Today’s Trading Playbook
Dina Abdelbadie | Equity Analyst
KEY THEMES
dabdelbadie@egy.primegroup.orgLast week, Elsewedy Electric [SWDY] published its Q4 2020 results, which were generally better than expected. Below, we highlight the key takeaways from the company’s earnings conference call:
Significant recovery: SWDY staged a strong recovery in Q4 2020 on back of its turnkey business which contributed 49% to its revenues for the first time in 2020. This handsome contribution offset a volume-driven decrease in revenues from wires and cables. Not only have its projects all been in operation despite the pandemic, SWDY has been awarded EGP18bn worth of fresh contracts in 2020. The company saw its meters backlog jump to EUR90mn at the end of 2020 from EUR74mn in 9M 2020.
More growth on way: SWDY's team is close to seal two deals in Indonesia and Pakistan, in line with the company’s vision to tap into new markets and widen its client base. The size and effect of these deals are not disclosed yet, but both are within the transformers segment and the Indonesia’s deal would be bigger than Pakistan’s. Meanwhile, SWDY is still open for other potential investments in other segments, with the hope of improving margins.
2021 targets: Management is optimistic with what could be achieved in 2021. They expect double-digit growth in both top line and bottom line. Excluding potential investments, maintenance capex is seen ranging around 3% of revenues. Transmission projects in Egypt and power generation projects in Africa are expected to be part of the company’s turnkey backlog, with a similar mix to last year’s. Also, new awards are expected to reach around EGP18bn with a steady revenue of c.EGP23bn over the coming two years.
Dividends and treasury shares: SWDY’s BoD approved a cash dividend of EGP0.4/share. The BoD opted to distribute a reasonable dividend – yet less than last year’s, resting on a belief that the net cash position helped the company execute as targeted and keeping it is a good sign now. After the pandemic effect wears off, they may ponder another dividend distribution but not right now. Cash is planned to help out with expansions and acquisitions to maintain a healthy debt level. While selling the treasury shares is in plans, the board’s final decision will be made in May or June.