Sidi Kerir Petrochemicals (Sidpec) announced this morning that its Board of Directors (BoD) has proposed a cash dividend of EGP0.7/share for FY18, down 50% Y-o-Y despite earnings rising 15% Y-o-Y in 2018. This implies a dividend yield of 3.5% and a payout ratio of 28%. This was well below our EGP1.6/share, which we based on a 65% payout ratio, slightly lower than the previous year’s (72% in 2017), as management had initially indicated it still plans to maintain a decent payout despite its expansion plans. However, management appears to have ultimately decided to take a more conservative approach in light of the planned propylene/PP project in which the company is investing. While the market is likely to be disappointed, we believe cutting the payout now is likely to be the most prudent move, especially as the financing for the new project has not yet been secured. 
 
As is always the case, shareholders typically vote to increase the dividend at the AGM (scheduled on 28 March) by around 15-20% (last year, they boosted it by 16%). However, it is not clear if this will also be the case this year, given the new projects. 

Yousef Husseini
 
Sidi Kerir: EGP19.52 as of 27 Feb. 2019, Rating: Buy, TP: EGP23.00/share, MCap: USD586mn, SKPC EY/SKPC.CA