Today’s Trading Playbook
KEY THEMES
Obour Land Food Industries [OLFI] intends to increase its selling prices going into Q4 2021. The decision is meant to contain the increase in raw materials costs, basically Skimmed Milk Powder (SMP). Figures from OLFI’s 9M 2021 results give very sound signs of stability. OLFI managed to achieve net earnings of EGP255mn, where Q3 2021 alone was EGP111mn (i.e. 43% of the period earnings). This comes following a slightly thin Q2 2021, were volumes were not as expected. We like OLFI given its main advantages sources, which include but are not limited to (1) a neat balance sheet, with moderate debt exposure, (2) careful procurement strategies, which averted the company several possibilities of margin slumps, and (3) strong distribution capabilities, which ensures healthy cash conversion cycles. While we believe that OLFI could be the most stable among the consumer universe, the stock suffers from scarce liquidity. Nevertheless, OLFI is currently traded at P/E of only 6.6x based on annualized 9M 2021. Also, OLFI is a decent dividend payer too, with a 10% dividend yield.
Elsewhere, global equities, and the U.S. in particular, have shrugged off the news of China warning its citizens to stockpile food as COVID-19 controls are tightened. The Dow Jones Industrial Average has hit fresh highs yesterday, alongside the other main indices. The record new highs for U.S. equities were helped by a strong set of earning releases.
Now, on to the top news and analysis for the day.