Today’s Trading Playbook
KEY THEMES
Industrial Engineering for Construction and Development –ICON- [ENGC] has posted its 9M 2021 results. During such period, ENGC bottom line showed substantial recovery, growing by 127% y/y to EGP116.4mn, on 55% higher revenues of EGP1.6bn, and a slight improvement in GPM. We note that, the turnaround in the performance during 2021 is derived from a strong recovery in Acrow Mis [ACRO] performance (i.e. a subsidiary of ENGC), thanks to a very weak base in 2020 in view of COVID-19 repercussions.
We also note that, ENGC has a 78.77% stake at Acrow Mis [ACRO], which is valued at EGP1.5bn according to ACRO market price, hence attributable equity value for ENGC of EGP1.2bn. Furthermore, ENGC current market cap is only EGP793mn, with standalone net debt of EGP130mn, which virtually value ENGC standalone business at negative EGP286mn. This comes despite ENGC standalone business is capable of achieving earnings of EGP13mn during 9M 2021. ENGC has recently performed a spinoff, which resulted in Tanmiya for Real Estate Investment [TANM], operating the real estate sector, with a market cap of c.EGP267mn. ENGC is mulling perusing further a spinoff, in order to clear out its current lines of businesses.
We believe ENGC is obviously mispriced. Also, a look from a consolidated perspective, if ENGC achieved bottom line of EGP140mn in 2021, which is very much achievable, it will be trading at 2021 P/E of only 5.7x. Valuing ENGC standalone business at 5x 2021e EV/EBITDA, while valuing ENGC’s stake at ACRO using its market price, we will reach a target price for ENGC of EGP10.56/share (+61%).
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