KEY THEMES
When the market barely moves in any specific direction and conventional rules do not seem to be that effective, it might be helpful to look for turnaround stories. One of these stories that we think is in the making is Misr Oil & Soap [MOSC]. Here is why. MOSC has managed to turn profitable in 2019/20, posting EGP17mn in net earnings vs. EGP16mn in net losses a year before. The reason comes in light of weaker raw materials prices. MOSC's key product is ration cards edible oil, a product that the Holding Co. for Food Industries buys from MOSC after supplying MOSC with its main materials (i.e. raw oil). There is some evidence that supports the possibility of replicating 2019/20 performance in 2020/21. This includes MOSC's 2M 2020/21 bottom line of EGP3.5mn. Also, MOSC has just finalized a settlement with Alex Bank, which should result in an EGP14.6mn increase in MOSC's book value of equity. Should the effect of this settlement appear in MOSC's income statement, we could be looking at EGP35mn bottom line for 2020/21, implying a forward P/E of 2.8x. Excluding the settlement, MOSC is still relatively cheap, currently trading at 6.5x P/E for 2019/20.
POSITIVE
MOSC, MICH: Please refer to the above. Misr Chemical Industries [MICH] continues to deliver strong y/y earnings, as we had alluded to before.
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