Stock market analyst Mac Sa of Mourad Ben Chaabane, has just published a study, compiled, but well put together with relevant analysis and figures, on one of the largest economic groups in Tunisia.
The analysts of the department of Mac studies recall first that Poulina Group Holding has evolved over the past 54 years to become a leading conglomerate in Tunisia, but also in the Maghreb, serving mainly Tunisia and other neighboring markets and even sub-Saharan. The same source notes that in 2020, and despite the economic and health context, “the group was able to preserve its position as the leading group on the Tunis Stock Exchange in terms of consolidated turnover of about 2.200 billion TD in 2020.
Taking advantage of its strong reputation, where the paw of the late Abdelwaheb Ben Ayed and the entrepreneurial spirit of the families shareholders of the group have always marked the management of the group, but also a broad market coverage, “the group is currently one of the leading producers of animal feed and food products in Tunisia, but also poultry (22.9% of turnover). The group is also strongly positioned on the sector of building materials including ceramics (market share of 60%) and bricks, “as the stock market analyst does not fail to do.
A conglomerate destined to play a leading role
According to figures reported by Mac, the group PGH remains one of the largest investors in the national economy by spending nearly 1 billion MDT in CapEx over the past 5 years to maintain its market position and increase its production capacity. But also, to penetrate new segments and new markets to further strengthen its level of integration and position itself on the segments with high added values.
The stock market analyst further specifies that “this policy of massive investment should continue in the coming years”.
According to him, “with its continuously growing revenues, PGH has a sustainable growth profile. The massive material investment, the high employability (nearly 15,000 direct and indirect employees) as well as the diversification efforts make PGH a conglomerate that will remain at the forefront of the national economic scene”.
Along with a growing business over the past few years, PGH has managed to significantly improve its margin levels (with gross margin increasing from 32.1% in 2015 to 36% in 2019, and EBITDA margin increasing from 14.1% in 2015 to 16.7% in 2019).
“We believe that the potential for growth in operating margins is still quite attractive,” believes stock market analyst Mac Sa, which adds that “the Poulina Group Holding has remained true to its image as a value creator and a key player in economic growth, despite all the difficulties and turbulence it has undergone.”
A turnover of 2.16 billion TND and a resilient BM, strengthened by diversification
The group’s consolidated turnover has increased by an average of 9.4% per year between 2015 and 2020 (against an average of 7.2% for all listed companies), with a peak of 13.1% in 2017 driven mainly by the building materials business (ceramic tiles in Algeria) and steel processing. In 2018, the group also recorded double-digit growth to exceed the symbolic threshold of 2 billion dinars in turnover (2.16 billion dinars).
In 2020, and like the economy as a whole, the group saw a 4.3% decline in its overall turnover, against a decline in corporate revenues of 8.1%, which proves the resilience of the group’s business model (BM) based on diversification to take advantage of different economic cycles.
“We believe that with the massive growth investments made in recent years, PGH should continue its growth in terms of top-line which should show a slightly faster pace of increase, not to mention the possible recovery of activity in Libya,” Mac Sa further believes, adding that “with revenues growing steadily, PGH has a sustainable growth profile.”
The stock market analyst explains this resilience to the COVID-19 crisis by “the massive material investment as well as the diversification efforts [which] make PGH a group destined to remain at the forefront of the national economic scene.
The opinion of Mac Sa
On the Tunis Stock Exchange, where the free float is 25.6% for a capital of 180 MDT, the stock market analyst indicates that, on the basis of the current price, PGH trades at EV/Sales and EV/EBITDA 2020E multiples of 1.5x and 9x respectively, relatively low levels in view of the levels at which its international peers trade, i.e. 4.4x and 15.3x.
And it is on the basis of this benchmark that Mac Sa considers that “the stock is currently undervalued” and “recommends buying it with a price target of 15.1DT (vs. 11.8 DT on 30/03/2021), corresponding to a potential upside of 28.3%”.
It then justified this optimism on the value and its development, by “a potential of growth coming from the new material investments carried out (brickworks, ceramic tiles, cement glue, etc….) with strong added value with a capacity, which is not any more to show, to improve its margins of year in year.
Moreover, the group, with its new orientation towards the acquisition of holdings in sectors and/or companies that are solid, sustainable and generate recurrent profits (SFBT, SITS, Tunisie Leasing et Factoring, etc. ….), is thus able to secure recurrent financial income and build up its assets.
