Dubai: JPMorgan has initiated coverage of Saudi Aramco’s shares with an “overweight” rating and a price target of 37 riyals ($9.86) per share, saying it sees scope for the company to increase its proposed $75 billion base dividend.
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JPMorgan was a joint global coordinator on Aramco’s public share sale in December, which raised a record of $29.4 billion in total, including a so-called greenshoe allocation of extra shares on the back of strong demand.
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In the run-up to the listing, the Saudi state oil giant said it planned to pay a base dividend of $75 billion in 2020.
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“Our bullish view is predicated on its dividend growth outlook, with scope to increase the $75 billion baseline as production scales up,” it said in a note on Wednesday.
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JPMorgan said Aramco’s ability to sell its oil at a premium, capital expenditure flexibility and a low debt to equity ratio, would allow Aramco to distribute a higher percentage of cash flow.
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At 0703 GMT, Aramco shares were trading 0.1 per cent lower at 34.80 riyals, compared with their IPO price of 32 riyals.
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JPMorgan is the first major global bank to assign Aramco an overweight rating.
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HSBC also initiated coverage of Aramco on Wednesday, with a “hold” rating and price target of 36.80 riyals, while Goldman Sachs on Tuesday rated the company “neutral” with a price target of 41 riyals.
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Both Bernstein and Jeffries initiated coverage of Aramco last month with an “underperform” rating, saying that the company had been priced at a premium to international oil majors despite governance issues.
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