Weekly Market Report

Trading Week: 2 – 5 December 2017

Summary

Main Topics

· TEDPIX slips 0.1%, ending seven weeks of gains

· Budget bill is finalized and goes to parliament on December 10

· Rial weakens on open market; CBI resumes increases in official dollar rate

· Banks are temporarily banned from taking deposits with maturities under one year

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) slipped 0.1% to close a four-day trading week at 91,092. The average daily trading value fell 11% to USD 58 million. The TSE30 Index also de­clined 0.1% and remains 26.5% up since March, compared to 18.7% for the TEDPIX. Falls across most sectors were limited and a number of large- and mid-cap industries end­ed the week higher, including Automotive, Base Metals, Engineering, Pharmaceuticals and Telecommunication.

 

There were signs of profit taking after weeks of gains, especially in sectors such as Oil Products which had risen significantly. Investors may also become more defensive in coming days ahead of an expected decision by the US Congress on the nuclear agree­ment with Iran. Since Iran is complying with the deal and other parties have expressed their strong commitment, some analysts believe that a possible move by Congress will be to eliminate its requirement for the president to certify Iran’s compliance every three months.

 

Oil Products, which includes refineries, fell 2.9%. Bandar Abbas Oil Refining Co. (PNBA), the largest refinery with market cap of USD 2.2 billion, fell 2.7%. Other refineries also end­ed the week lower. PNBA released its latest projections for the current fiscal year ending March 2018. PNBA raised its full-year EPS forecast to IRR 993, up 17% from its previous estimate in August. PNBA’s estimate of IRR 37,000 for the official rial-dollar exchange rate for the second half (Oct-Mar) is 4.6% higher than the current rate. PNBA’s revenue is pro­jected to rise 23% to USD 4.8 billion while it expects net income to increase 33% to USD 328 million. PNBA closed with a forward P/E of 6.7x based on its own EPS estimate. De­spite this week’s drop, PNBA’s total return over 12 months is still 62%, against 52% for the sector.

 

Base Metals rose 0.5% despite a 0.6% fall in its largest constituent, Esfahan Mobarakeh Steel (FOLD). National Iranian Copper Industries Co. (MSMI) rose 2.3%, after gaining 7.9% last week. Iran Aluminum Co. (ALIR), a small company with a market cap of USD 218 million, climbed 10.3% to become the second highest gainer of the week. ALIR was also the most traded stock by value on the TSE, ending the last two days of the week with a buying queue.

 

Iran Fara Bourse

The IFB Overall Index fell 1.7%, trimming its gains since March to 15.8%. The decline was mainly due to a 4.8% correction in large-cap Marun Petrochemical Co. (PMRZ), a main olefin producer and the largest company on the IFB. PMRZ has gained nearly 25% in three months due to a weaker rial and stable global prices.

 

PMRZ released its audited consolidated financial statements for the first half of its current fiscal year ending March 2018. Its results, published on Wednesday when markets were closed for a public holiday, show that operating revenues in the first six months rose 42% year-on-year to USD 632 million. PMRZ’s net income attributed to common shareholders increased 39% to USD 226 million. The average sales price was IRR 36 million per tonne (~ USD 873 per tonne), up 42% in rial terms. Exports accounted for 48% of revenue com­pared to 58% in the first six months of last year.

 

Zagros Petrochemical Co. (PZGZ), a major methanol producer which makes almost all its revenues from exports, was temporarily suspended from trading on Sunday before an­nouncing a “significant” change in its EPS estimate. PZGZ released unaudited projections showing a 40% increase in its full-year EPS estimate compared to the last estimate in March. Only six weeks ago PZGZ said it did not need to update its EPS estimate. Even in the updated estimates, the exchange rate for the remaining four months of the current fis­cal year is assumed to be only 2.8% higher than the average for the first eight months, which could be too conservative. PZGZ closed with a P/E of 4.95x based on its own up­dated EPS estimate.

 

Foreign Exchange Market

The rial continued to fall against major currencies. The dollar market exchange rate rose 1.4% to IRR 41,805 while the official rate was raised by 0.3% to IRR 35,373. The official rate had been stable for two weeks after months of steady increases. President Rouhani has rejected suggestions that the government’s actions are the only reason behind the rial’s weakness. However, it is clear that a higher official dollar rate is in the government’s interest and the Central Bank of Iran (CBI) has kept raising the rate, although it is having little success in its stated goal of closing the gap between the official and market rates. The governor of the CBI said unification of the exchange rates is linked to improvements in international transactions.

 

Economic Development

Banks and other financial institutions are banned from accepting or renewing deposits with maturity of less than one year until the end of the Iranian calendar year in March 2018, the CBI announced. The restriction is aimed at reducing competition over attracting deposits at any cost. The CBI set the maximum deposit rate at 15% for one-year deposits and 10% for any other short-term deposit, but banks and other institutions are reportedly offering higher rates for 3-month, 6-month, 9-month and other “special deposits”. The CBI warned that this practice is risky and banks are effectively paying more than they are making.

 

The budget bill for the next Iranian fiscal year (April 2018 - March 2019) has been finalized and approved by the government and is scheduled to be presented to parliament (Majlis) on December 10. A recent parliamentary research report assumed an official rial-usd rate of IRR 36,300 for the budget, which is just slightly higher than the current official rate. With this exchange rate and an oil price of USD 49 per barrel, the research center predicted limited room for investment and infrastructure spending.

FX Information

Description

7 December 2017

30 November 2017

% Change

Official USD - IRR

35,374

35,265

0.3

Market USD - IRR

41,805

41,237

1.4

Official EUR - IRR

41,742

41,838

(0.2)

Market EUR - IRR

49,880

48,939

1.9

Official GBP - IRR

47,330

47,497

(0.4)

Market GBP - IRR

58,000

55,900

3.8

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

91,092

(60)

(0.1)

18.7

TSE30 Index

3,892

(2.3)

(0.1)

26.5

Iran Fara Bourse Overall Index

1,013

(17.2)

(1.7)

15.8

Description

This Period

Last Period

Market P/E

6.9

6.9

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

58

65

(11)

IFB Average Daily Traded Val­ue (Million USD) **

50

43

16

Industry Index Information

Description

Close

% Change

Coal Mining

1,482

10.2

IT & Communications

185

5.0

Non-Metallic Ores

2,258

4.0

Automotive

16,911

2.8

Engineering Services

768

2.0

Construction

672

1.8

Rubber & Plastics

21,111

1.7

Pharmaceuticals

8,858

1.2

Telecommunication

1,118

1.1

Machinery & Equipment

16,119

0.9

Ceramics & Tiles

2,142

0.9

Other Financial Services

2,118

0.8

Sugar

9,068

0.8

Base Metals

52,974

0.5

Machinery & Electric Equipment

495,278

0.3

IT

12,202

0.2

Banking

571

0.1

Leather Production & Products

2,064

0.0

Medical & Measurement Products

10,244

0.0

Mining

12,058

0.0

TSE All-Share Index

91,092

(0.1)

Chemicals

5,377

(0.1)

Foods excluding Sugar

3,523

(0.2)

Textile

1,282

(0.3)

Investment

2,026

(0.7)

Metallic Ore

17,824

(0.7)

Printing & Publishing

195,114

(0.9)

Utility Service Providers

218

(1.2)

Agriculture

6,623

(1.2)

Oil Drilling & Services

440

(1.3)

Cement

628

(1.3)

Insurance

4,674

(1.7)

Industrial Conglomerates

8,451

(1.8)

Oil Products

311,840

(2.9)

Transportation & Logistics

3,797

(3.6)

Metallic Products

24,644

(4.5)

Paper Products

12,456

(5.2)

Wooden Products

49,623

(7.3)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

ABDI

Dr. Abidi Pharm. Laboratories Co.

53.5

13.9

ALIR

Iran Aluminum Co.

4.2

10.3

DPAK

Darou Pakhsh Pharm. Mfg. Co.

11.7

5.1

FNAR

ZAR Spring Mfg. Co.

2.5

2.9

SINA

Sina Tile & Ceramic Ind. Co.

5.6

2.2

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

ALIR

Iran Aluminum Co.

4.2

10.5

FOLD

Esfahan Mobarakeh Steel Co.

6.5

5.5

CHML

Chadormalu Mining and Ind. Co.

4.3

5.2

HWEB

Hi Web Co.

12.0

4.8

PNES

Esfahan Oil Refining Co.

9.8

3.9

** All figures in USD are converted from IRR at the free market rate

Turquoise Partners - Firouzeh Asia Brokerage

All Rights Reserved - 2017

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