KEY THEMES
President Abdel Fattah Al-Sisi discussed building the largest container handling station within the MENA region with a capacity of two million containers annually through Abu Quir Port. We note that Alexandria Container and Cargo Handling [ALCN] operates only within Alexandria Port Authority (APA) with a terminal in Alexandria Port and another in El-Dekheila Port. While a new port could pose a competition threat, we view the current challenges facing the ALCN business model as more severe (i.e. weak global trade, and stronger EGP). Hence we think this will be, for now, neutral on ACLN, given the unknown timeline of the project.
Meanwhile, Misr Chemical Industries’ [MICH] edited preliminary earnings for 2019/20 reached EGP64mn (-18% y/y), but we remind you that its 9M 2019/20 (ended 31 March 2020) bottom line was only EGP28mn. This implies that Q4 2019/20 bottom line recorded around EGP36mn (56% of full-year earnings). Also, MICH BoD on 27 August did announce that July 2020 bottom line came at EGP14.5mn, nearly marching June’s 2020. MICH earnings in July 2019 were merely EGP0.465mn. Such stellar monthly performance promises strong 2020/21 bottom line figure, as the company enjoys a cut in electricity prices, as well as high demand for its product portfolio, especially chlorine and sodium hypochlorite. We expect GPM now is north of 40%, hence we expect MICH for the first three quarters of 2020/21 to depict a very high double digit earnings growth, given such a weak base in 2019/20.
POSITIVE
MICH: Expectations of a strong 9M 2020/21 given a weak base in 2019/20.
neutral
ALCN: Abuqir port news expected to be, for now, neutral on ACLN, given the unknown timeline of the project, and the already existing challenges facing the business.