Riyadh – Mubasher: Al Rajhi Capital expected that SABIC's share price to possibly trade higher by the help of other factors despite the softening in product spreads.

The research firm said that these factors include: acquisitions, as the company looks to create incremental value with cash (21% of market cap), such as SADAF deal, adding to achieving an improvement in Metals segment.

Al Rajhi Capital pinpointed that any divestments of assets will improve RoE and any further significant cost cutting measures may also help its cause, noting that the company aims to diversify feedstock across gas and coal, and to have more value added products, which are more defensive.

"Though we do not factor these fully into our estimates yet, it builds our comfort and optimism in the stock for the long term and we recommend higher allocation on dips," the report said.

SABIC will be one of the more resilient plays in 2017 as the broader economy sees cost pressures, Al Rajhi added saying that at the same time, there is no likely change in feedstock price mechanism for SABIC at-least till 2019 as we had highlighted in our note “Themes for 2017."

 After updating the fourth quarter's results, Al Rajhi revised the target price TP to SAR 97 per share, maintaining "Neutral" rating, with possibility of upside surprises.