Orascom Construction [ORAS]: Rich in Value
The Story of a Local Turned Global Contractor
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Orascom Construction [ORAS]
Egypt / Industrials / Core Coverage Report
12MPT: EGP146 (+65%)
as of 12 April 2021
Investment Rating: overweight | Risk Rating: Medium
Key Insights
Diversification is key
Orascom Construction [ORAS] has a diversified construction portfolio in terms of geographical distribution and product mix. It draws on a strong brand in the MENA region, topped by Egypt which made up 76% of ORAS’s total backlog vs. the U.S.’s 16%, in 2020. Through its 50%-owned joint venture BESIX, ORAS also maintains presence in Europe in the fields of construction, real estate, and concessions.
Favorable demographics
ORAS’s 2020 performance is weakened by COVID-19, but the brunt is felt more by margins while revenues increased. Egypt has the lion’s share when it comes to the backlog of ORAS. We think that the ongoing infrastructure spending in Egypt will last for a couple of years to come, be it in water desalination, transportation, or new cities. ORAS tries to expand more in Iraq, while being selective in Africa, added to ORAS’s current presence in the U.S. and Europe. Q4 2020 results were promising, thanks to higher revenues and BESIX turning to profitability, providing a sign of recovery.
BESIX performance seen to recover in the medium term
BESIX is a leading contractor operating in Europe, the Middle East and also Australia, where it recently acquired Watpac Limited, a construction and mining services provider. BESIX’s standalone backlog stood at EUR4.2bn in 2020.
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