Cognor – Hold For the Time Being
Cognor's adjourned Annual General Meeting is scheduled to reconvene on 26 July 2019 to discuss the size and timing of this year's dividend payout. The Company's shareholders in June had agreed to postpone the vote on the Management Board's original DPS proposal of PLN 0.30 (implying Dyield of 17%) until an official statement from Poland's Energy Ministry specifying the eligibility and size of planned compensations to commercial electricity users to make up for the upcoming hikes in utility energy prices. Shares in Cognor experienced a sharp rise during the past two months, but sentiment could turn in a matter of days if shareholders resolve to cut dividends in the face of insufficient compensation. On top of that, Cognor is expected to report marked earnings deterioration in Q2 2019. For these reasons, we would hold off investment in Cognor until the 14 August earnings release. When it comes to prospects in the longer term, Cognor looks poised to bounce back from a sub-par second quarter in the second half of 2019 looking at the increasing advantage of the more cost-efficient EAF steel producers over BOF steelmaking, coupled with expectations that the global steel industry will regain momentum in the second half of the year. With the 9-month price target intact at PLN 1.84 per share, we downgrade COG from accumulate to hold.
Cognor Holding SA, formerly Cognor SA, is a Poland-based company that operates in the steel industry. The Company's activities are divided into four business segments: Scrap, Production, Distribution and Other. The Scrap division focuses on buying, processing, refining and selling of scrap metal and nonferrous scrap. The Production division is responsible for processing scrap metal into steel billets, as well as converting steel billets and nonferrous scrap into finished products. The Distribution division sells various commodities, such as steel products, steel and nonferrous scrap and steel billets. The Other division includes materials recycling, among others. The Company's products range comprises metal bars, steel sheet, plates, pipes and rods, as well as sheet zinc and tin plates, among others. It operates through a number of subsidiaries, such as Cognor Blachy Dachowe SA, Zlomrex Metal Sp z o o and Huta Stali Jakosciowych SA. The Company is controlled by PS Holdco Sp z o o.
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