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Tunisia: What risk Assad may face ?

Assad share price  stood out in recent months by a trend boosted  by a particular buying drive late  September 2008. Analyzing this performance, taking into account the risk factors the group is facing, strengths, weaknesses, opportunities and threats, the average assessment of the stock made by Mac Sa broker  leads to an average development  of 11.81 DT  representing a  9% gain over the course of 27 November 2008.
“The evolution of Assad stock share over January 2006 – November 2008 period highlighs trend upward. Indeed, the Tunindex index pace of growth has largely outstripped that of Assad during the period from January 2006 to August 2008. Beginning in September 2008, and in the wake of declining growth rate of the Tunis Stock Exchange, Assad stock price has also posted a decline. The equity performance up to 14 November 2008, amounted to167% against 18% for Tunindex. Liquidity dropped in 2007 despite the decline in nominal terms meant to improve it. In 2008, and from May, there was a reversal of the trend. The improvement in liquidity was fed by buying drive observed during the period from May 2008 to August 2008. The price share followed during this period upward trend reaching its highest historical level of 15400DT on August 14,,2008. As far as profitability is concerned Assad share underwent in 2006 a decline of 13.2% against an increase of 43% for the index Tunindex. In 2007, the price was well oriented rising 10.1% against an increase of 12% for Tunindex. The surprise came undoubtedly in 2008, when the share reached the climax on November 14, 2008, rising by 185% while the stock market index gained only 13%, according to analyst Mac Sat
The analysis of the financial structure of  Kallel group  indicates a ratio including capital and real estate assets which amounted to above 100% during the past three years  “This situation reflects a balanced financial structure as all non-current assets of the company are largely funded by equity and  medium and long term loans,” said analyst firm Mac Sat This also highlighted a positive progression of financial dependency ratio (DMLT / capital), which rose from 19.1% in 2005 to 15.1% in 2007. “An increase attributed to the considerable increase in profit and the lower level of indebtedness in 2007,” according to the analyst

As for the assessment of the company operation, the stock broker highlighted the sustaining improvement of current activity in recent years including 2007, which allowed Assad to strengthen its key operating ratios.

The broker, however,  mentioned constraints relating to the price of lead, the main input in the production of plates, which went from 3500 dollars to 1400 dollars during the Oct 2007 – Oct 2008. period He  also pointed out calls that  Assad  managed to improve its gross margin which rose from 38.6% in 2006 to 43.2% in 2007, thanks mainly to  production costs mastery by recycling old batteries and indexing  export sales price to that of lead in the international market.

During 2008 first six months, the company’s performance has been bolstered up through a  41% turnover increase and a 35.8%, gross margin rise but down slightly compared to the same period of last year.

Risk factors

Mac’s study devoted an important section to analyzing risks the company could face, especially during these hard times experienced by automobile industry.

Mac refers first to exchange risks. It found out  that “Assad is the group which  faces low-risk in terms of exchange, export selling prices being  indexed to the price of lead since late 2006. It evokes the risk that the company may undergo a change risk since purchases are made predominantly in dollar against sales invoiced in euros.

Second risk that Assad could face is that of raw materials prices increase including lead. A risk that seems clearly measured, since the company started indexing  export sales price to that of lead.

As for «dependence on exports markets.” export sales account for 60% of sales. Analyst Mac, however noted that ” Assad group secures  a small share (400 000 batteries) of the  international market needs estimated between 200 million and 250 million batteries. As the main operator on the local market, Assad has a margin which is large enough allowing it to handle the case  according to the world market trend.


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