KEY THEMES
Orascom Construction [ORAS] generated USD1.7bn in revenues in H1 2021 (+4% y/y) and the management is happy about it, as per a conference call yesterday following their earnings release on Sunday. Below, we list the three main ingredients of the company’s revenue pie as explained in the call.
(1) ORAS did not fully feel the pinch from the challenging increase in raw material prices, which was hedged against in many of its projects. ORAS focused on attracting high quality contracts in Egypt, while benefiting off the country's booming construction and renewable energy initiatives.
(2) ORAS's management is comfortable with the healthy backlog of its 50%-owned company BESIX and its structural adjustments for achieving its targets.
(3) In the U.S., ORAS's net income grew 7.5x y/y to USD1.7mn, despite an 18.5% y/y decrease in revenues to USD259.7mn which the management attributed to the unconsolidated income of its joint ventures.
Our view: We appreciate the y/y recovery and expect stronger H2 2021 financials on a profitable BESIX and the completion of major projects. We note that our rating for ORAS is Overweight with a 12M PT of EGP146/share (+95%).
POSITIVE
ORAS, SWDY, HRHO, FWRY: Both ORAS and Elsewedy Electric [SWDY] are cheap and continue to add new awards every other day. EFG Hermes Holding’s [HRHO] finalization of its imminent acquisition will further add value and stability to its valuation. Fawry [FWRY] may see foreign inflows in September following its inclusion in FTSE Russell’s Middle East index.
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