Trading in demerged entities i.e. ICI Pakistan (non-paints) and Akzo Nobel (paints) started on a very surprising note for investors
Recall, the Board of ICI Pakistan decided to split up its paints and non-paints segments into two separate legal entities in a split ratio of 66.5% for non-paints (ICI) while remaining 33.5% for paints (Akzo Nobel)
Contrary to fundamentals ICI Pakistan share price showed positive surprise to the investors’ while Akzo Nobel disappointed the market on its debut
Hence, its pertinent to shed some light on other relevant factors which in our view may have caused such abrupt price behavior
Though we maintain our “Under review” (UR) stance on both the recently split entities, the deferred triggers like coal fired boilers and risks like falling PSF margins, gas curtailment to Soda ash and higher financial cost will make it difficult for ICI Pakistan to improve profitability
Expectation of a onetime cash payout amid handsome cash availability (PKR79/sh), or incase of retention, higher other income (PKR4.7/sh) is key driver for Akzo Nobel Pakistan
The recent surprising move in both the stocks may provide investors an opportunity to capitalize gains in pre-acquisition speculative movements however, we believe investors should also consider financial strengths and prospects in each
what would you recommend, sell akzo, keep it, buy it, ici better or akzo??
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