New Research
Sidi Kerir Petrochemicals (Sidpec) [SKPC]: Great Margins for the Future?
Closing 2022 with an exceptional performance: Sidi Kerir Petrochemicals Co. (Sidpec) [SKPC] resumed its strong upward trajectory, following weak revenues seen in 2019 (-14% y/y) and 2020 (-30% y/y). Over the years, the cost per tonne of SKPC’s ethane/propane (E/P) mix, its main feedstock, has been increasing, which dampened its margins. However, the new pricing formula introduced in October 2022 improved SKPC’s H1 2023 margins to a great extent, alleviating its cost burden going forward.
Joining the “competition”: SKPC currently holds a 20% stake in the Egyptian Ethylene & Derivatives Co. (ETHYDCO), its main Egypt-based competitor. SKPC said it will acquire the 80% it does not already own in ETHYDCO through a share swap. With SKPC currently controlling 25- 35% of the domestic PE market, the combined market share of both companies could reach 50% if the tie-up goes through.
Overweight / Medium Risk, 12MPT EGP38.9/share (+51%): To determine SKPC’s and ETHYDCO’s combined equity value, we used a sum-of-the-parts (SOTP) method, valuing SKPC and ETHYDCO using two separate DCF models. Thus, we valued SKPC’s equity at EGP20.5bn (including 20% of ETHYDCO), while ETHYDCO’s equity was valued at EGP35.5bn. Given that SKPC’s BoD already approved its acquisition of an 80% stake in ETHYDCO through a share swap, we combined both valuations, which came out to EGP48.9bn or EGP29.9/share. This implies a 12MPT of EGP38.9/share which offers an upside potential of 51%.
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Today’s Top News & Analysis
August inflation figures released
Etisalat to invest EGP6bn in Egypt
Egypt's imports of Israeli gas increased 21% y/y in H1 2023
Chinese companies interested in establishing a USD7.5-12bn industrial zone
POUL Q2 2023: Strong y/y growth in net profits on higher revenues and better other income
Talaat Moustafa to build an SAR40bn housing project in KSA
MACRO
August inflation figures released
Egypt's annual core headline inflation decreased to 40.4% in August 2023 (vs. 40.7% in July 2023) while the monthly core CPI increased 0.3% in August (vs. 1.3% in July 2023 and 0.6% in August 2022). Meanwhile, annual headline urban inflation rate increased to 37.4% in August 2023 (vs. 36.5% in July 2023) while the monthly urban CPI increased 1.6% in August (vs. 1.9% in July 2023 and 0.9% in August 2022). (CBE)
Etisalat to invest EGP6bn in Egypt
Etisalat by e& plans to invest EGP6bn in Egypt in 2024. Meanwhile, the company submitted a request to the National Telecom Regulatory Authority (NTRA) to increase their prices in Egypt. (Zawya)
Egypt's imports of Israeli gas increased 21% y/y in H1 2023
Egypt's imports of Israeli gas reportedly reached 903mn cubic feet (+21% y/y) in H1 2023. Since July 2023, Egypt has been importing gas from Israel at a rate of 800mn cubic feet per day, and this is expected to continue until September. Meanwhile, Egypt's total natural gas production declined to 6.1bn cubic feet per day (production has been between 6.5-7bn cubic feet in the past). (Asharq Business)
Chinese companies interested in establishing a USD7.5-12bn industrial zone
The CEO of the General Authority For Investment & Free Zones (GAFI) revealed that 10-15 Chinese companies are interested in establishing an industrial zone specializing in chemicals and petrochemicals with a total investment cost of USD7.5-12bn. (Al-Mal)
CORPORATE
POUL Q2 2023: Strong y/y earnings growth on higher revenues and better other income
Cairo Poultry [POUL] posted a 13% y/y growth in Q2 2023 net profits to EGP207mn on:
Higher revenues of EGP2.8bn (+72% y/y) despite a 2pp y/y decrease in the gross profit margin to 16%.
SG&A-to-revenues ratio improved to 4% (+1pp y/y).
Other income increased by 80% y/y to EGP88mn.
Regarding H1 2023, POUL reported H1 2023 net profits of EGP755mn (+220% y/y) on:
Higher revenues of EGP5.6bn (+81% y/y).
Improved gross profit margin of 24% (+9pp y/y).
SG&A-to-revenues ratio improved by 2pp y/y to 4%.
Other income increased by 74% y/y to EGP135mn. (Company disclosure)
TMG to build an SAR40bn housing project in Saudi Arabia
Talaat Moustafa Holding Group [TMGH] signed an agreement with National Housing Co. to develop and build 27,750 housing units over a 10mn sqm land plot in Saudi Arabia. The project's total investments are expected to be SAR40bn. (Economy Plus)
Key Dates
15-Sep-23
IMF Review / Second IMF review with Egypt (end-June 2023 quantitative targets).
17-Sep-23
MCQE: Cash dividend / Deadline for eligibility for a dividend of EGP0.750/Share.
19-Sep-23
EXPA: EGM / Amending Article No. 5 of the bank's bylaws.
20-Sep-23
MCQE: Cash dividend / Payment date for a dividend of EGP0.25/share (1st installment).
RMDA: Stock dividend / Last date for eligibility for a 0.52-for-1 stock dividend.
21-Sep-23
RMDA: Stock dividend / Date for distributing a 0.52 for-1 stock dividend.
MPC Meeting / Determining the CBE's policy rate.
26-Sep-23
MICH: OGM / Approving financial statements ending 30 June 2023 and the proposed dividends.
ODIN: OGM / Approving financial statements ending 30 June 2023.
ODIN: EGM / Amending Article No. 7 of the company's bylaws.
TAQA: OGM / A board reshuffle.
TAQA: EGM / Amending Article No. 24 of the company's bylaws.
27-Sep-23
BTFH: OGM / Discussing netting contracts.
28-Sep-23
EAST: OGM / Approving financial statements ending 30 June 2023 and the proposed dividends.
30-Sep-23
ABUK: OGM / Approving financial statements ending 30 June 2023 and the proposed dividends.
ABUK: EGM / Amending Articles No. 8, 16, 21 & 39 of the company's bylaws.
AMOC: OGM / Approving financial statements ending 30 June 2023 and the proposed dividends.
IFAP: OGM / Approving financial statements ending 30 June 2023 and the proposed dividends.