HC raises Ezz Steel to overweight for obtaining a new licence

Reuters, Thursday 8 Mar 2012

The company's retention of new steel licenses grants the largest steel maker a 'significant cost advantage', says the investment bank

Egypt's largest steel maker Ezz Steel will likely be allowed to retain the operating licences for two of its plants after paying a fee, said HC Securities, which upgraded the stock to "overweight" from "neutral."

The valuation raise means that Ezz stocks given better value for money than others. 

Earlier this year, media reports indicated the government was restoring operating licences for some Ezz plants that it withdrew in October under a court ruling.

"Ezz Steel will retain its direct reduced iron license, which is a massive boost given the significant cost advantage," analyst Ahmed Hafez wrote in a note to clients.

In October, Trade and Industry Minister Mahmoud Eisa said the government wants ensure the company pays fines imposed by the September court ruling -- in which it was ordered to pay LE660 million -- but wants it to keep the licences because that scenario would best serve the companies, the state and the workers involved.

An official settlement contract is yet to be signed, but under the agreement, 15 per cent of the fee is to be paid up front and the balance over five years, said Hafez.

"We see this as quite positive, given the strategic importance of the investment and as we believe the payment schedule bodes well with the fact that the first direct reduced iron module is at an advanced stage of construction," he added.

Shares of the company had closed at LE7.76 on Wednesday.

Search Keywords:
Short link: