NBK Capital issued a report on Orascom Construction Industries (OCI) (OCIC.CA), defining the stock’s 12-month fair value at EGP 292.50, compared to its market price of EGP 248.20 and recommending an “Accumulate”.
The investment arm of the National Bank of Kuwait (NBK) stated; “We have revised our estimates for OCI. For the construction segment, we have downgraded our EBITDA margin estimates from 13.5% to 11.4% for FY/2012, as OCI’s recently-signed, high-margins contracts, have seen their start up delayed.”
“Beyond FY/2013, we have revised our long-term construction EBITDA margin from 13.5% to 12.5%, to account for lower-than-expected margins mainly in the GCC.”
“For fertilizers, our main revisions again affect FY2012, due primarily to the delayed start-up of Sorfert Algeria and OCI Beaumont. We have raised our product prices for FY/2013, and now are relatively more optimistic on our long-term fertilizer prices assumptions.”.
Accordingly, the report issuer concluded; “Based on our fair values, Orascom Engineering and Construction would trade on an FY/2013 EV/EBITDA of 6x and OCI Fertilizers on an FY/2013 EV/EBITDA of 6.5x, both of which we view as fair in a comparative context”.
