        Recurring net profit: EGP25.1mn, -22% Y-o-Y, -42% Q-o-Q, -49% vs. EFGe
        Revenue: EGP320.2mn, +19% Y-o-Y, -20% Q-o-Q, -18% vs. EFGe
        EBITDA: EGP63.3mn, -3% Y-o-Y, -25% Q-o-Q, -29% vs. EFGe
 
Dice reported a disappointing set of 3Q18 results, with headline earnings falling 26% Y-o-Y (-34% sequentially) as all margins trended downwards because of significant increases in operating costs. Excluding FX losses of EGP1mn and capital gains of EGP2mn, recurring earnings came in at EGP25mn, down 22% Y-o-Y (-49% vs. EFGe on a combination of lower-than-expected revenues and margins). Moreover, net finance costs increased 21% Y-o-Y to EGP25mn (+32% Y-o-Y, +40% YTD). Top-line grew 19% Y-o-Y during the quarter (-18% vs. EFGe), which is surprisingly slower than the c40% seen 1H18. We believe volume growth was likely weak (management is yet to provide volume/segment details) as the company’s utilisation ramp-up, especially at Cairo Cotton Center (CCC), was likely far slower than originally anticipated. Headline gross margin contracted c1.5pps Y-o-Y to 27.4% in 3Q18 (+0.6pp Q-o-Q), likely as garment volumes were muted, limiting scale benefits. Meanwhile, gross profit was up 12% Y-o-Y, coming in 21% below our estimate (COGS +21% Y-o-Y). EBIT margin contraction was sharp, at c3.6pp to 17.7% as SG&A expenses increased 40% Y-o-Y (-2% vs. EFGe) on significantly higher general and administrative costs (+66% Y-o-Y), likely due to costs related to the CCC deal, in our view. Export rebates were up 20% Y-o-Y to EGP12mn (-21% vs. EFGe), mostly in line with revenue. Accordingly, EBIT was almost flat (-1% Y-o-Y), coming in 32% below our estimate. EBITDA margin compression was more aggressive, at -4.3pps to 19.8%, with EBITDA coming in at EGP63mn, falling 3% Y-o-Y (-29% vs. EFGe) as depreciation fell 13% Y-o-Y.
 
The results set falls significantly short of our forecasts and management guidance (EGP220-250mn) for the year. While the year was off to a slow start, 2H should have compensated for the shortfall as it is typically seasonally stronger, but this does not appear to be the case. Based on these figures, we believe the company is likely to achieve cEGP150mn for FY18, and we will be revising our forecasts accordingly. 

Nada Amin, Hatem Alaa, Seif Rageh

Dice Sport & Casual Wear: EGP15.30 as of 18 Nov. 2018, Rating: Buy, TP: EGP35.00/share, MCap: USD45mn, DSCW EY/DSCW.CA