Today’s Trading Playbook
Amr Hussein Elalfy CFA | Head of Research
KEY THEMES
Conventional wisdom at the onset of the COVID-19 crisis would have suggested that drugmakers would be amongst the gainers. However, their performance has been mixed so far in 2020. On one hand, some companies, like EIPICO [PHAR] and Rameda [RMDA], have struggled to grow their revenues, let alone their profits. On the other hand, others have either turned from losses to profits, such as Memphis Pharma [MPCI], or successfully produced double-digit earnings growth rates, such as Arab Drug Co. [ADCI]. The latter just reported its 5M 2020/21 pretax earnings jumped a solid 42% y/y. What else could investors hope for?! Thus, we think one of the key themes investors might want to consider is “selectivity”, which is to be selective even within the sector of choice.
POSITIVE
ADCI: Extrapolating the 5M 2020/21 pretax earnings, we could see ADCI report net earnings north of EGP115mn in 2020/21, implying a forward P/E ratio of just 4x! The stock is already up 78% ytd, and we think it has more room to grow.
Negative
ALCN: Alexandria Container & Cargo Handling [ALCN] continues to report dismal earnings, with 5M 2020/21 suggesting the company will deliver its third double-digit down year. In view of stable to stronger EGP, we do not expect the picture to improve any time soon.