Tasnee shares surge 7% on Cristal’s North American business sale

Shares of National Industrialization Co. (Tasnee) jumped 7 percent to SAR 21.06 in less than an hour of trading on Thursday.

The jump in price came after Tasnee announced that the US Federal Trade Commission (FTC) had approved Tronox Limited’s planned acquisition of its North American titanium dioxide (TiO2) business.

Nearly 7.7 million shares, valued at SAR 162 million, were exchanged in the early hour of trading.

“The news is positive read for Tasnee but already priced in, as stock price is +30.5 percent YTD outperforming the petrochemical sector and broader Tadawul index,” Nitin Garg, vice president – Research, SICO told Argaam.

“The deal will deleverage Tasnee balance sheet and will allow it to focus on petrochemical business. The stock is fairly valued at these levels,” he added.

The approval by US commission on Tronox purchase of Cristal is very positive news for Tasnee, Sanat Sachar, Portfolio Manager , Al Mal Capital, told Argaam.
 
“The deconsolidation of this business will not only improve the net income as Cristal business was putting pressure on overall margins but also helps in repaying some of their debt using the cash proceeds from the sale,” he said.
 
The brokerage does not expect huge upside from this news as most of this is priced into the valuations.

Cristal, owned 79 percent by Tasnee and 20 percent by Gulf Investment Corporation, will sell its North American TiO2 business to British chemicals firm NEOS Enterprises. 

Under the deal, Cristal will receive $1.67 billion in cash and hold a 24 percent stake in Tronox, Tasnee said in a bourse filing.

The funds will be used to fully pay Cristal’s outstanding bank debt, it added.

Tasnee’s net profit after zakat and tax rose 68 percent year-on-year to SAR 1.2 billion for fiscal year 2018, driven by an increase in average selling prices of TiO2 products.