Mubasher: Pharos Research maintained a 'Buy' recommendation on Egypt Kuwait Holding (EK Holding), setting the stock's fair value (FV) at $0.51 per share, according to a report issued on Monday.

This outlook was driven by the clear business model of Sprea Mist ($0.29 a share of EK Holding), NatEnergy ($0.18 a share), and AlexFert ($0.07).

Sprea contributed EGP 529 million to the company top line, with a gross profit margin of 34% compared to 30% last year.

EBITDA margin increased from 27% to 32%, while net profit more than doubled to EGP 125 million.

"Sprea’s strategy includes high focus on developing its export footprint, with focus on gaining distribution channels to African markets. Currently, exports constitute 20% of top line and management is targeting a higher constitution", the report indicated.

On the other hand, NatGas connected more than 19,300 households to the grid, while targeting 94,000 clients in 2016 and 134,000 in 2017. Moreover, the company has added 8 MW that will start producing in August 2016, bringing the total capacity to 34 MW.

"On a positive note, higher electricity prices on the back of the devaluation of the EGP translated into higher revenues for Kahraba, complemented by the addition of three new contracts", the research agency believes.

In Q2-16, EK Holding raised its stake in NatGas to 84% and plans to acquire 90% through the buyout of another minority shareholder.

Furthermore, AlexFert is a second milestone thanks to the stable utilization rates and higher Urea prices.

"The plant has seen utilization rates rise to an average of 87% during 1H-16, compared to c. 25% during the same period last year. While improved utilization rates have reflected positively on the company’s top-line", according to the report.

The research firm expected dividend payout per share to be around 2.5 cents, with an upside potential to 3 cents if net profits hit $60-65 million in the fiscal year 2016.

Regarding the stock performance, it would start realizing its potentials with FX shortage resolution, or higher interest from foreign institutions into USD-denominated stocks within the local market, the report concluded. 

The company reported net income of $13.2 million in Q2-16, higher 5.5% y-o-y, while H1-16 net income rose 27.2% y-o-y to $35.0 million.