KEY THEMES
On Thursday, the Ministry of Trade & Industry said it was cutting the anti-dumping fees levied on steel billet imports by 3 percentage points to 13%, with a minimum of USD60/ton instead of USD74/ton. This may have extinguished hopes of another extension to the fee regime which was extended back in April in view of COVID-19. By way of background, we remind you that this cut should have already taken place after 11 April 2020 as part of the government’s planned phasing out the anti-dumping fees on steel billet imports. Furthermore, another cut is still scheduled for April 2021, which will bring anti-dumping fees down to 10%, with a minimum of USD46/ton until April 2022. Weighing the impact of that decision on Ezz Steel [ESRS], we think it should be the least of the steel maker’s worries, as ESRS has already got its hands full with other challenges of (1) soft selling prices, (2) elevated debt levels, and (3) inflated prices of raw materials (i.e. iron ore). In other words, the impact is not major for ESRS and should have been priced in already. Meanwhile, the decision should theoretically bode well rolling factories, such as Misr National Steel [ATQA].
Elsewhere, Abu Dhabi private equity fund ADQ is studying the acquisition of Bausch Health’s unit in Egypt, Amoun Pharmaceuticals, for an amount in excess of USD700mn. The drug maker was an acquisition target back in 2006 when a consortium of foreign investors, where the company was able to generate EGP1.8bn in revenues back in 2015. Further M&A could be expected in the pharma space, one of our preferred sectors.
POSITIVE
Pharma, ATQA: Notwithstanding any immediate M&A action, we believe the pharma sector warrants some re-rating, trading at low to mid-single-digit P/E multiples. Meanwhile, ATQA may be buoyed by the abovementioned news.
NEUTRAL
ESRS: We do not see a direct impact from the abovementioned news as investors await the final word on natural gas pricing.
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