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....
OC offers 14% dividend yield in 2021e. OC distributed USD0.46/share in 2020, and we expect this to rise to USD0.67/share in 2021 and USD0.73/share in 2022 (distributed semi-annually), on rising profitability and a liquid balance sheet. This is equivalent to a yield of 14.4% in 2021e and 15.7% in 2022e (based on the EGX)—the highest in our Egypt universe, and vs. 1.7% and 2.3% for global construction peers. OC trades on a 2022e P/E of 4.4x, 63% below peers, which we see as unjustified. Net incom...
Best play on the sector, upgrade TP on improving outlook. OC offers ideal exposure to the MENA construction sector, trading at a highly attractive 2020e EV/EBITDA and P/E of 0.5x and 3.8x, respectively, while offering a 2019-21e EPS CAGR of c14%. This comes on top of a lucrative 2020e dividend yield of 9.2%, stemming from a 2020e payout ratio of 35%. An upward revision of our 2020e assumptions (revenue and net income revised by c11% and c13%, respectively, on a 16% upward revision of 2019e award...
OC reported 3Q19 revenue of USD790mn, up 8.3% y/y and down 0.1% q/q. MENA accounted for 65.1% of revenue in 3Q19 vs 73.3% in 2Q19 and 68.3% in 3Q18. EBITDA came in at USD57mn in 3Q19, down 2.2% y/y and 20.5% q/q, owing to provisions booked related to MEI in the US. Attributable net income came in at USD32mn, up 10.7% y/y and 2.9% q/q. The 81.2% sequential improvement in MENA attributable net income was offset by the USD21mn loss generated from US operations. BESIX contribution to bottom line rec...
Saudi construction market to outperform, replenishing the region’s backlog. 2019 marks a strong comeback for the Kingdom, with 2019 y-t-d award intake recording an 82% hike to USD29bn, boosted by aggressive investments in the oil, gas, and water segments. This represents 38% of MENA 2019 y-t-d new awards of USD75bn (-13% y-o-y), compensating, to a large extent, for the 40% and 70% drop in the UAE and Egypt’s awarded projects. The Kingdom’s 2019-20e pipeline includes USD70bn worth of projects (ou...
OC reported Q2 19 revenue of US$790mn, up 5.3% yoy and 12.0% qoq, owing to a 21.3% yoy and 7.8% qoq increase in MENA revenue (MENA accounted for 73.3% of revenue). EBITDA came in at US$72.1mn in Q2 19, up 38.7% yoy and 2.6% qoq. Attributable net income came in at US$31.3mn, down 38.1% yoy and up 3.6% qoq. The annual decline in profitability was driven by: 1) higher interest expense, and 2) lower contribution from BESIX (US$8.5mn vs US$17.2mn in Q2 18).
Maintain expectation of a sustained long-term gas deficit. We cut our demand estimates by 4-7% over 2018-21, mainly due to the impact of global externalities (higher oil prices and capital outflows from EM economies), on economic growth and gas demand. We hold our supply and pricing forecasts roughly unchanged. We also maintain our view that Egypt will remain a gas deficit nation beyond 2020e, despite the drastic supply improvement – Egypt’s natural gas supply should grow at a 2017-20e CAGR of 1...
Egypt offers the highest sustainable growth. Egypt has been outperforming its GCC peers over the past half-decade in terms of growth, with a steady 20% CAGR in cash spending on construction activity (USD24bn in 2018e). Egypt’s 1H18 award intake came in at USD18bn, burgeoning by 125% y-o-y, with 2018 total awards seen at USD36bn. The country’s 2018-19e pipeline stands at USD20bn, USD11bn out of which is power projects, while the balance mainly pertains to infrastructure projects. The interest on ...
Raise TP on margin upgrades, higher granted value to Besix. We raise our TP on OC’s Nasdaq listing by 8.5%, and EGX listing by 19.4%, to USD11.5/share and EGP203/share, respectively, the latter bolstered by a weaker EGP. The drivers are higher group margins, driving a 2017-19e EBITDA CAGR of 10%, and an improved cash cycle at Besix, valued at 1x P/B valuation, up from 0.7x. OC is cheap, trading on a 2018e EV/EBITDA of 4.4x, 50% below EM peers, and whilst its working capital drained 2017 cash flo...
Downgrade earnings. EGP liberalisation should allow for increased project finance and FDI, but we reduce 2017-18e EPS by an average of 16% due to: i) translation of EGP-backlog (26% as of 3Q16) plus ii) lower margins on US provisioning and long term Egypt margins falling to EM norms. We cut our TP by 10% to USD9.00/share which on end-2017e USD:EGP of 14.35 is EGP130/share. Given a 6M rally of 102%, outperforming EGX30 by 36%, this warrants a downgrade to Neutral. The 2017e P/E implied by our TP ...
Sales mix finally allows for margin uplift. We expect OC’s EBITDA margin will rise to 6.8% for 2Q-4Q17e, up from 5.4% in 1Q17 and 2.5% in 2016, even with full potential charge of USD88.4mn in mechanic liens on a US project. Drivers are healthy margins for the rump of OCI N.V. backlog and IFCo handover by 3Q17e. Our new 2017 EPS estimate (12% upgrade on higher margins) implies 5.7x P/E or 3.6x, assuming OC is not liable for mechanic liens. We raise our TP for OC’s Nasdaq listing by 18% to USD10.6...
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Up EGP TP by 22% to reflect end-2017 USD:EGP estimate of 11.9. There are also some developments in favour of the stock that we believe are worthy of flagging. During OC’s 2Q16 investor call, the CEO stated that Saudi receivables (inclusive of charges and claims) is cUSD80mn, a marginal c4% of total receivables, limiting the impact of a write-off and backlog cancellation to 7.5% of our TP. In addition, OC demonstrated strong award intake in 1H16 with its proforma backlog rising by 13.2% y-t-d to ...
Unjustifiably cheap. We reiterate our Overweight rating on OC, arguing that the past 6 months’ share price drop is unwarranted. The market price implies an EV of USD746mn, 3.4x 2015e EBITDA or 0.1x Sep 2015 backlog, steeply below the EV/backlog average of 0.28x in MENA post the 2008 global financial crisis. This comes despite OC’s focus on high-margin, lower-risk infrastructure projects, and despite our expectations for margin improvement, driving a 2015-17e EPS CAGR of 40%.
Downgrade to Neutral; lower TP 16.7%. We have concerns that shares in CF Industries may be subject to an overhang upon the issuance of CF shares to OCI N.V. once the deal closes (which should be in 1H16 depending on approvals). This, alongside expectations for higher gas costs in Egypt (by c70% to USD6.7/mmBtu), leads us to reduce our target price for OCI N.V. by 16.7% to EUR28.5/share, of which retained assets are EUR12.6/share.
12M target price of USD18/share implies 32% potential return. The stock trades on a 2017e P/E of 6.4x, 34% below peers and a sharp drop from its 2015e P/E of 16.4x. Bumper award years from Egypt, margin recovery, and deleveraging should drive OC’s EPS (60% CAGR). Our valuation does not give weight to potential infrastructure investments, presenting upside. Margin inflection should be as early as 1Q this year—a key catalyst, in our view. EGP devaluation y-t-d does not concern us, as OC naturally ...
Egypt presents quality growth. We estimate OC’s new awards during 2014 at USD4.8bn, leaving 2014e closing backlog at a record USD5.7bn, up c48% y-o-y. Of these awards, we believe 25% came from Egypt although the 1H period was slow. Because Egypt, where contracting capacity is scarce, has an urgent need to deliver infrastructure projects, key contracts can be awarded without a bidding process, suggesting favourable terms. Greater stability could also lead investors to reverse USD63bn worth of pro...
OHD’s business model is geared towards the holiday-home market and Red Sea-based hotels. The company owns c28mn sqm of undeveloped land across the Red Sea coast, in Gouna, Makadi Bay, and Taba Heights. The developer adds value by building integrated communities that also feature residential properties, hotels, schools, marinas, and hospitals. The developer continues to own and manage its communities and infrastructure. However, primary revenue drivers are real estate and 6,039 hotel rooms.
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