28%.22 55.160.01 0.30 0.01 0.44 Kuwait Stock 76.37 0.02 1.62 9.

This is due to the decrease in capital markets. and real estate businesses. is known as Aerated Concrete Industries Company.com/En_ACICO_Overview.com. Kuwait posted a 51. They operate in the industrial. ACICO Industries Company diversified into the construction sector through the grade A ACICO Construction as classified by CTC (Central Tenders Committee) in Kuwait. 5 Shareholding: 3 4 5 Global GCC Cement Sector Quarterly. ACICO Industries Company is a fast growing company whose products and services meet essential necessities and requirements of modern life including building materials. Their original strategy is to be prepared to enhance and adapt to the constantly changing nature of their clients.kw (Kuwait Stock Exchange Market) December 18. hotels. ACICO is the only certified agent for Hebel Company in Germany. November 2011 http://www. That recorded a decrease of 4 million KD for the same period of 2010.4 ACICO profit (30/9/2011): Net profit of the company for the last 9 months of 2011 was 1.5 million KD. 2011 Page | 4 .acicogroup. Kuwaiti cement companies hold large portfolios in investments which altered profits during the 9M11 as the political and economic scene of the world reduced sentiments in capital markets in the region. ACICO Industries Company.7% decrease in net profits to reach KWD49mn during 9M11(9 months of 2011). cement.3 ACICO-Company Background: ACICO Industries Company is a shareholding Kuwaiti company established in 1990 and listed in both The Kuwait & Dubai financial markets.cms KSE. construction.ACICO Industries Company Exchange Kuwait Stock In the Cement Sector.

The company is also listed on the Dubai Financial Market (DFM). The stock closed at KD0.357/KD0.00 December 18.350 % 6.000 shares. The average daily volume traded of the stock was 252.890 % 9. Listing & Trading: ACICO was listed in the Kuwait Stock Exchange in 1997. Price Performance Closing Price* (Fils) 234.330 % 5.ACICO Industries Company Exchange Kuwait Stock As for shareholding pattern of the company.234 on December 6. under the ticker ‘ACICO’. Holder Name Al-Khalid (Ghassan Ahmad Saoud) Al-Khalid (Ahmad Ghassan Ahmad Saoud) Kuwait Investment Co SAK Al Saqer (Hamad Abdulaziz Al Hamad) Public Source : Reuters 3000 Xtra . with a turnover ratio of 20%. This means that the trading on the share is very low for the last 52 weeks.196. various members of the Al-Khalid family have sizeable holdings in the company about 22. with a 52-week high/low of KD0.670 % Board of Directors: The Board of Directors of the company consists of the Al Khaled family member.760 % 65. The company’s shares have enjoyed healthy liquidity in the past. 2011 Page | 5 .24%. 2011. % O/S 12. with Abdul Aziz Al Ayoub as the Chairman of the Board. Name Abdul Aziz Al Ayoub Ghassan Al Khalid Ahmad Al Khalid Walid Al Khalid Faisal Al Majed Faten Al Naqeeb Ahmad Al Rifai Current position Chairman of the Board Vice Chairman of th Board Member of the Board Member of the Board Member of the Board Member of the Board Member of the Board Source : Reuters 3000 Xtra .

reuters.KW * Closing price for 6/12/2011 ** Average Volume Traded is calculated for the last 12 month Business Overview: The core business of ACICO Company is involved in: Industrial. This value chain assures the timely supply of raw materials for ACICO manufacturing operations and projects which decreases the risk December 18. They use the materials from the industrial part to create construction sites which they use for their own real estate and hotel sectors.ACICO Industries Company Exchange 52 wk High (Fils) 52 wk Low (Fils) Average volume Traded** Turnover Markt Cap.00 252. Construction.00 Source : Reuters. Hotels and Real Estate and we will talk about each one briefly.00 196.com/finance/stocks/overview?symbol=ACIC. Cement. self-dependency. 2011 Page | 6 . (KD) Kuwait Stock 357.443. ACICO are involved in all these sectors for one clear reason.000 20% 55.960. http://www.

ACICO Industrial manufactures blocks. This feature interlocks blocks. slabs. ACICO Industrial is a manufacturer of AAC blocks with tongue and groove feature.6 AAC is a light weight. Portland cement. ACICO AAC plants are located in the State of Kuwait. United Arab Emirates.: ACICO Industrial is the largest manufacturer of Autoclaved Aerated Concrete (AAC) in the Middle East. It is manufactured from fine ground silica sand. lintels and slabs with different characteristics to meet the needs of its customers. It produces blocks. Kingdom of Saudi Arabia and Qatar. providing more stability and decreases the amount of glue needed between the blocks. roof. ACICO ACICO Industrial ACICO Construction ACICO Real Estate ACICO Hotels ACICO Industrial Co. floor panels and lintels.com/En_core_industrial_overview.ACICO Industries Company Exchange Kuwait Stock factors associated with manufacturing.acicogroup. reinforced wall. insulating and fire resistance building material that is formed into blocks. and reinforced structural components. lime. water and aluminum paste as aerating agent.cms December 18.7 ACICO Cement: 6 7 http://www. This gives them a strong competitive advantage because they are in full control of all their projects.com/En_core_industrial_overview. lintels.acicogroup. 2011 Page | 7 . It is used for a wide range of both load and non-load bearing and framed construction applications.cms http://www.

Operating and manufacturing in compliance with local and international standards. ACICO Construction: ACICO Construction Co. operated by experienced skilled engineers and managed through a professional management team to maintain quality in compliance with local and international standards. technicians.cms December 18. delivery schedules.com/En_core_cement_overview. ACICO Ready Mix Concrete proves its capability to meet projects specifications. Since its inception in 1990. is classified as grade "1" Construction Company by Central Tenders Committee (CTC) in Kuwait and UAE. we are able to maintain and assure the quality of ACICO's Cement.8 Ready Mix Concrete: ACICO Cement was urged by its high quality cement production to set up two production lines of dry & wet Ready Mix Concrete.ACICO Industries Company Exchange Kuwait Stock ACICO Cement plant is located in Shuaibah Industrial Area with a large production capacity and underway to exceed one million tons per year. highly qualified technical engineers. ACICO has experienced sustained and steady growth 8 http://www. Public Authority for Housing Welfare and other governmental bodies. customer expectation and satisfaction. Through their high-tech quality control laboratories. ACICO Cement is approved by the Ministry of Public Works.acicogroup. and skilled labors. 2011 Page | 8 . proper technical services. The plant is designed and equipped with the most advanced technology.

cms December 18. growth. mother company of the prominent brand "Radisson".443 Row Houses with supporting Infrastructure to name a few. procurement and construction (EPC) contracting in multi-discipline projects. and within budget. and multi-use high rise towers in Kuwait and the UAE. often ahead of time.acicogroup. ACICO has commissioned the Rezidor Hotel Group.com/En_core_construction_overview. chalets. Due to the lucrative nature of the industry and the expertise of our team. ACICO Industries Company erected two hotels in the UAE. which has been instrumental in creating more than two decades of successful growth.605m2 in the emirate of Fujairah spreading on more than 500 meters of private beach. has successfully demonstrated its maturity by developing a 55 level hotel and 60 level multi-use tower on prime area on Sheikh Zayed Road in Dubai and building of residential township.ACICO Industries Company Exchange Kuwait Stock and became a leading company in engineering. ACICO Construction Co.in Kuwait. The second hotel was erected 60 stories high on Sheikh Zayed Road in the heart of Dubai. it was fundamental to our business to obtain and maintain client satisfaction by delivering quality construction services on time. With almost two decades of experience. 2011 Page | 9 . ACICO's sphere of activities covers presently Kuwait and UAE markets and expanding into rest of GCC. schools. ACICO prides itself on conducting business based on highest ethical practices and international standard. The Rezidor 9 http://www. the operations of its hotels and resorts. hospitals. Our first hotel was built with the load bearing walls construction on an area of 29. Over years of ACICO Construction Co. a string of several governmental approvals and variety of successful projects were achieved such as villas.9 ACICO Hotels: Another success to our portfolio was the diversification into the hospitality sector. ACICO has strong clientele base and strong relationship with GCC banks. commercial and residential buildings.

and maintaining all properties owned by the group. selling. 2011 Page | 10 .cms December 18.com/En_core_realestate_overview. commercial.acicogroup. ACICO Real Estate has succeeded in bringing an outstanding performance and integrity to real estate investment in the most active cities in the region.acicogroup. ACICO Real Estate was essentially established for letting. Our services include property and asset management services for high rise. This step came as part of the integration strategy of the group. office.cms http://www.11 10 11 http://www.ACICO Industries Company Exchange Kuwait Stock Hotel Group have an extensive track record of hotel management in over 70 countries.com/En_core_hotels_overview. medical and residential buildings.10 ACICO Real Estate: ACICO Real Estate is a diversified real estate management company.

They entered the hospitality sector by building the Radisson Royal Hotel Dubai and Radisson Blu Resort Fujairah. Dubai. Radisson Royal Hotel Dubai Radisson Royal Hotel Dubai is a five-star hotel that defines the magnitude of business and pleasure in one place. Also there are a lot of successful projects like:       Nassima Tower . well-known projects ACICO built were in The Emirates. Leisure destinations like Burj Khalifa. The project covers an area of 29. and Golf clubs are a few minutes' drive from the hotel.Kuwait December 18.UAE ACICO Business Park .Dubai American University in Dubai ACICO Medical Plaza – Dubai Chevron . and Dubai Metro in the proximity of the hotel. they have The Dubai Trade center.605m2 with all 257 rooms having an uninterrupted panoramic view of sea. Dubai Mall. It is located in the most distinctive location which is the Sheikh Zayed Road. Radisson Blu Resort Fujairah Radisson Blu Resort Fujairah is located 90 minutes away from Dubai and lies between Hajjar Mountains and approximately 500 meters away from the private oceanic beach.ACICO Industries Company Exchange Kuwait Stock Company Projects: The most successful. Dubai International Exhibition and Convention Center. Add to that.UAE Nakheel Town Houses . Dubai International Financial Center. 2011 Page | 11 .

On that day. However. 2011 Page | 12 .Kuwait Wataniya Resort . the momentum was -25. on the 28th of November. The Momentum Indicator was -57 points which is less than -50.ACICO Industries Company Exchange Kuwait Stock     Dasman School . MACD on the 7th of September closed at price 198 fils. MACD gave us a bearish signal which led to the decrease of the price to 230 fils on the 15th of December and till today it gives us a sell signal. On the 13th of September. December 18. and Bollinger show that. momentum was 69 which is more than 50. appears to be bullish which indicates buy decision. there was a bullish signal which led to the increase of the price of the share to 270 fils on the 24th of October with high traded volume at that period. Technical Overview: Company Name Sector R1 R2 S1 S2 Target Price Target price from Bollinger analysis. ACICO Indusrty 234 Fils 248 Fils 220 Fils 208 Fils 245 Fils* Recommendation: Our recommendation is to buy the share because multiple indicators like RSI.Kuwait The Palms Beach Hotel .Kuwait Etc …. The trend of the share in general.Khairan .This indicated a neutral to buy signal. Momentum. This indicated a bearish signal which led to the decrease of the price from 265 to 230 fils. This indicated a bullish signal which led to an increase in the price from 196 to 265 fils on the 29th of September. On the 15th of December.

And it was 48. 2011 Page | 13 . Bollinger indicator on the 15th of December gave us a bullish signal because the price approached the bottom line of the Bollinger. This gave a bullish signal which led to the increase of the price to 250 fils on the 21st of September.5 points which indicated a neutral to buy signal. Overview RSI December 18.ACICO Industries Company Exchange Kuwait Stock The RSI was 24 points on the 6th of September which is less than 30. And the RSI was 60 points which gave a bearish signal which led to the decrease of the price to 230 on the 15th of December. And the target price from the Bollinger analysis is 245 fils (middle line). This caused the price to push up from 220 to 230 fils.

Momentum Bollinger December 18. 2011 Page | 14 . RSI.ACICO Industries Company Exchange Kuwait Stock MACD .

65 -42.33 10.02 2.66 31-Dec10 31-Dec09 31-Dec08 31-Dec07 31-Dec06 December 18.39 2.43 0.56 63.85 0.74 5.34 0.28 2.28 0.23 12.18 4.00 0.17 86.58 1.33 1.45 -0.14 60.66 0.11 0.17 0.17 0. (%) Liquidity A/R turnover Inventory Turnover Quick ratio Cash Ratio Growth Potential Assets Growth (%) Book Value Growth (%) Earnings Growth (%) Revenues Growth (%) Profitability Asset Turnover 6.00 0.01 0.12 2.08 -6.46 65.95 11.24 9.25 0.36 26.17 0.16 0.36 0.09 0.21 4.45 -0.09 0.70 0.43 -70.11 0.46 0.01 4.06 7.72 42.09 0.54 59.24 0.57 2.66 9.64 3.98 4.45 0.46 0.12 1.63 0.72 0.00 4.35 2.11 45.76 0.61 1.16 6.42 0.43 0.58 0.04 0.17 3.82 0.18 0.65 2.02 1.50 21.48 6.79 1.22 0.32 60.10 0.73 0.62 1.73 0.77 0.ACICO Industries Company Exchange Kuwait Stock Fundamental Overview: -Ratios Overview Period End Date Liquidity and Asset Ratios Current Ratio Total Assets / Equity Sales / Assets Sales / Inventory Sales / Receivables Leverage Total Debt/Total Assets (%) Total Debt/Equity (%) Times Interest Earned (TIE) Return on Cash & Equiv.05 1.48 0.02 83.70 2.50 0.69 -0. 2011 Page | 15 .

02 is high which means that ACICO has been aggressive in financing its growth by debt. The growth was pretty high before the 2008 crisis with 72% growth. It indicates that ACICO needs more investment to generate sales revenue which means less profitability of the firm. This means that 65% of the company’s assets are financed by debt. This indicates that the revenue has been decreasing for the last 2 years. This indicates that ACICO would be unable to pay off its debt obligation if they came due at that point. December 18. The cash ratio of ACICO is 0. The sales to asset ratio has declined in the last 2 years which isn’t a good sign.11 in 2010 which is low. The debt to equity ratio of 2.ACICO Industries Company Exchange Return on Assets (%) Return on Average Assets (%) Return on Equity (%) Return on Average Equity (%) Operating Margin (%) Payout Ratio (%) 2% 2% 5% 5% 6% 60% 2% 2% 5% 5% 3% 57% 3% 3% 9% 9% 5% 16% Kuwait Stock 12% 15% 29% 34% 2% 49% 12% 12% 25% 25% 13% 70% Liquidity and Asset Ratios: The current ratio is less than 1 which is a good sign. The revenue growth in the last 2 years has been negative. 2011 Page | 16 . Growth Potential Ratios The assets growth potential in 2010 is 12%. This means that creditors would be reluctant in how much debt they should give to ACICO. Leverage Ratios The total debt to total assets ratio in 2010 was 65%. This means that the majority of the company’s assets are financed by debt.

8% 4.9% (Real GDP economic growth of Kuwait for the next 5 years) 3) We assumed the Risk Free Rate (RF) as 4. The Return on Assets (ROA) and Return on Average Assets (ROAA) for the last 3 years has been consistent within a certain range (between 2 and 3%).ACICO Industries Company Exchange Kuwait Stock Profitability Ratios The Return on Equity (ROE) ratio measures the amount of net income earned as a percentage of equity.75% 5) We took the beta of the company from Reuters 3000 xtra 6) We assumed the growth rate in the DDM model as about 30% Discounted Cash Flow Two Stage FCFE Variable Length Risk Free Rate RP is Terminal Growth Expected Growth Beta Cost of Equity Ke Year 1 2 2011 2012 Growth Phase 5 years 4.8%) 2) We assumed the terminal growth in the FCFE model 4.875 (Discount Rate from CBK + 2%) Damodaran Economy Growth From KMIFIC Research (Reuters) 6.066 7.17 11.23% FCFE PV of FCFE 5. ACICO’s ROE is pretty consistent with its competitors and is higher than the sector median so they are in the normal range. The Return on Average Equity (ROAE) has been consistent in the last 2 3 years due to the consistency and predictability of the company’s ROE.82% 1.269 December 18.5 %( 2.90% 19.454 5. Fundamental Analysis Assumptions: 1) We assumed the growth rate for the FCFE for the next 5 years as (19. 2011 Page | 17 .500% 5.5% discount rate from CBK+2%) 4) We took the Risk Premium (RP) from Aswath Damodaran's website as 5.

778 0.9% 1.022 0.014 0.022 0.505 6.029 0.314 121.617 0.17 11.06% 1.819 7.329 6.346 No.016 0.75% 30. of shares*1000 Terminal FCFE Year 5 PV of Terminal Price Value per share 236.012 0.50% 5.019 0.ACICO Industries Company Exchange 3 4 5 2013 2014 2015 Kuwait Stock 8.362 0.037 0.444 December 18.940 207.23% DPS 4.013 0.710 10.17 11.436 12. 2011 Page | 18 .017 0.23% PV of DPS 2011 2012 2013 2014 2015 1 2 3 4 5 Expected: Year 6 Terminal Price: Year 5 PV of Terminal Price Value per share 0.648 Discounted Cash Flow Two Stage DDM Variable Length High Growth Phase 5 years Stable Growth Phase Forever after 5 years Risk Free Rate RP is Expected Growth Beta Cost of Equity Ke Year 4.

we have used the weighted average price-to-earnings (P/E) multiple and Price-to-book-value (P/BV) for ACICO's competitors. The price-earnings multiple of a stock is a reflection of various factors.552 December 18. which makes up the peer set for ACICO. predictability and sustainability of its revenues.058 0. 2011 Page | 19 . The stock closed at KD0. The value of ACICO’s shares derived from the weighted average of the DCF and relative valuation methods is KD0.369 0.578 0.648 0.ACICO Industries Company Exchange Kuwait Stock Multiples Overview Relative Valuation Method: The peer group valuation is performed to compare the intrinsic value of ACICO arrived at using the DCF calculation. which implies that the weighted average value of ACICO’s shares is at a premium of 58% to the share’s current market price.444 0.1 0. such as the expected profitability of the company.5 0.037 1. And the weights to each method are shown in the table below: Weighted Valuation Method Value Weight Valuation DDM FCFE P/E P/BV Weighted Value/share 0. In order to value ACICO using this method.00 0. the quality of its earnings and the quality of its management.1 0. 2011.324 0. its growth potential as perceived by the market.133 0. among others.3 0.552 per share.234 on the KSE at the end of trading on the 12th of December.

ACICO Industries Company Exchange Kuwait Stock Recommendation: The company's involvement in multiple sectors gives it a strong competitive advantage and growth prospect. The final recommendation is a strong buy of ACICO’s stock. 2011 Page | 20 . we recommend a strong buy of the company's stocks for long-term investors. Looking at the technical analysis. 209218877  Mohammed Fahad Al-Ahmad. the fair value is 0. 209114510 December 18. 209118313  Hady Mohammed Makki . looking at the fundamental analysis. the low trading volume of the stock indicates that the stock price will take time to rise to its intrinsic value.552KD. Therefore. Equity Rating and Definition: Rating Strong Buy Buy Hold Reduce Sell Definition Fair value of the stock is > 50% from the currebt market Price Fair value of the stock is > 10% from the currebt market Price Fair value of the stock is between +10% and -10% from the current market Price Fair value of the stock is between -10% and -20% from the currebt market Price Fair value of the stock is < -20% from the currebt market Price Done by :  Anas Mamoon Kouki .

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