x Abu Dhabi, UAEMonday 22 January 2018

Grass looks greener for fertiliser maker

Jordan Phosphate may get growth spurt from population rise

Investors in Jordan Phosphate have been holding their noses of late, but analysts say the stock in the fertiliser company could soon be smelling like a rose. The shares are down 22 per cent since January and net income slumped last quarter, when the company cited higher costs. Jordan Phosphate is the sixth-largest phosphate producer globally and could serve as an effective play on continued world population growth and demand for commodities. Farmers use phosphate to increase the yield of their crops.

India is the price setter for phosphate rock and if demand in the subcontinent is strong that should keep prices elevated. Global phosphate prices have increased in the second quarter, staying in a steady range of between US$110 and $120 per tonne, up from $90 a tonne in the first quarter of this year. More than 50 per cent of Jordan Phosphate's exports are to India, while the rest is sent to Europe and the rest of Asia.

Jordan Phosphate also boasts one of the lowest costs per tonne among producers. The company is listed on the Amman Stock Exchange and has a market capitalisation of 1.1 billion dinars. There are a number of investors with sizable stakes in the company, including Jordan Islamic Bank, the country's ministry of finance, the government of Kuwait, Brunei's sovereign wealth fund and Franklin Templeton Investments.

Jordan Phosphate is covered by multiple analysts with global investment banks, most of whom have "buy" ratings on the stock. The consensus target price is about 19 dinars a share. The stock dropped 0.7 per cent to 13.90 dinars a share yesterday, suggesting it still has plenty of upside potential. Jordan Phosphate entered a $260 million joint venture with a Chinese company last month to increase its production capacity for fertiliser and chemical products.

Jordan is estimated to hold 1.2 billion tonnes of phosphate reserves. halsayegh@thenational.ae