Obour Land 4Q18: Recurring earnings -18% Y-o-Y on soft revenue growth & higher SG&A costs; below EFGe 
Obour Land reported 4Q18 results with headline earnings down 15% Y-o-Y (-12% sequentially). Recurring earnings (ex-FX gains/losses, provisions, impairments and capital gains) declined 18% Y-o-Y to EGP57.1mn on higher SG&A costs as well as depreciation charges, missing our estimate by 20% mainly on weaker-than-expected revenue and EBITDA margin. FY2018 earnings declined 3% Y-o-Y to EGP236.2mn (-1% on a recurring basis).
 
Revenue was inched up 4% Y-o-Y and came in 20% below our forecast to EGP626.1mn 
 
The company’s BoD has proposed a DPS of EGP0.25 (total of EGP100mn) for 2018, which is in line with our estimate. This implies a DPO of 42% and a dividend yield of 3.1%. 
 
The key negative surprise is the decline in white cheese volumes for the second quarter in a row (indicating some market share loss). Earnings momentum could improve in 2019 as the milk and juice operations continue to ramp up, the company implemented a price increase at the end of the 2019 (with room for more hikes) and as it is targeting to gradually return to its c22% gross margin. We have a Buy rating of the stock mostly on valuation grounds.

Nada Amin, Hatem Alaa, CFA, Mirna Maher

  
Obour Land: EGP8.15 as of 3 Mar. 2019, Rating: Buy, TP: EGP14.00/share, MCap: USD186mn, OLFI EY/OLFI.CA