Analysts build up hopes for Orascom

Cairo construction firm has long list of projects in the works

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A strong pipeline of projects and little competition in its home market have analysts bullish on Orascom Construction Industries, Egypt's biggest publicly listed construction firm. The stock is beaten down at the moment, it is off 20 per cent in the past two months to 226 Egyptian pounds as investors were hit by the euro-zone jitters. Of the seven analysts following the stock, all have a 12-month target price of at least 270 pounds.

"The company has an excellent track record in execution and delivery," said an analyst at the Cairo office of EFG-Hermes, who asked not to be named. "And it operates in a region which has extensive plans for infrastructure spending." He estimates the company has a backlog of projects worth US$6 billion. Orascom's acquisitions and its partnerships with counterparts in key markets are central to its strategy. One of the most significant deals was clinched in 2004, when Orascom bought a 50 per cent stake in Besix Group, the Belgian contractor.

That same year Besix landed a multibillion-dollar contract to build Burj Khalifa, the tallest tower in the world, in partnership with the UAE's Arabtec Construction and South Korea's Samsung Engineering and Construction. Besix was also recently awarded a Dh973.3 million contract to build Bahrain's North Manama Causeway in a joint venture with the Bahraini contracting company Haji Hassan. The deal came shortly after it picked up Dh6.5bn worth of projects in Abu Dhabi: the Dh5bn deal to build the Cleveland Clinic and the Dh1.5bn contract from the Abu Dhabi National Oil Company to build its ADNOC Tower headquarters.

Orascom has also spread its wings to India by joining up with HCC Infrastructure, a unit of Hindustan Construction, to jointly bid for road projects from the national highways authority. Meanwhile, Orascom's fertiliser group paid $415.5m in April for the melamine and fertiliser subsidiaries of Royal DSM, the Dutch group. "This has doubled their capacity in terms of fertilisers while capitalising on the expected increase in fertiliser prices," said the analyst from EFG-Hermes.