Orascom Construction: 3Q21| Weaker MENA margins hit earnings; Backlog ...

WEAKER MENA MARGINS HIT EARNINGS, SUBSIDIARIES SLIGHTLY COUNTERBALANCED OC reported USD28.4 million in bottom line for 3Q21 (-6% YoY, but +19% QoQ). The drop-in bottom line is attributed to weaker profitability from MENA operations caused by a drop in MENA EBITDA margin to 6.8% (-2.8pps YoY, -0.8pps QoQ), which we think could be attributed to some cost overruns due to surging raw material prices and relatively lower margin projects. On the bright side, US operations saw a surge in profits (+3...

Orascom Construction: Strong Awards Momentum Nourishes Backlog

BOTTOM LINE BENEFITS FROM BASE YEAR EFFECT, GROWING TOP LINE, AND SUBSIDIARIES CONTRIBUTION OC reported USD23.8 million the bottom line for 2Q21, (+144.4% YoY, and muted QoQ). The robust YoY recovery partially resulted from the lower base bottom line of 2Q20. The bottom line came better than our estimate of USD21 million, as a result of a higher EBITDA margin in the US and strong top-line growth. MEA's net attributable profit was USD22.3 million (+34% YoY, -10% QoQ), while the US accounted fo...

Orascom Construction: Bottom line impacted by lower than expected top ...

OC reported USD23.9 million in the bottom line for 1Q21, -4.4% YoY, and -9.5% QoQ. The bottom line came lower than our estimates of USD27 million, mainly due to weaker than expected topline and USD1.4 million of losses coming from On the bright side, the bottom line was cushioned by a higher EBITDA margin which came higher than expected at 8.5% versus the estimated 7.6%, mainly caused by an uptick in MEA margin by 0.8pps on a sequential basis. MEA's net attributable profit was USD24.8 million...

ORAS EY: 4Q20 – MEA growth drives revenue performance; margins pressur...

BOTTOM LINE IMPACTED BY WEAK MARGINS WITH LOWER SEQUENTIAL PROFITABILITY FROM BESIX OC reported USD25.9 million in bottom line for 4Q20, down 6.2% YoY and 14.2% QoQ. The bottom line came lower than our estimates of USD38 million, due to weaker margins during the quarter on both MEA and the US, and a lower positive contribution to the bottom line of USD2.8 million from BESIX than the prior quarter. MEA's net attributable profit was USD19.8 million (-24.1% YoY, +4.8% QoQ), while the US account...

Orascom Construction: Management webinar key takeaways

ON-THE-GROUND UPDATES 1. The company witnessed healthy operations in 2020, despite having some delays in a few projects owing to the spread of the pandemic that reflected on 2Q20 numbers. However, 3Q20 numbers showed a rebound with a backlog of USD5.3 billion and net cash of USD209 million. 2. BESIX has returned to profitability in 3Q20 (with c.USD20 million in profits) after facing some challenges during 1H20, The pressure was caused by three projects, two of which in the UAE and the ...

ORAS EY: 3Q20 – US growth drives revenue performance; margins driven b...

BESIX turns profitable and underpins bottom-line growth OC reported a USD30.2 million bottom line in 3Q20, down 6% YoY but more than double QoQ. MEA's net attributable profit was USD18.9 million (-56.4% YoY, +13.2% QoQ), while the US accounted for USD1.3 of profits significantly better than USD21 of losses in 3Q19 and muted 2Q20 bottom line. Net income coming from BESIX recorded USD10 million which is on par with the 3Q19 figure but remarkably better from the USD7 million losses during 2Q20 a...

ORAS EY | A deep value stock; Reiterate Overweight

A high quality name, trading at historical low valuation. OC’s current share price values the contractor at an unjustified 2021e EV/EBITDA of c1x (vs. 2.5x historical average), while assigning zero value to BESIX. We value the latter at 1x book (USD360mn), in line with global peers. We cut our TP by only c6%, post the COVID-19 pandemic, to EGP160/share, as the 1pp downward revision in our MENA margins assumptions, on higher forecasted operating costs and more challenging outlook, has been mostly...

ORAS EY: Q2 20 — Robust top line overshadowed by BESIX losses

BESIX weighs on the bottom line for the third consecutive quarter OC reported a 2Q20 net attributable income of USD9.8 million, down 69% YoY, and 61% QoQ. MEA's net attributable profit was USD17 million which was hampered by the USD7 million loss coming from BESIX, while the US reached break-even at the bottom-line level. NPM came in at 1.2% versus 4.0% in 2Q19 and 3.0% in 1Q20. The company beat our estimate of USD6 million (NPM of 0.95%). The bottom line was hammered during the quarter by t...

Egypt: August 2020 EGX30 Rebalancing – Expected additions and deleti...

Pharos’ Expectations for EGX30 Additions and Deletions Additions 1. Egyptian Iron & Steel (IRON) 2. Oriental Weavers (ORWE) 3. Beltone Financial Holding (BTFH) 4. Export Development Bank of Egypt (EXPA) 5. Edita Food Industries (EFID) Deletions 1. Porto Holding (PORT) 2. Egyptian Resorts Company (EGTS) 3. Egyptian Chemical Industries - KIMA (EGCH) 4. Alexandria Mineral Oils Company (AMOC) 5. Orascom Construction PLC (ORAS) Reminder: Criteria For Joining the EGX30 The Egyptian Exchange review....

ORAS EY: Slower execution and softer awards momentum in sight

Cash burn within acceptable levels; Dynamics look better than expected The company’s net cash position declined to USD114mn, implying a daily cash burn of USD1.8mn during the quarter, which we think is acceptable given current circumstances. We do not rule out that the cash burn will likely continue in 2Q20 but at softer rates. Softer-than-expected preventative measures We are slightly comfortable now as the company noted that “execution at nearly all projects is currently ongoing; execution...

ORAS EY: Q4 19 – Preventive measures to weigh down on burn rate

Topline and EBITDA beat estimates; bottom line down on BESIX losses OC reported 4Q19 revenue of USD899mn, up 15.5% y/y and 13.8% q/q and above our estimate of USD784mn. MENA accounted for 61.4% of revenue in 4Q19 vs 65.1% in 3Q19 and 73.3% in 4Q18. EBITDA came in at USD69mn in 4Q19, up 89.2% y/y and 19.5% q/q, owing to US operations swinging into positive territory sequentially, and above our estimate of USD61mn. Attributable net income came in at USD28mn, down 16.6% y/y and 14.3% q/q, and be...

Water and transportation in the limelight, raise FV

ORAS - Valuation Update

​We upgraded our fair value for Orascom Construction (ORAS.CA) to USD 7.02/share (EGP 119.36/share) with a “BUY” rating; and an upside potential of 18.6% (for the EGP value). This upgrade came on the back of recovery from the one off loss in 2015 and the steady performance in the MENA operations in 9M2016. We took into account the effect of the floatation of the EGP, which will have a significant effect on the company’s operations which would start showing in 4Q2016 financials.

OC Initiation report

​ A positive outlier in a debilitated regional construction sector-USD-denominated P&L component is >50% of cash flowsnearestequivalent play is Sewedy Electric (Buy, EGP 62) Group backlog is c.75% USD/EUR denominated, thanks to USbasedorder book + local projects priced in foreign currencies We initiate with a Buy rating (TP EGP 85, 21% upside) as OCtrades 28%/46% behind comparable MENA and globalcontractors respectively, on FY 17-18e P/E