Saudi's Methanol Chemicals reports narrowing earnings loss, beats estimates

Despite reporting better than expected earnings, the company's shares dropped, as "any positive surprise is more than priced in to the name at current levels"

  
The Oil pipe lines of SK Corporation oil refiner on March 16, 2006 in Ulsan, South Korea. Image used for illustrative purposes.

The Oil pipe lines of SK Corporation oil refiner on March 16, 2006 in Ulsan, South Korea. Image used for illustrative purposes.

Getty Images/Chung Sung

Saudi Arabia’s Methanol Chemicals (Chemanol) reported an earnings loss in the first quarter of 2019, but the company’s earnings beat analysts’ expectations.

Chemanol’s Q1 2019 net loss amounted to 0.31 million Saudi riyals ($82,630) beat an estimate from EFG Hermes of a 4 million riyal net loss, and was considerably lower than the 10.26 million riyals the company lost in the same quarter last year.

“The main positive in the results is the resilient margin level, as it was only down to 24 percent, from 25.4 percent last quarter despite a huge drop in methanol and derivative prices," Yousef Husseini, head of the chemicals equity research team at EFG Hermes, adding that prices fell by 17 percent during the quarter.

Chemanol’s Q1 2019 revenue stood at 154.86 million riyals, compared to 157.17 million riyals in Q1 2018, a 1.47 percent increase.

Husseini said that EFG Hermes has a sell rating on the stock, citing its high valuation - its price is 24 times current earnings, while methanol prices so far this year are 25 percent below last year's average.

"We think any positive surprise is more than priced in to the name at current levels," he said.

The company’s shares dropped 1.19 percent to 9.13 riyals at 1:03 GST on Wednesday and are 1.51 percent lower than the start of 2019.

(Reporting by Gerard Aoun; Editing by Michael Fahy)

(gerard.aoun@refinitiv.com)

Our Standards: The Thomson Reuters Trust Principles

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2019

More From Markets