KEY THEMES
To navigate the market nowadays, we probably need tens of different trading playbooks. It seems that we are sailing in uncharted waters looking for land, but we need to be careful because what may look like land could be very well a mirage. Thus, investors, who are long term by definition, need to be able to balance the risks of trading in the short term versus investing for the long term. What this means is that investors should not diverge from their long-term strategy to chase short-term gains that may just be that: short term.
Meanwhile, and continuing with one of the two market-moving events (i.e. earnings), Cleopatra Hospitals Group [CLHO] posted a 23% y/y increase in consolidated net profit for Q1 2021. The company registered c.EGP101mn in net earnings, which brings its TTM EPS to EGP0.19/share. The results make us believe that for at least the first three quarters of 2021, we are going to get a very nice base effect, which will decorate quarterly results form a y/y perspective. The important takeaway is growth on top-line level was volume driven, given the slim volumes witnessed during 2020. While CLHO had compensated the drop in volumes in 2020 through price hikes, Q1 2021 GPM strengthened to 38.7% (+466bps y/y). CLHO’s strong opening to 2021 from an earning perspective, coupled with weak stock performance, sends the name’s P/E down to 21x. We deem CLHO’s current TTM P/E as too low compared to historical levels. To put it into perspective, CLHO’s 3-year average P/E is 35x, which render the current levels as being very repressed.
POSITIVE
TMGH: Having laid the foundation of its new project "Nour City", TMG Holding [TMGH] may see its stock re-rate as a result.
CLHO: Q1 2021 results were strong, suggesting a recovery.
EAST: Eastern Company [EAST] usually does well whenever we witness a price hike in cigarettes, be it related to taxes or health insurance. EAST often manages to squeeze out some profits from such price hikes.
MTIE: MM Group’s [MTIE] Q1 2021 double-digit earnings growth posted should bring attention back to the stock in line with consumption recovery.