Follow Turnarounds
Today’s Trading Playbook
KEY THEMES
We recommended Misr Oils & Soap [MOSC] before on our Trading Playbook published on 21 October 2020. Since then MOSC saw a peak of EGP25.25/share (+50% since our call), where it trades now at EGP19.01/share (+13% since our call).
MOSC's key product is ration cards edible oil, a product which the Holding Company for Food Industries buys from MOSC. The Holding Company for Food Industries also supplies MOSC with its main materials (i.e. raw oil). MOSC has managed to turn profitable in 2019/20, posting EGP17mn in net earnings vs EGP16mn losses in the prior year. The reason comes in light of weaker raw materials prices.
We note that company's 5M 2020/21 pretax income came at EGP6.6mn. Also, MOSC has just finalized a settlement with Alex Bank, one which will result in EGP14.6mn increase in MOSC's book value of equity. Should the effect of this settlement appear in MOSC's income statement, we could be looking at EGP35mn bottom line for 2020/21, which implies fwd P/E now of MOSC of 3.2x.
Elsewhere, news about the government launching the National Program for Converting and Replacing Cars with participation of GB Auto [AUTO] could further catalyze better performance by the automaker. The stock rallied some 7% on the first day trading of the year, yet it still trades at depressed P/E of only 5.7x.
positive
MOSC: The likelihood of a robust earnings growth in 2020/21.
AUTO: The participation in the national program to convert cars could further support better performance by the name.