Sunday, 6 February 2011

FT Tilt - Egypt stock update: Orascom Construction(Registration)

The Egyptian Exchange will remain closed on Sunday and Monday, and authorities have said they will give two days' notice before reopening the bourse, suggesting that if no announcements are made, it will be closed on Tuesday also. The market has been closed since January 27.

While traders expect the market to be hit hard on reopening, many stress that the sell-off will likely be a selective one, particularly by local and international institutions that buy and sell on a stock-by-stock basis. Companies with substantial business outside of Egypt, especially exporters who have not had production disrupted, should fare better than most, and are already looking cheap after the massive sell-off at the beginning of the crisis.

Top among them is Orascom Construction Industries (OCI), a long-time favourite of FT Tilt. Kuwait's Global Investment House, which rates the stock a "buy", sat in on a conference call with OCI management, and summed up the situation thus:

According to the Company officials, its fertilizer business has not been affected at all. There was no loss time recorded and production of Egyptian Fertilizer Company and Egyptian Basic Industries Company continued at full throttle. There was no disruption in the fertilizer exports as well. Regarding OCI's construction business some of its projects which were in Cairo's core district witnessed a 5-6 days closedown along with looting of furniture and office equipments estimated between USD200k-300k which is quite a paltry number considering Company's cash balances and net income estimates of USD1,228mn and USD663mn for 2011. So far it is not known if the loot is covered under insurance. Nevertheless, Global Research estimates that the loot amount is quite insignificant and it would not materially affect the Company's financials and valuations. With the recent steep decline in the Company's share price post Egyptian political chaos, OCI share price has a potential upside of 41.5% to EGP321.3/share.

No comments:

Post a Comment