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-on-year decline.
The cables business, notably the Pakistani submarine fiber optic cable operator, Pakistan Cables, was the main contributor to revenue, with 91% in 2020, or -1.3pps year-on-year), registering 664 , EGP 2 million (-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, i.e. + 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% year-on-year drop in COGS. 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, an irregular interest gain of EGP 61.7 million realized in the first quarter (Q1) of 2020 related to the Brazilian investment and lower foreign exchange losses.
Net income was supported by lower 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 spin-off.
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 resulted in interest income of EGP 74.1 million versus 14 EGP 0 million in 2019, due to settlement, at a discount, of a loan from an international bank.
This was linked to the Brazilian investment contributing EGP 61.7 million to 83% of the reported interest income gain. In addition, interest expense simultaneously declined from EGP 149.8 million in 2019 to EGP 45.7 million 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 0.54 EGP per share to OIH FV.
Other catalysts include: the proper use of the claims from the termination of the Lebanese OIH contract; and a clear investment strategy / value-creating acquisitions over the next few years.