Sidi Kerir Petrochemicals (Sidpec) announced that its shareholders, in an AGM, decided to increase its 2013 dividend to EGP2/share, from the previously proposed EGP1.8/share.
Naeem Research said the recommended dividend represents a payout of 80%, up from the previously proposed 73%; a positive for the stock, given the higher implied yield of 9.8% (well above the EGX30 average of 3%)
The dividend in absolute terms, reflects a 33% YoY increase compared to EGP1.50/share in 2012. However, the payout proportion is still below the company's 5-year average of 87% and compares to the 2012 payout of 84%, according to Naeem.
It added that the marginal drop in the payout could be explained by the company’s increased investment into the USD1.9bn Egyptian Ethylene and Derivatives Company (Ethydco) project; expected to be functional in 2017. SKPC targets to own 20% of this venture, which will be funded 35% through equity
Sidpec’s improved profitability in 2013 (bottom-line up 49% YoY), came mainly as a result of a 30% YoY increase in Polyethylene (LDPE) prices and petchems in general, Naeem said.
“We maintain our TP on SKPC at EGP22.8/share and recommend a BUY,” Naeem said.