Today’s Trading Playbook
KEY THEMES
Public Enterprises Minister has announced in a TV interview the interest of a strategic Arab investor in non-other than Egypt Aluminum [EGAL], with a targeted stake between 20%-25%. Meanwhile, it is also expected that such transaction will take the form of a capital increase, which will finance EGAL’s optimistic upgrade plans. The minister announced that the upgrade plans could cost around USD300mn, pending necessary studies. Sourcing the USD300nmn will be through a mix between debt and equity capital increase. However, the cherry on top was the announcement of serious consideration to build a solar power station, with a capacity that could range between 600 to 1,200 MW.
On the other hand, EGAL itself has announced the appointment of U.S. based Bechtel, in order to conduct a study to revamp and upgrade its current facility, while keeping the nameplate capacity at 320 ktpa. EGAL also announced the possibility of a capital increase, while also exploring the option of inaugurating solar power station.
We view the announced plans as very positive for EGAL. Our view on the stock since the massive rally in aluminum prices used to be clouded by (1) inevitable normalization in selling prices, and (2) electricity prices were bound to adjust higher over the longer term. However, scrapping the seventh line upgrades, while bringing back the solar power station to the table will substantially influence our outlook positively. In the meantime, quantifying the impact on EGAL’s valuation will be heavily reliant on the technical studies regarding the USD300mn upgrades, as well as the actual capacity of the solar power station, coupled with its investment cost.
Now, on to the top news and analysis for the day.
Top News & Analysis
MACRO NEWS
Passenger car sales fell for the second month in a row, lower by 20% y/y. (Enterprise)
ADQ will invest USD10bn in industrial projects in Egypt, the UAE and Jordan as part of a partnership signed in Abu Dhabi yesterday. (Enterprise)
CORPORATE NEWS
Emaar Misr for Development’s [EMFD] consolidated net profits for Q1 2022 surged to EGP1.58bn (+199% y/y) vs. EGP529.1mn during the same period last year
Eastern Company [EAST] announced its 9M 2021/22 results, reporting an increase in net profit reachingEGP4.2bn (+9% y/y).
Cleopatra Hospitals [CLHO] announced its Q1 2022 consolidated results, reporting a decrease in net profits reaching EGP102mn (-5% y/y), on the back of lower EBIT, which reached EGP116mn (-16% y/y).
MM Group [MTIE] Q1 2022 bottom line dropped 60% y/y to EGP51mn on 23% y/y decline in to total revenues of EGP1.9bn.
Macro Group [MCRO] reported Q1 2022, with revenue growth of 14% y/y, recording EGP144mn. Growth in top line came in view of a 13% annual growth in average selling prices, while on the other hand volumes grew at a 2% y/y speed. As a result, bottom line upped notably by 182% y/y to EGP31mn. (Company disclosure)
Heliopolis Housing & Development [HELI] has started the designing work for the 107 feddan area in New Heliopolis. (Arab finance)