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MANAGEM : A new setback to relativize

High volatility of metal prices …

In a climate of economic uncertainty marked mainly by the trade tensions between Washington and Beijing, the rise of the Dollar and doubts about the Chinese economic recovery, metal prices have been highly volatile since the beginning of the year and show a widespread decline over the last few weeks.

… Combined with difficult operating conditions for SMI …

MANAGEM Group has recently published a Profit Warning for its subsidiary SMI (80% owned) for the first 6 months of the year. In fact, impacted by the sharp deterioration in silver content on the IMITER mine, the company expects a decline in the turnover of its subsidiary of MAD 250m and a loss of about MAD -100m for the H1 2018.

… That should overstretch MANAGEM’s results

Under these conditions, the financial realizations of AL MADA’s mining subsidiary should be impacted for H1 2018 as well as for the rest of the year. Thus, we decided to lower our initial forecasts published in April 2018 in order to take into account the new parameters that will have a negative impact on the company's financial achievements.

A stock price heavily prejudiced

The unstable economic climate coupled with the publication of a profit warning by its subsidiary SMI have strongly penalized the price. Indeed, the stock has lost more than 20% of its market capitalization since the beginning of the year with 2 consecutive sessions of downward reservation following the alert on the results of IMITER.

A recommendation lowered to “Hold”

Valued by us at MAD 1,267 for target P/E of 31.2x in 2018e and 28.1x in 2019e, we are downgrading our recommendation to "Hold" in view of the Group's strong growth potential which aims to become a reference regional player with a proven ability to resist price volatility.

… However, the stock remains to monitor

Several parameters could revive the prices of metals including the easing of Sino-US trade tensions, the decline of the Dollar, the exacerbation of geopolitical tensions in the Middle East, etc. As such, we believe that the stock should be closely monitored as a rise in metal prices could lead to a new rally for MANAGEM.