KEY THEMES
Oriental Weavers Carpet [ORWE] will receive the average base rate of subsidy for its exports, as part of what the carpet maker sees as one of the best Egyptian export subsidy programs since 2002. Non-applicable to sales generated by ORWE’s subsidiaries OW US and OW China, the subsidies will be released over three phases starting FY21 (1 July 2020 - 30 June 2021) and ending FY23 (1 July 2022 - 30 June 2023).
ORWE estimates its export subsidy will average 7.5% in FY21 and 11.0% in FY22, comparing to less than 5% previously. Also, the subsidy rate could be brought higher in some cases including exporting to certain countries. But whether these rates will still apply for FY23 is undecided.
We expect ORWE to benefit greatly from the new program as it employs an export-heavy strategy. We believe ORWE could receive rebates of c.EGP400mn on its FY21 exports, amounting to c.30% of its FY21 earnings.
POSITIVE
ORWE: More visibility surrounding its export subsidy receipts should bode well for the stock, a high dividend yield play too.