Today’s Trading Playbook
KEY THEMES
Q3 earnings season continues. Recently, Alexandria Mineral Oils' [AMOC] Q1 2021/22 preliminary ending 30 September 2021 showed a consolidated bottom line of EGP230mn vs. net losses of EGP32mn a year earlier. From a y/y perspective, AMOC's earnings recovery continues, thanks to an 86% bounce in revenue to EGP3.7bn and a GPM expansion to 11% vs. 2% a year earlier. AMOC continues to enjoy the rally in oil prices, given the state of key input/output spreads. However, on a sequential basis, the quarter has shown obvious signs of weaknesses in margins despite higher revenues, which dragged AMOC’s stock lower yesterday. AMOC’s earrings have slipped 42% q/q despite 21% higher revenues on the back of an 8pp weakness in GPM. We await the release of the full financials for more details. Meanwhile, we remind you that we had picked AMOC in our Trading Playbook issued on 18 July 2021 on the back of strong H2 2020/21 results. The stock has rallied by as much as 25% since then, including dividends. However, we think the stock was pretty close to fair value at yesterday’s open, given expectations of AMOC’s margins normalization in the periods to follow.
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