Beirut (APD) - The Egyptian brokerage firm HC Brokerage (HCB) issued a "Buy" recommendation for the shares of Cairo-based Orascom Construction Industries (OCI), allocating a substantial upside potential of 27%.
"We are re-initiating coverage on OCI with a 'Buy' recommendation, based on our price target of LE 280 per share. Our price target offers a 27% upside potential to LE 221 per share," HCB said in a research paper on Tuesday.
Pinpointing what it termed as "key attractions" in OCI, HCB listed following positive factors: inter-group synergies; OCI's expansion in the substantially lucrative natural gas-based fertilizers industry; tax exemptions of its subsidiaries Egyptian Cement Company (ECC) till 2009 and Algerian Cement Company (ACC) till 2012; and OCI's "strategic alliances with topnotch international players in the construction and cement sectors."
As "key concerns", HCB named OCI's investments in countries with high political risk (such as Iraq), the threat of cement overcapacities in the Gulf region by the end of 2007, and the increase in energy prices.
Based on expansion of annual production capacities of OCI's cement group from 14.4 million tons as of the end of 2005 to 34.4 million tons by 2008, fiscal year 2008 is likely to mark a "breakthrough year" for OCI, HCB said, forecasting a 22.7% year-on-year revenue leap for the company, to LE 29.2 billion, "in FY08f".
In related news, OCI is expected to close on Thursday its rights issue that was launched earlier in February. The size of the offering is LE 2.3 billion ($403.65 million).
OCI issued 11.5 million shares at the price of LE 201 per share. The share price consists of a par value of LE 5 and an issue premium of LE 196.
Through this rights issue OCI will boost its paid-up capital by LE 57.5 from LE 952.9 million to about LE 1.01 billion.
The overall value of the issue premiums totaling approximately LE 2.25 billion will be allocated to reserves, HCB said.
OCI intends to use the proceeds from the rights issue to finance its expansions in emerging markets such as Turkey and Algeria.
As the largest construction and building materials company in the region, OCI's cement group ranks on ninth place globally based on announced cement capacities and the construction group is among the top 150 largest contractors in the world, HCB confirmed.
OCI is listed on the Cairo & Alexandria Stock Exchanges (CASE) and the London Stock Exchange (LSE).
Shares in OCI rose by LE 5.75 or 2.63% to LE 224.75 in Wednesday afternoon trading on CASE. [TS]
By Shikrallah Nakhoul, APD Staff Writer in Beirut
© APD (Arab Press Digest) 2006
