Weekly Market Report

Trading Week: 3 –7 Feb, 2018

Summary

Main Topics

· TEDPIX gains 0.2%; TSE30 climbs 1.8%

· Rial falls as gap between market-official rates widens to 25%

· CBI starts selling forward contracts on gold coins to calm speculation

· Household products holding company launches IPO

· CBI clears the way for issuance of mortgage backed securities

· Non-oil trade deficit narrows in January on export growth

 

Tehran Stock Exchange

The TSE Overall Index (TEDPIX) added 0.2% over the week after falling 1.4% last week, taking its return since March to 28.1%. The average daily trading value remained around USD 62 million, although it rose slightly in rial terms. A number of large cap industries re­covered, helping the TSE30 to climb 1.8% and bring its return since March to 41.5%.

 

The TSE listed a new company this week. The Detergent Industry Management of Behshahr Industries Development Co. (SHOY) held its IPO and hit the 5% daily limit on its first trading day, ending the week with a market cap of USD 242 million. The demand vol­ume in the buying queue was around 15% of the shares floated. SHOY is the subsidiary of another TSE-listed holding company, Behshahr Industries Development Co. (TSBE) which fell 6% this week. More than 90% of SHOY’s dividend income comes from two subsidiar­ies, Paksan Co. (PAKS) and Goltash Co. (GTSH), whose products include soap, shampoo and toothpaste. Both companies are also listed on the TSE.

 

Among sectors, Base Metals rose 1.9%. Esfahan Mobarakeh Steel Co. (FOLD), the larg­est flat steel products maker, rebounded to add 3.7%. FOLD raised its EPS estimate for the fiscal year ending March 20 by 26% to USD 1.1 billion and closed with a forward P/E of 4.3x. FOLD’s unaudited results also showed that it has realized 72% of its full-year EPS over nine months. Calcimine Co. (KSIM), a zinc and lead producer, fell 3.5% after gaining 9.5% last week. Both companies were among the top five most traded stocks by value on the TSE for a second week.

 

The Automotive sector climbed 2%, lifted by gains in auto parts suppliers as well as Saipa Diesel Co. (SPDZ) and SAIPA (SIPA). SPDZ rose 7.5% although it is still a loss-making company with negative equity based on its nine-month results for the fiscal year ending March 20. A senior executive of Volvo Trucks visited SPDZ and suggested that SPDZ may become a regional exporting hub for the Swedish company. SPDZ is a major produc­er of trucks in Iran with historical ties to Volvo.

 

SIPA, the second largest car maker which still has exposure to SPDZ via its complex net­work of affiliated companies, added 1.4%. Iran Auto Parts Industrial Group (GHAT) climbed 25.9% and Mashhad Wheel Mfg. Co. (RINM) advanced 26.6%. GHAT disclosed that it will sell its 35.4% stake in RINM. Shares in both companies frequently hit the 5% daily limit over the last two weeks, prompting the regulator to temporarily suspend them from trading and ask for disclosure of any important information. Both GHAT and RINM jumped 10% after they resumed trading and RINM ended the week with a buying queue. 

 

Iran Fara Bourse

The IFB Overall Index rose 1.3% and is up 26.1% since March. Methanol exporter Zagros Petrochemical Co. (PZGZ) rose 4.2%. PZGZ raised its full-year earnings forecasts for the fiscal year ending March 20 by 36% on higher volumes, price increases, and more favora­ble exchange rates. PZGZ expects to produce 3.1 million tonnes of methanol, 3.3% higher than the previous estimate. The export price of methanol for the remaining two months of the fiscal year is assumed to be USD 380 per tonne, compared to USD 331 per tonne dur­ing the first 10 months. These rates are above the effective price of USD 314 per tonne for the whole year as assumed in the last estimate of nearly two months ago. PZGZ esti­mates it will generate full-year revenue of IRR 43 trillion (USD 930 million) and net income of IRR 18.6 trillion (USD 400 million). PZGZ ended the week with a market cap of USD 1.77 billion and forward P/S of 1.9x and forward P/E of 4.4x, based on the company’s own estimates.

 

Marun Petrochemical Co. (PMRZ) advanced 2.5% and closed with a market cap of USD 3.6 billion. The main olefin producer accounts for nearly 26% of the IFB’s total capitaliza­tion and has a big impact on movements in the index. 

 

Middle East Mines Industries Development Holding Co. (KHMZ), with a market cap of USD 1.2 billion, rose 1.5%. KHMZ has exposure to companies that provide raw materials for the domestic steel industry. Esfahan Steel Co. (ZOBZ) was suspended from trading because of questions over its financial statements. ZOBZ posted some clarifications in response. The IFB gave ZOBZ nine months to meet listing requirements. ZOBZ has been loss making for two years and the IFB initially gave notice that the company could be del­isted.

 

Foreign Exchange Market

The rial resumed its downward trend. The dollar’s market rate climbed 1.8% to IRR 46,289. The gap between the market and official rates widened up to 25% as the Central Bank of Iran (CBI) raised the official dollar rate by just 0.1% to IRR 36,979.

 

The CBI started selling forward contracts on gold coins to the general public in an attempt to dampen speculation. Gold is popular in Iran for hedging against inflation, especially for those who do not want to bother with trading and holding foreign currencies. Based on the CBI’s gold coin forward contracts, buyers pay IRR 1,000,000 per contract accounting for roughly 66% of the current spot price. The settlement price will be determined at maturity and holders receive discounts of 4% and 9% for six-month and one-year maturities re­spectively.

 

Economic Development

Iran’s non-oil trade deficit narrowed to USD 1.3 billion in January from USD 2.0 billion in December. Non-oil exports jumped 26% in January to USD 4 billion, while imports in­creased 2% to USD 5.3 billion. Iran’s non-oil exports rose 22% to USD 35.6 billion over the 10-month period ending January 2018 compared to the same period last year. Imports fell 2% over the same period to USD 42.8 billion.

 

The Monetary and Credit Council passed regulations paving the way for the introduction of mortgage backed securities (MBS).  The law had already required the CBI and the Minis­try of Roads & Urban Development to cooperate to support housing supply via debt selling and create a secondary market for mortgages. The new regulations would create a mech­anism for implementation of the law. The CBI says that, based on the new regulations, it will review requests from banks for issuance of MBS. The banking system struggles with limited lending capacity and the government has attempted to fill the gap by expansion of the debt market.

FX Information

Description

8 February 2018

1 February 2018

% Change

Official USD - IRR

36,979

36,950

0.1

Market USD - IRR

46,289

45,466

1.8

Official EUR - IRR

45,318

45,907

(1.3)

Market EUR - IRR

57,861

56,506

2.4

Official GBP - IRR

51,294

52,457

(2.2)

Market GBP - IRR

67,708

66,334

2.1

Market Information

Index Info

Close

Unit Change

% Change

%  Change from March 20, 2017

TSE Overall Index - TEDPIX

98,299

166

0.2

28.1

TSE30 Index

4,354

77

1.8

41.5

Iran Fara Bourse Overall Index

1,103

14

1.3

26.1

Description

This Period

Last Period

Market P/E

7.5

7.5

Trade Statistics

Description

This Period

Last Period

% Change

TSE Average Daily Trade Vol­ume (Million USD) **

62

62

0

IFB Average Daily Traded Val­ue (Million USD) **

44

33

33

Industry Index Information

Description

Close

% Change

Wooden Products

75,792

22.0

Oil Drilling & Services

399

3.8

Agriculture

6,148

3.5

Coal Mining

1,767

3.1

Automotive

16,552

2.0

Base Metals

59,996

1.9

Sugar

9,374

1.3

Rubber & Plastics

19,020

1.2

Non-Metallic Ores

2,266

1.0

Construction

662

1.0

Paper Products

10,734

0.9

Other Financial Services

2,250

0.9

IT

12,597

0.7

Industrial Conglomerates

9,846

0.7

Engineering Services

727

0.6

Machinery & Electric Equipment

480,663

0.5

Metallic Products

22,499

0.5

Chemicals

6,334

0.4

Ceramics & Tiles

1,799

0.3

Cement

581

0.3

Machinery & Equipment

16,963

0.2

Oil Products

357,243

0.2

TSE All-Share Index

98,317

0.2

Printing & Publishing

218,336

0.2

Textile

1,260

0.04

IT & Communications

231

0.0

Medical & Measurement Products

10,244

0.0

Mining

12,058

0.0

Insurance

4,397

(0.3)

Telecommunication

1,120

(0.5)

Metallic Ore

20,205

(0.7)

Investment

2,036

(0.7)

Leather Production & Products

1,998

(0.8)

Foods excluding Sugar

3,346

(1.0)

Pharmaceuticals

8,514

(1.0)

Transportation & Logistics

3,648

(1.0)

Financial Markets Management

75

(1.9)

Banking

556

(2.2)

Utility Service Providers

233

(2.5)

TSE Top 5 Gainers

Company

Close **

(USD Cents)

% Change

RINM

Mashhad Wheel Mfg. Co.

2.4

26.6

GHAT

Iran Auto Parts Industrial Group

4.7

25.9

FIBR

Iran Fiber Mfg. Co.

11.2

22.0

BENN

Iran Behnoush Co.

10.9

16.9

GSKE

Agricultural Ind. Services Dev.

7.3

15.2

TSE Top 5 Value Leaders

Company

Close **
(USD Cents)

Trade Value **

(Million USD)

FOLD

Esfahan Mobarakeh Steel Co.

6.4

9.5

KSIM

Calcimine Co.

14.9

5.4

PKLJ

Persian Gulf Petrochemical Ind.

12.1

5.2

PKHA

Kharg Petrochemical Co.

53.6

3.5

PJMZ

Jam Petrochemical Co.

22.7

3.3

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

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