KEY THEMES
Tonight, MSCI will announce its August 2021 Quarterly Index Review (QIR), which is this time around not touted as much by investors in the market as 3-6 months ago. Indeed, market consensus is that Egypt should see no changes in MSCI EM three constituents, namely CIB [COMI], Eastern Co. [EAST], and Fawry [FWRY], which replaced Elsewedy Electric [SWDY] three months ago. Meanwhile, we continue with the Q2 earnings season, picking on two names, namely Sidi Kerir Petrochemicals’ [SKPC] and Egypt Kuwait Holding [EKHO].
SKPC’s preliminary Q2 2021 bottom line came in at EGP131mn (-14% q/q). sequential slippage in bottom line came despite 4% higher revenues to EGP1,360mn, as GPM weakened by 59bps to 20.9%, leading to a flattish gross profit of EGP285mn (+1% q/q). We believe SKPC will be able to deliver a strong annual growth in 2021 due to a very weak base, yet the company could face quarterly headwinds arising from higher feedstock cost, which is higher from the one registered in 2020.
Elsewhere, EKHO released its H1 2021 figures, with attributable net profit equal to USD88mn, as the company reaped the fruits of long-term diversification, capitalizing on higher global commodity market and feedstock costs stability, especially within the fertilizer & petrochemicals segment in 2021. We continue to have a positive view on EKHO, supported by (1) EKHO’s business model stability and management soundness, (2) the integrative feature among its segments, (3) being a perfect play on rallying global commodity markets, and (4) EKHO’s new launches which include setting up a production line for sulfuric acid next year, besides the imminent commencement of operations for Nile Wood by Q3 2021. EKHO is currently traded at annualized H1 2021 P/E and EV/EBITDA of 6.4x and 5.3x, respectively.
POSITIVE
EKHO: A strong set of results in H1 2021.