Today’s Trading Playbook
Amr Hussein Elalfy CFA | Head of Research
KEY THEMES
We can argue that investors at large can see value in many stocks that trade in the market, but only a few believe in that so-called “fair value” being realized. Some argue that the market price is the fair value investors are willing to pay for a certain stock, which is true in a sense but only at that time of trade execution. For example, early in the year, Telecom Egypt [ETEL] rose on news of a potential deal involving its 45%-owned No. 1 mobile operator Vodafone Egypt [VODE]. Investors all of a sudden saw value in ETEL! Yesterday, a similar story took place involving MOPCO [MFPC] which rose 20% on the day following news of a divestment by a major shareholder, Nutrien, of its 26% stake at a value of USD540mn. Realizing that there was an arbitration case to the tune of USD140mn against MFPC’s subsidiary ENPC, the deal would remove an overhang on the stock and implicitly re-rate the stock at a much higher level. This implies a value of USD400mn for the 26% stake, which values MFPC at USD1.54bn or EGP105/share, an 82% premium to the prior day’s close. Before the announcement, the stock was trading at 6.4x LTM earnings (now at 7.6x). We think the stock could re-rate to 9x, which would imply a price target above EGP80/share (leaving another c.15% on the table) compared to a consensus of EGP82.5/share. You may check all the updated multiples here.
positive
MFPC, ABUK: As MFPC re-rated on the news, Abu Qir Fertilizers [ABUK] rose as investors re-rated the stock as well. We see another 10% in ABUK.
NEGATIVE
ETEL: We could see the stock punished today following news of Vodafone Group [LSE: VOD] suspending its plans to divest its 55% stake in VODE.