Saudi Aramco value in bank research varies by more than $1 trillion

Valuations for Saudi Aramco vary by more than $1 trillion, according to fund managers who have seen banks’ research, underscoring the uncertainty hanging over what could be the world’s largest stock market listing.

Fund managers are poring over bank research after Aramco on Sunday announced its intention to float on the Riyadh stock market.

Sources have told Reuters that Aramco could offer 1%-2% of its shares, raising as much as $20 billion to $40 billion. A deal over $25 billion would top the record-breaking IPO of Chinese e-commerce giant Alibaba in 2014.

On Sunday, however, Aramco provided no size of the planned IPO, no timeframe, identified no cornerstone investors and gave no information on an expected follow-up listing overseas.

Saudi Crown Prince Mohammed bin Salman has spoken of a $2 trillion value target for the world’s largest oil producer while banks have provided varying figures.

Bank of America (BOFA) Merrill Lynch estimates Aramco’s valuation at $1.2 trillion to $2.3 trillion while EFG Hermes has a valuation of $1.55 trillion to $2.1 trillion, two fund managers who have seen the research reports told Reuters.

Goldman Sachs – one of the banks coordinating the IPO – has put the company’s valuation between $1.6 trillion and $2.3 trillion, two sources said.

Bernstein analysts estimated “a fair value range” for Saudi Aramco is $1.2 trillion to $1.5 trillion.

“Our discounted cash flow approaches… suggest $1.4 trillion on average,” it said.

BOFA Merrill’s has also used the discounted cash flow model, a valuation methodology that uses future cash flow, according to one fund manager who saw the research.

The banks were not immediately available for comment.

Credit Suisse’s research offers a similarly wide range in value, the fund manager said.

“These ranges are always wide as research analysts want to cover both low end and high end so you want to show sensitivity of assumptions,” one analyst said.

EFG Hermes research implies a 2020 estimated enterprise value to EBITDA ratio of 6.9 times to 9.4 times, a price-to earnings ratio of 14.5 times to 19.5 times, and a dividend yield of 3.9% to 5.3%.