EKHO released 1Q23 financial results, posting a 77% QoQ (-16% YoY) increase in consolidated net profit to record USD60 million, compared to USD34 million in 4Q22 and USD71 million in 1Q22. Consolidated revenues declined 12% QoQ (-23% YoY) to USD225 million in 1Q23, down from USD255 million in 4Q22 and USD291 million in 1Q22. Growth in Sprea Revenues Alleviates Some Pressure off Consolidated Total Revenue Consolidated group revenues were shaped by: * Alexfert revenues declined to USD77 millio...
Maintain OW; Cut TP c18%. Our 12M TP cut reflects a 2% higher WACC assumption and 16% higher natural gas price at AlexFert following the latest gas price amendment. EKH trades on a 2023e EV/EBITDA of 3.0x (based on the EGP listing), a c40% discount to global peers, unjustified in our view, with its 2023-25e EBITDA CAGR of -1.7% being in line with global peers. EKH also offers a dividend yield of 11.5% in 2022e, paid in USD for all listings.Beyond a urea/gas story. On 15 September, the Egyptian g...
COMMODITY RALLY CONTINUES, FUELLING ROBUST EARNINGS Egypt Kuwait Holding reported 3Q21 consolidated results. 3Q21 revenue came in at USD211.6 million (+14%QoQ, +45%YoY), which was primarily owed to EKHO’s fertilizers and petrochemicals segment which boasted a 60%YoY hike in revenues. EKHO’s bottom-line stood at USD 63.8 million in 3Q21 (+13%QoQ, +68%YoY), implying a strong NPM of 30.2%. Gross profit came in at USD96.0 million (+16%QoQ, +71%YoY), which implies a GPM of 45.4%, versus the GPM of...
Urea fundamentals beat. Granular urea prices have risen c170% y-t-d to USD752/t (Egypt, fob), spurred by rising energy costs. Europe’s energy crisis has sent natural gas prices to a record USD31/mmBtu (Dutch TTF gas hub), and a cutback on coal production in China has propelled the price of coal (c75% of its urea production) to a 2012-21 high of USD153/t. This situation will likely persist over 1Q22. While crop inventory is low, we predict that the combination of: i) new urea capacity hitting the...
UPGRADE TP TO USD2.03/SHARE; MAINTAIN OVERWEIGHT We upgrade our valuation for EK Holding to USD2.03/share (up from USD1.61/share). The upgrade factors in: i) Stronger Urea price outlook for Alex Fert, ii) a recovery in Sprea’s export activity post the expected demand recovery within its export markets, alongside incorporating its expected expansion plans including, expanded Formica sheet production, SNF capacity additions and a sulfuric acid product line which is expected to kick in by 2H22, ...
Value, growth, and yield, with catalysts. EKH offers a decent upside of c36%. The potential rerating triggers are: i) the share currency conversion programme, due in September, ii) strong earnings growth (32.8% in 2021e and 8.8% CAGR over 2021-23e, driven by the global commodity price rally and EKH’s expansion plans), and iii) attractive dividends, paid in USD for all shareholders, yielding 6.1% in 2021e and 6.5% in 2022e. EKH trades on a 2022e EV/EBITDA of 4.9x, falling to 4.5x in 2023e vs. 8.0...
Commodity rally continues fueling positive earnings Egypt Kuwait Holding reported its 2Q21 consolidated results. 2Q21 revenue came in at USD186 million (-3%QoQ, +24%YoY), which was primarily owed to EKH’s fertilizers and petrochemicals segment which boasted a 27%YoY hike in revenues. Gross profit came in at USD 82.8 million (+6%QoQ, +42%YoY), which implies a GPM of 44.5%, versus the GPM of 40.6% achieved in 1Q21. Group EBITDA recorded USD 81.5 million (+5%QoQ, +33%YoY), implying a margin of 4...
Full Article at IIR has reaffirmed its Recommended rating for PIA after undertaking a review post the appointment of a new Portfolio Manager, Harding Loevner. The full report can be found on the IIR website. On 26 July 2021, Pengana International Equities Limited (PIA) announced a fully franked dividend of 1.35 cents per share for the June quarter. This represents an 8% increase on the March quarter dividend and takes the total dividends declared for FY21 of 5.1 cents per share, fully franked....
In this report we assess the average material prices for 2Q21 and depict the impact of pricing trends on the financial performance of the relevant listed equities in Egypt. Prices of raw materials in the food and beverages sector continued to normalize in 2Q21, except for prices of SMP and WMP. Accordingly, we expect a gradual recovery of margins to appear in the 3Q21 results of JUFO, EFID, DOMT and OLFIas price increases kick in and with seasonality of revenues. Most companies have an invent...
FERTILIZERS AND PETCHEMS LEAD SEQUENTIAL AND YEARLY GROWTH Egypt Kuwait Holding reported its 1Q21 consolidated results where revenue for the quarter came in at USD191 million (+31%QoQ, +19%YoY). The quarterly surge was principally driven by EKHO’s fertilizers and petrochemicals segment which grew by 63%QoQ, on the back of the rally in urea prices. Additionally, the company’s GP also witnessed a healthy expansion and recorded USD78.0 million (+44%QoQ, +38%YoY), implying a GPM of 40.6% (+4pps Q...
Multiple planned production eases weigh on sequential results Egypt Kuwait Holding reported its 4Q20 results where revenue for the quarter came in at USD146.6 million (flat QoQ. -2%YoY). The yearly slip, according to management was attributed to an “intentional slow down” in sales at Sprea in order to utilize the recent uptrend in feedstock prices and engage in higher product repricing in the forthcoming periods. Additionally, the company’s GP witnessed a hefty decline YoY as it recorded USD5...
ON-THE-GROUND UPDATES ON 2020 * Management is anticipating flat YoY growth of attributable net profit in 2020, with figure anticipated at USD 115-116 million. * Management also expect to report solid FY2020 performance across all business lines. However, strong growth in topline my not filter down to the profit level on the back of weak interest income contribution post the CBE’s cuts in rates. * Recent updates include: 1) Raising stake in AlexFert to 45.3% from 38%; 2) Nile Wood (...
Mix of high earnings visibility, defensive business and lucrative dividend yield. We reiterate our Overweight call on EKH, our top-pick within our industrials coverage, with a TP of USD1.50/share. EKH’s is well-poised to deliver a 2020-22e EPS CAGR of 18%, driven by c16% expected growth in Sprea, NatEnergy and ONS, along with an additional contribution of USD7mn from MDF plant (6% of TP) in 2022e. EKH’s trades on a 2021e P/E of 7.6x, down to 6.6x in 2022e, while offering a lucrative 2020e divide...
BROADLY STABLE QUARTER FOR EKHO; OPERATIONAL EFFICIENCY REMAINS EVIDENT EK Holding reported its 2Q20 results, recording revenues of USD150 million (-7% QoQ, +13% YoY). Strong YoY increase performance is attributable to its energy segment which reported a 34%YoY increase in revenues as well as robust operational performance across EKHO’s other business segments. 2Q20 Gross profit came in at USD58mn (+3%QoQ, 18%YoY) driven by increased profitability by Sprea Misr and Offshore North Sinai (ONS)....
* Nitrogen Fertilizer producers are ramping up capacity utilisation in an attempt to offset weak urea prices with the outlook still uncertain. * Petrochemicals have fared worse than their Agrochemical peers, as they have been enduring so far an unprecedented crash in oil prices, despite the recent recovery, and demand shocks for almost all crude oil distillates. * Consumer stocks will benefit from the low prices of food and oil-based commodities persisting throughout the quarter, ...
Healthy operational growth; 2019 bottom line meets expectations EK Holding reported 1Q20 revenue of USD152.3 mn, up 13.0% y/y and 16.4%. While all segments grew sequentially, the improvement was mainly driven by Sprea, up 8.1% y/y and 35.4% q/q, and Nat Energy, up 28.4% y/y and 40.0% q/q. The GPM came in at 31.4% compared to 33.0% in 1Q19 and 32.0% in 4Q19. The slight decline was almost entirely driven by Nat Energy’s GPM which fell to 30.0%, down by 10pps y/y and 8pps q/q. Attributable net i....
Downgrade FV to USD1.61/share, maintain Overweight We downgrade our valuation of EK Holding to USD1.61/share (down from USD1.70/share) as we account for the impact of the covid-19 situation on each of EK Holding’s subsidiaries. The slight downgrade came mainly as a result of 1) a downwards revision of estimates for both Nat Energy and Sprea, 2) a weaker price outlook for urea at Alex Fert, and 3) higher assumed reinvestment rates for all subsidiaries. Despite the cut in its FV, we believe tha....
Attractive risk-reward proposition. We update our valuation for EKH, to account for a stretched monetisation plan at ONS, lower discount rates, and softer urea prices. We raise our rating to OW from Neutral, on lucrative upside post the stock’s price correction, based on a TP of USD1.80/share (vs. USD1.75 previously). With its: i) decent total return of c39%, ii) intact growth profile (2019-21e NI CAGR of 22%), iii) healthy profitability (c37% EBITDA margin, 23% RoAE over 2019-21e), iv) undemand...
Raise TP by 21% to USD1.75/share, warranting Neutral post rally. EKH rallied 47% y-t-d, outperforming EGX30 by 28%. We raise our TP to: i) incorporate the additional 130bcf of shallow layer gas reserves, based on updated management guidance, while cutting 2019e production, due to adverse weather conditions, and ii) factor in higher power and gas distribution at NatEnergy. Our TP implies a 2019e and 2020e P/E of 15.5x and 11x, respectively (vs. 12x and 9x for our Egypt industrials coverage), fair...
Global pressures pose risk to short-term outlook. Higher oil prices and global financial pressures encourage a conservative shift in fiscal and monetary policies. Our base case assumes an average 55% fuel subsidy cut in July, along with a 1% hike in policy rates in 3Q18. Based on the government’s budget for an oil price of USD67/bbl (vs. USD76 spot), and the USD:EGP rate of 17.25 for FY18/19, we calculate a combined EGP5bn increase in costs for each USD1 increase in Brent and 1% depreciation in ...
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