AMOC – Double-digit growth on EGP floatation
July 18, 2017
Earnings more than double on inflated operations:
Alexandria Mineral Oil Company (AMOC.EGX) announced preliminary financial results for FY2016/2017, posting 153% YoY growth in earnings to EGP1.10bn, slightly lower the MTRe of EGP1.17bn by 6%. During the year, AMOC booked EGP275.2mn of FX gains vs. EGP36.8mn a year earlier. Excluding the impact of such gains, normalized net income would have recorded EGP825.4mn, increasing 107% YoY. Revenues jumped 119% YoY to EGP9.59bn, beating MTRe of EGP8.85bn by 8%. The growth in top line could be attributed to the fact that AMOC’s products are benchmarked to global prices in USD terms. Hence, EGP devaluation triggered higher selling prices for the company’s products.
Stable margins, probably on heavier-than-expected products’ mix:
In our latest update for AMOC dated 21 May 2017, we forecasted improved operating margins to be driven by improved product mix towards higher-margin and lighter products. Yet, operating margins remained stable YoY, missing our forecasts, probably on heavier-than-forecasted products mix. Gross profit grew 116% YoY to EGP1.31bn, marking a GPM of 13.7% (MTRe: 17.1%, 2016: 13.9%). EBITDA added 115% YoY to EGP1.20bn, with EBITDA margin coming at 12.5% (MTRe: 14.6%, 2016: 12.7%). We are still awaiting full financial results for more analysis.
providing a natural FX hedge:
In view of AMOC’s key value drivers (i.e. a pure USD-business with an appetite to expand in related activities, such as the first refining business, providing high potential for margins enhancement), we remain positive on the stock. We thus maintain our Buy/Moderate Risk rating with the same 12-month PT of EGP1.14.