This is yet another short trading week, shortened by a long Eid El-Fitr holiday from Wednesday, 12 May through Sunday, 16 May. Trading will resume next week on Monday, 17 May. For this week, investors will await the results of MSCI EM rebalancing (due on 11 May) and look forward to more CQ1 2021 results for clues about companies’ performance. As for the latter, Sidi Kerir Petrochemicals [SKPC] reported last Thursday strong earnings for Q1 2021, thanks to higher polyethylene (PE) selling prices. With PE continuing to trade above USD1,300/ton, SKPC’s performance is likely to be sustained in Q2 2021. Already up 3.2% last Thursday, SKPC is now up around 14% ytd, in line with PE prices (+12% ytd). Also last Thursday, Alexandria Mineral Oils [AMOC] reports its 9M 2020/21 results, turning to profitability, thanks to better margins.
That said, we think there is still room for commodity-linked stocks to appreciate further through H1 2021. Besides SKPC and AMOC, we had alluded before to Egypt Aluminum [EGAL], up 3% since our call on 27 April. Also, Ezz Steel [ESRS] saw its stock appreciate 8% in May, after raising its selling prices on 1 May. Over the weekend, ESRS raised its selling prices again by c.3%.
Elsewhere, we now know that LSE-listed Integrated Diagnostics Holdings [LSE: IDHC] will have its local shares debut on Thursday, 20 May, denominated in Egyptian pounds. Investors will likely look at Speed Medical [SPMD] as one of IDHC’s peers that is already traded on the EGX, albeit with a much smaller size with a market cap of only EGP2.7bn, a quarter of IDHC’s market cap. However, IDHC and SMPD are currently traded at similar valuation levels on LSE and EGX at TTM P/E of 22.8x and 23.1x, respectively.
POSITIVE
AMOC, EGAL, ESRS, SKPC: We suggest these four stocks as plays on the commodity super cycle.