Helwan Fertilizers

Earlier this week, Prime Research published its notes on Helwan fertilizers and their relation with Abo Qier Fertlizsers. Here we are quoting the complete note from Prime Research.

A 10% stake in Helwan Fertilizers sold for EGP1.3bn, neutral for Abu Qir Fertilizers.

According to the daily report of the Egyptian Exchange published on February 2, 2023, a 10% stake in Helwan Fertilizers Company (HFC) was sold for a total value of EGP1.3bn representing 15mn shares. We note that Abu Qir Fertilizers [ABUK] owns a 17% stake in HFC. Using the deal value, we calculate that HFC was valued at EGP13.1bn, which implies EGP2.2bn for ABUK's stake.

We had included the value of ABUK's stake in HFC at a value of EGP2.1bn in our price target of EGP40.6/share. Thus, the deal value is higher than ours by some 7%. If we use the implied deal value, our valuation of ABUK would increase by only EGP0.12/share, representing merely 0.3% of ABUK's market price.

According to our estimates, the implied P/E multiple from the deal using HFC's 2021 earnings of USD101mn is 4.3x (at yesterday's exchange rate of EGP30/USD). We believe the effect of the deal on ABUK's share is neutral, given that the valuation resulting from the HFC deal is very close to our valuation. (EGX, Prime Research)