Sidi Kerir Petrochemical Company’s (Sidpec) board of directors (BoD) has proposed a dividend of EGP1.4/share for FY16 (vs. a dividend of EGP1.35/share in FY15). This represents a pay-out ratio of 57.4% and a dividend yield of  7.1%. This comes in lower than our forecast of EGP1.65/share (67.6% pay-out), but we note that Sidpec’s shareholders typically vote to increase the dividend by c10% during the annual general meeting. We believe the final dividend is likely to end up closer to EGP1.55/share, representing a 10% increase from the proposed dividend, still below our forecasts.

Overall, while the dividend is slightly disappointing, we believe the company could be retaining some earnings to finance future expansions, with the company announcing yesterday that it is planning on building a USD800mn-USD1bn polypropylene (PP) complex with ECHEM and the Ministry of petroleum. We remain Buyers of Sidpec, but highlight to investors that we expect 2017 to be a challenging year, as far as operating rates are concerned, given a planned maintenance shutdown in July, as well as the installation of an amine and Co2 recovery unit. 

Sidi Kerir: EGP19.33 as of 20 Mar. 2017, Rating: Buy, TP: EGP25.00/share, MCap: USD555mn, SKPC EY/SKPC.CA