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Pharos cuts Orascom Investment’s FV to EGP 0.66/shr

Pharos cuts Orascom Investment’s FV to EGP 0.66/shr
The stock’s lower evaluation was ascribed to the sale of MENA Cables
Orascom Investment Holding
OIH
-3.26% 0.42 -0.01

Cairo — Mubasher: Pharos Research has slashed its fair value (FV) of Orascom Investment Holding’s stock by 29.8% to EGP 0.66 from EGP 0.94.

The stock’s lower evaluation was ascribed to the sale of MENA Cables, lack of value-accretive investments, valuing OIH’s stake in Beltone Financial Holding at BV rather than at the IFA FV of EGP 9.30 per share, which was based on profitability targets that did not materialise, the Cairo-based firm said in a research note on Wednesday.

Pharos noted that its evaluation of OIH’s stock was also based on the extension of the Pakistan cable which exhausted around EGP 800 million of cash, along with adding OIH’s 30% stake in Sarwa Capital Holding for Financial Investments at EGP 10.0 a share, using a simplified discounted cash flow (DCF) model.

OIH’s acquisition of a stake in Sarwa Capital was “on time”, Pharos said, adding that OIH’s stock price performance still awaits a clear strategic direction, or “value-accretive” acquisitions.

Due to owning 30% in Sarwa, the deal will be a key value driver for OIH, controlled by the Egyptian giant owned by billionaire Naguib Sawiris, on both valuation and profitability levels, the research firm highlighted. Pharos highlighted that “SRWA contributes to c.63% of OIH’s FV”.

“Despite OIH’s BoD approval to acquire Nile Sugar, we believe that OIH should not conclude that transaction, since Nile Sugar is a personal investment of the Sawiris family which creates conflict of interest,” Pharos explained.

During the first nine months of 2018, Orascom Investment posted a 346% year-on-year hike in consolidated profits, registering EGP 1.07 billion, versus EGP 239.9 million.