1. Nawal
Kaiser
Ameera
Mohammed
Layla
AlKhabbaz
Ali
Hussain
Faisal
AlAhmed

2. BUY BHD 1.072 BHD 0.620 SELL HOLD BUY recommendation 72.85%
1-year forward
SELL
HOLD
BUY
BUY
recommendation
72.85%
upside
BHD 0.620
16th January 2018

3. COMPANY DESCRIPTION

4. Aluminium Bahrain
69.4%
Dependent
20.6%
Diversify
Public
10%

5. Timeline
1968
Alba was incorporated
2010
Alba launches IPO

6. Expected operations of Line 6 Project Largest single-site smelter
2019
Expected operations of Line 6 Project
2014
Introduction of Project Titan
Largest single-site smelter

7. Alba’s Products 34% 30% 14% 11% 11% Extrusion Billets Liquid Metal
Foundry Alloy
Ingots
Rolling Slabs
Standard & T-Ingots
34%
30%
14%
11%
11%

8. Regional Sales Revenue (2016)
Secure Market Position
Asia
Domestic
Americas
Europe
17%
41%
10%
18%
Emphasis on Quality
14%
MENA
Strong Client Relationship

9. INDUSTRY ANALYSIS

10. 5%-6% Demand for Aluminium Demand Growth 2017 - 2021 4.90% Transport
4.20%
4.20%
Electrical
Machinery & Equipment
5%-6%
Demand Growth
Standard
Ingots
Foundry Alloy
Ingots
Extrusion
Billets
3.50%
3.30%
Consumer Durables
Packaging
2.90%
2.10%
2.50%
Foil Stock
Construction
Other
5-Year CAGR Growth in Demand

11. Curtailment of reported production by 30%
Supply for Aluminium
Closure of unlicensed production
Curtailment of reported production by 30%
Raw Material Cost
Alumina
China owns
60% of
aluminium
global
supply
2.2% YoY
Supply Growth
Carbon
Crude Oil

12. DEMAND & SUPPLY
FORECAST

13. LME Aluminium Price Forecast (USD$)

14. 0.95%
0.91%
0.97%
0.92%

15. Porter’s 5 Forces Threat of Competition Power of Buyers Threat of
New Entrants
Threat of
Substitution
Power of
Suppliers

16. Bahrain’s GDP Contributors
BAHRAIN Economy
Rise in Oil Prices
Oil Sector
Credit Worthiness Downgraded
Fuel Subsidy Withdrawal
Non-Oil Sector
Introduction of 5% VAT
Bahrain’s GDP Contributors
(2017)

17. FINANCIAL ANALYSIS

18. Dividend Per Share
0.011
0.017
0.021
0.016
2021
2020
2019
2018
2017
2016
2015
2014
0.018
0.00
0.019
0.036
0.027
2013
0.028
2012

19. Cash Flow Generation
Coverage Ratio
Cash Ratio

20. 67% Cost of Sales $1,437 per metric tonne $1,300 per metric tonne
Regular
Aluminium Company
67%
$1,437 per metric tonne
$1,300 per metric tonne

21. Return on Equity 13% 12% 11% 10% 9% 7% 6% 5% 4% 3% 2021 2020 2019 2018
2017
2016
2015
2014 7% 4% 3% 9%
11%
12%
2013
2012

22. VALUATION

23. 1-year forward Blended Target Price
VALUATION METHODS
BHD 0.643
Ben Graham
BHD 0.649
10%
Relative Valuation
BHD 1.496
DCF Valuation
40%
BHD 1.072
50%
1-year forward Blended Target Price

24. Alba’s Contribution to GDP
Cost of Equity
Risk-free rate 5.5%
Beta
Market Return %
Bahrain’s GDP
Growth Rate
2.25%
Cash Flow from Operating Activities
(–) CAPEX
(–) Working Capital Changes
Cost of Debt
3.25% + 1% = 4.25%
Weightings
5-year historical weightings
Alba’s Contribution to GDP
12% %
WACC
Free Cash flows
to Firm
Terminal
Growth Rate

25. 7 RELATIVE VALUATION Alcoa Kaiser Aluminum Corporation
Century Aluminium Company
United Co Rusal PLC
Hindalco Industries LT
UACJ Corp
Aluar Aluminio 7
peers

26. RELATIVE VALUATION 11.57 21.03 A A L L B B I N D 7.58 U S T EV/ P/EY I N D U S T R Y
7.58
21.03
EV/
EBITDA
P/E
10.16
9.56
17.79

27. BEN GRAHAM Formula
𝑽= 𝑬𝑷𝑺 × 𝑷𝑬+2𝒈 ×𝑹 𝒀

28. RECOMMENDATION FACTORS
Line 6 Project
Positive Industry Outlook
Project Titan
Strong Financial Position

29. CAPEX USD$3 billion EBITDA (‘000)
Line 6 Project
Positive Industry Outlook
Project Titan
Strong Financial Position
CAPEX USD$3 billion
1.54 million metric ton
540,000
EBITDA (‘000)
+ 53%
2019
1 million metric ton
Alba’s Contribution to GDP
Largest Single-Site Smelter Worldwide

30. Positive Industry Outlook Strong Financial Position
Line 6 Project
Positive Industry Outlook
Project Titan
Strong Financial Position
Demand
Europe
China
India
Supply

31. Positive Industry Outlook Strong Financial Position
Line 6 Project
Positive Industry Outlook
Project Titan
Strong Financial Position
LME Aluminium Price Forecast (USD$)
Impact on Alba’s Revenue
Revenue Overall Increase of 89%

32. Positive Industry Outlook Strong Financial Position
Line 6 Project
Positive Industry Outlook
Project Titan
Strong Financial Position
Project Titan
2-year Efficiency Program
Gas
Carbon
2014 – 2015
2016 – 2017
Alumina
$150 per metric ton
$100 per metric ton
Crude Oil
$148 per metric ton
$78 per metric ton

33. Positive Industry Outlook Strong Financial Position
Line 6 Project
Positive Industry Outlook
Project Titan
Strong Financial Position
Profitability
Liquidity

34. KEY RISKS

35. Operational Cost Risk
Strategic Risk
FOREX Risk
Bahrain Economic Risk
Credit Risk
Liquidity Risk
Raw Materials Risk
Gas Prices
LME Aluminium Prices
Interest Rate Risk

36. Positive results despite low LME
Success
Risk Failure
Minimal
Gas Prices
LME Aluminium Prices
Positive results despite low LME
Secure contract till 2021

37. Positive Industry Outlook
Solid Company Analysis
Conclusion

38. BUY
Appropriate
Valuation Methods
BHD 1.072
Strong Financial Analysis

39. Company Analysis Aluminium Bahrain Timeline Alba’s Products Regional Sales Revenue (2016) Market Profile Industry Analysis Demand for Aluminium Supply for Aluminium Demand & Supply LME Aluminium Price Forecast (USD$) Porter’s 5 Forces Bahrain Economy Financial Analysis Dividend Per Share Cash Flow Generation Cost of Sales Return on Equity Valuation Valuation Methods Discounted Cash Flow Valuation Model Relative Valuation Ben Graham Formula Recommendation Factors Line 6 Project Positive Industry Outlook Project Titan Strong Financial Position Key Risks Risk Grid Appendix Historical Stock Price Alba Production Levels Rising Raw Material Costs Return on equity Bahrain Real GDP Growth Rate Financial Statements Balance Sheet Cash Flow Statement Statement of Changes in Equity Financial Ratios Discounted Cash Flow Valuation Line 6 DCF Valuation Piotriski F-Score Beniesh M-Score Altman Z-Score Aluminium Demand by Sectors Alba’s clients Porter’s 5 forces & pestl analysis Alba's Upside & Downside