        Revenues: USD112mn, +43.8% Y-o-Y, -0.8% Q-o-Q, -5.5% vs. EFGe 
        Gross profit: USD33mn, +70% Y-o-Y, -11.7% Q-o-Q, -8.5% vs. EFGe 
        Net income: USD23mn, +36.3% Y-o-Y, -9.4% Q-o-Q, -5.8% vs. EFGe 
 
EK Holding released its 2Q18 financial highlights, showing earnings of USD23mn (+36.3% Q-o-Q, -9.4% Y-o-Y, -4.4% vs. EFGe). A set of results that shows EK's resilience and was for the most part in line with our estimates. Proportionately, core subsidiaries (Alexfert, Sprea, Natenergy and ONS) contributed cUSD21mn of 2Q18’s earnings for the group, while the diversified businesses contributed the balance. Revenues for the quarter were broadly in line (-5.5% vs. EFGe) and reached USD112mn, which saw contributions from: i) Alexfert (USD43.8mn); ii) Sprea (USD32.3mn); iii) Natenergy (USD17.1mn); iv) ONS (USD9.3mn); v) the recently consolidated Delta Insurance (USD7mn); and vi) other negligible items contributing to the balance. Profitability, however, was marginally weaker than expected as gross profits came in at cUSD33mn, which missed our estimates by 8.5%. EK’s results did include a couple of sizable one-offs, which to a great extent offset each other’s impact. One of those one-offs was impairment worth cUSD13.7mn, the bulk (cUSD12mn) of which was related to management’s decision to reduce its cement asset’s (BMIC) value on its books due to the prevailing oversupply in the Egyptian market. However, on the positive side, management had already taken prudent steps before hand and booked, throughout past quarters, provisions for possible impairments for BMIC. Based on our discussion with management, the majority of 2Q18’s USD17.2mn reversal in provision relates to those taken on BMIC; hence, one-offs did not affect EKH’s earnings for the quarter. 
 
Performance of main operations:
        Alexfert: EK’S fertilisers asset delivered robust results Y-o-Y, driven by: i) a one-off reversal of provision; as well as ii) a ramp-up in operations despite the c2% decline in urea prices in 2Q18. That being said, operating rates were marginally lower than expected during the quarter, albeit not by any alarming rate as the plant was operating still at c90% rates. We think the urea market continues to enjoy higher pricing and would bode well for Alexfert throughout the remainder of the year. Alexfert booked earnings of USD9.9mn during 2Q18 (+118% Y-o-Y, +3% Q-o-Q, +7% vs. EFGe).
 
        Sprea: The downstream formaldehyde derivative value chain did not disappoint and came in with expectations during 2Q18. Management continues to seek expansion opportunities at Sprea to extract value within the downstream formaldehyde space. Sprea generated earnings of USD7.3mn during 2Q18 (+14.6% Y-o-Y, -5.2% Q-o-Q, +0.7% vs. EFGe).
 
        ONS: Still ramping up, but ONS is already proving to be a rising star amongst EK’s assets as it beat our estimates by a wide margin, with earnings reaching USD4.3mn (+1.5% Q-o-Q, +34.7% vs. EFGe). ONS is still in its early stages of growth and continues to ramp up production at its 113bcf reserve base, while future exploration may still offer upside. 
 
        Natenergy: While Natenergy is still a superbly positioned utility within Egypt, which should benefit from the wave of energy deregulation, earnings were weaker than estimated at only USD5.3mn (+28.1% Y-o-Y, -19.6% Q-o-Q, -12.6% vs. EFGe). 
 
We think EK still presents an attractive investment proposition, considering its: i) valuation of c11x PE in 2018; ii) cash-rich balance sheet, (proportionate net cash + liquid investments represent c27% of MCap); iii) an attractive dividend yield of c5.2% in 2018, with room to expand; and iv) the potential value accretion that may be unlocked from future gas discoveries. So far, there has yet to be an announcement on the potential size of reserves laying beneath ONS’ concession, which may eventually turn out to be multiples of current P1 levels. Based on our discussion with management, the geological studies are still ongoing. We have not factored in any value from these future gas discoveries. Even taking a conservative stance, by excluding ONS’s P1 113bcf reserves completely from our numbers, EK would still be trading at a 2018 P/E multiple of c13x, while offering an attractive recurring EPS CAGR of 15% (2018-23e). To us, exposure to EK seems to be offering: i) downside protection (due to the cash balance and dividend yields); and ii) optionality for sizable value accretion if incremental gas is discovered. Accordingly, we reiterate our Buy rating on the name. 
 
Egyptian Kuwaiti: EGP1.15 as of 14 Aug. 2018, Rating: Buy, TP: EGP1.35/share, MCap: USD1,178mn, EKHO EY/EKHO.CA
Ahmed Hazem Maher, Alaa Saleh