Sabic, the industrial giant, is a major source of export revenue for Saudi Arabia. It represents about 5 per cent of the global petrochemicals market.
By 2002, there will be six new world-scale ethylene crackers on stream in the Middle East, all of which will be export-oriented. Three will be owned by Sabic with others of Qatar, Oman and the UAE. Analysts say that the outlook for global petrochemicals markets, particularly olefins, in the next five years is significantly effected by this new capacity. The overriding reason for Sabic's competitiveness is the easy access that it has to cheap and abundant feedstock. In addition, ethane cracking, which Sabic uses to obtain ethylene, is more cost efficient than the naphtha cracking commonly used in Europe.
Sabic explains its overall strategy as based on expanding its international marketing reach, controlling cost and quality and investing in R&D. Europe. During the first quarter ending March 2000, Sabic’s performance improved tremendously with net income increasing by a massive 434% year on year. The gross profit margin nearly doubled as SABIC managed to control operating costs, which experienced only a 27% growth vis-à-vis a growth in sales of 56%. With the annualized earnings per share placed at SR 13.88, the current price to earnings ratio works out to just 12.64.
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Technical Analysis
We have plotted below the price and volume chart for BAJ for the past 2 years. The stock attracted heavy volumes between June 99 and December 99 and after a brief pause, once again is trading briskly. A buy signal is generated when the moving average line is placed below the price line and vice-versa. Currently the moving average line is above the price line indicating a buy.The Relative strength index (RSI), which indicates resistance at 70 and support at 30, has never crossed down the support level in the past 52 weeks. The current price of SR 90 is very close to the 52 week high,. which is SR93.75.
RSI suggests that the stock is at trading range and investors may wait for further movement to get clear direction. (CCFI)
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© 2000 Mena Report (www.menareport.com)
