Arabian Cement (Egypt) announced yesterday that it will restructure its outstanding debt worth USD23mn and EGP499.3mn with a new facility obtained from the European Bank for Reconstruction and Development (EBRD) and the Commercial International Bank of Egypt (CIB). Management believes the new financing package will be positive for ARCC, as it adds time for repayment, hence increasing the company’s liquidity and flexibility. Management also added that this refinancing exercise would marginally save some interest costs as well. 
 
Our view: ARCC currently enjoys a healthy BS (2019e net debt/EBITDA of 1.2x and interest coverage of 2.8x); the new financing package would provide additional comfort in the current weak demand cycle of cement, in our view. However, we do not expect the refinancing exercise would make any significant impact on our valuation as what will be saved in funding costs should be minimal. We currently have a Buy rating on ARCC as the stock is currently trading at compelling valuation (FY20 EV/EBITDA multiple of 4.4x) despite being the efficient cement producer of Egypt. 

Sameer Kattiparambil
 
Arabian Cement (Egypt): EGP5.33 as of 5 Dec. 2018, Rating: Buy, TP: EGP9.00/share, MCap: USD113mn, ARCC EY/ARCC.CA