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Abu Dhabi, UAEWednesday 14 November 2018

Arab Potash fails to light up analysts

Arab Potash, the Jordanian publicly listed fertiliser, fails to excite analysts on grounds of valuation and liquidity.

Arab Potash, one of the largest companies listed on the Amman Stock Exchange, has failed to excite analysts, who remain concerned about its valuation.

The Jordanian fertiliser producer has gained almost 40 per cent in the past six months. The stock, which is considered expensively priced, trades at a 28.3 per cent premium relative to its peers. While Arab Potash trades at 22.2 times price to earnings, the sector average trades at 17.3 times price to earnings.

The company produces four grades of potash - standard, fine, granular and industrial - with a large share of production consisting of standard grade potash. Arab Potash enjoys low cash cost per tonne of production and has its own access to the commodity via the Dead Sea.

The company has a free float of only 3 per cent on the Amman bourse. Its liquidity deteriorated significantly last year compared with the year earlier. The average daily value and volume of shares traded dropped to 110,553 Jordanian dinars and 3,260 shares from 679,084 dinars and 18,932 shares, respectively, in 2009.

"This is particularly striking when considered in relation to its size, standing as one of the largest companies on the Amman Stock Exchange in terms of market cap, falling second only to the Arab Bank," said Tanya Khammash, an analyst at Jordinvest in Amman. Ms Khammash has a "hold" rating on the stock with a price target of 35.51 dinars. Arab Potash closed unchanged at 45.5 dinars yesterday.

The company's profitability took a dive in 2009 as sales plummeted in the midst of turbulent economic and financial conditions on a global scale.

Net profit reached 131.77 million dinars in 2009, down from 311.39m dinars the year before. The company's bottom line is expected to improve on the back of higher potash prices.

Its primary markets are in the Far East, with India, China and Malaysia accounting for some 75 per cent of its total sales in 2009. The producer is currently in negotiations with India and China to negotiate selling prices, amid increased demand from North America because of rising corn prices.

halsayegh@thenational.ae