        Revenues: EGP33mn, +35% Y-o-Y, +63% Q-o-Q, +44% vs. EFGe 
        Gross profit: EGP7mn, +2% Y-o-Y, +83% Q-o-Q, +11% vs. EFGe 
        Net income: EGP59mn, +66% Y-o-Y, -58% Q-o-Q, -8% vs. EFGe
 
Canal Shipping Agencies released its 1Q18/19 financial highlights, showing a notable Y-o-Y increase in earnings to EGP59mn from EGP36mn and missing our EGP64mn estimate. While full financial results are yet to be released, the company derives its profitability primarily from dividends generated from its 20%-owned investments in: 
 
        Dammietta Container Handling (DCHC); and 
        Port Said Container Handling (PSCHC). 
 
As for core operations, revenues reached EGP33mn (+35% Y-o-Y, +63% Q-o-Q), while GP margin saw some improvement to reach c22.1% (vs. 19.7% in 4Q17/18) and a gross profit of only cEGP7mn. Full financial statements have not yet been released, but we note that the GP is typically fully absorbed by SG&A expenses, and core operations offer negligible contribution to the bottom-line. 
 
We think CSAG’s two main investments are the key drivers for earnings growth in years to come, especially as container traffic improves at the two main ports of Damietta and Port Said. The market seems to have assigned an unjustifiable discount to CSAG’s two core investments (DCHC and PSCH), which have generated combined earnings of EGP1.8bn in 2017/18a (cEGP360mn for CSAG’s proportionate stake). At 1Q18/19's run rate, we think CSAG would be trading at a 2018/19e P/E multiple of only c6x, following the c45% correction in the share price since April. Accordingly, we reiterate our Buy rating on CSAG. While we are Buyers of both CSAG and ALCN (trading at c10x PE multiple vs. our implied valuation of c14x), we prefer CSAG’s cheaper trading multiple of c6x PE in 2018/19.  
 
Canal Shipping: EGP7.72 as of 01 Nov 2018, Rating: Buy, TP: EGP15.00/share, MCap: USD86mn, CSAG EY/CSAG.CA