1. Today’s Trading Playbook
Mohamed Saad | Equity Analyst
KEY THEMES
Sidi Kerir Petrochemicals’ [SKPC] BoD has postponed its decision regarding selling the SKPC’s polypropylene project license in exchange of 5% stake at Red Sea National for Refining & Petrochemicals (RSNRPC). We don’t know for sure the capital structure of RSNRPC, nor the accurate valuation for the company which is expected to commence operations in 2021. However, we tend to think that it would be a good idea for SKPC to escape future cash commitments towards its polypropylene project, which will involve a capital increase as well as all the risks associated with setting and running the facility. It could go either way, yet for the reasons mentioned earlier, we think accepting the offer is the way to go here.
Elsewhere, the rally in global commodity prices has pushed aluminum prices to levels not seen since October 2018. We remind you that the reason for the 2018 rally was a collaboration of trade war-related tariffs as well as sanctions on UC Rusal. Prices during the 2018 rally reached as high as USD2,556/ton before ending the year below the USD2,000/ton mark. While the dynamics of the current rally is different (as aluminum prices are now peaking on supply concerns), the result will be pleasant for Egypt Aluminum’s [EGAL] Q3 2020/21 profitability, as at the very least we don’t expect to see gross losses during the quarter.
positive
EGAL: Rising aluminum prices should enhance EGAL’s P&L performance in Q3 2020/21.
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