The Saudi Industrial Investment Group (SIIG) announced that it had sold its 50% share in the Petrochemical Conversion Company (PCC) to an unspecified buyer (not a related party) for SAR31mn. PCC is currently booked at zero value on SIIG’s balance sheet after the company wrote down over SAR1.5bn in the investment and as such, the sale will lead to a capital gain of SAR31mn. 
 
No impact on recurring earnings, but positive for cash flow and removes overhang: Because the PCC investment was already written down to zero, SIIG stopped reporting the company’s earnings (losses) in its financials in 2017, following the shift to IFRS accounting standards. As such, according to the company’s income statement, this should have no impact beyond the SAR31mn capital gain. However, we view this positively as there was always a risk that SIIG would be forced to recapitalise or loan cash to PCC, given that the company was loss-making, even on cash basis (according to our previous conversations with management) and as such, by selling the company, the risk of further cash outflows to PCC has been removed. With the PCC overhang now gone, management should have more visibility on cash flows going forward, which could open the door for them to be more aggressive in their dividend payments in the coming years. (Company disclosure, Yousef Husseini)