Orascom Investment Holding (OIH) reported revenue of EGP 730.5 million in 2020, up from EGP 811.4 million in 2019, reflecting a 10% year-over-year decline.
The cables business, notably the Pakistani operator of submarine fiber optic cables, Pakistan Cables, was the largest contributor to revenue, with 91% in 2020, or -1.3 pps year-on-year) , registering 664.2 million EGP (-11.1% year-on-year).
The company’s investment properties (Victore Investment Holding, RE investment in Sao Paulo, Brazil) contributed 8.4% of total turnover in 2020, representing + 11.7% year-on-year, and recording 61, 6 million EGP (+ 0.53% year-on-year).
Meanwhile, OIH’s gross profit fell to EGP 355.4 million in 2020 from EGP 418.3 million in 2019, implying a 15% year-on-year decline, mainly due to lower revenues, taking into account a 5% drop in COGS year-on-year. As a result, the GPM fell to 49% in 2020 (-6pps year-on-year).
OIH reported net losses from continuing operations of EGP 60.8 million in 2020, compared to net losses of EGP 402.5 million in 2019. This was supported by lower recorded provisions, a irregular interest income gain of EGP 61.7 million realized in the first quarter (Q1) of 2020 related to Brazilian investment and lower foreign exchange losses.
The result was supported by the decrease in provisions recognized in 2020 amounting to EGP 22.5 million compared to EGP 89.87 million in 2019 (-75% year-on-year), due to the demerger .
OIH recorded net finance income in 2020 of EGP 20.2 million, compared to net finance costs of EGP 170.4 million in 2019. This translated into interest income of EGP 74.1 million. EGP compared to EGP 14.0 million in 2019, due to the settlement, at a discount, of a loan from an international bank.
This was related to the fact that the Brazilian investment contributed EGP 61.7 million to 83% of the reported interest income gain. In addition, interest expense has simultaneously decreased from 149.8 million EGP in 2019 to 45.7 million EGP in 2020 (-69% year-on-year).
Pharos Research sees potential catalysts that could improve the operational performance of the company.
The first of these is a clear resolution on the repatriation of Koryolink profits or the sustainable payment of dividends in euros, which could potentially add EGP 0.54 per share to OIH FV.
Other catalysts include: the proper use of debts resulting from the termination of the Lebanese OIH contract; and a clear investment strategy / value-creating acquisitions over the next few years.