According to media sources, Egyptian Chemical Industries Company (KIMA) [EGCH.CA] has requested to drawdown on the first installment of its USD380mn syndicate loan facility within the coming two months to finance ongoing payments for its facilities' rehabilitation and expansion plans. The source added that the Tecnimont had already completed 40% of the new ammonia-urea facility and expected to complete the project within 20 months, while we expect further delays will push the completion date to 2020.

Overall, we think that the company's rehabilitation and expansion plans come at an expensive ticket price of cUSD730mn, translating into cUSD1,400/tonne of urea, which will likely generate less-than-accretive returns on capital; hence, we reiterate our Sell rating on KIMA, as the stock seems to have more than priced in the expansion plans and is trading at demanding valuation levels.

Egyptian Chemical Industries (KIMA): EGP6.68 as of 22 Mar. 2017, Rating: Sell, TP: EGP5.00/share, MCap: USD214mn, EGCH EY/EGCH.CA