Tehran Stock Exchange's main index, TEDPIX, has posted a return on investment of 31% from early September until the end of last week. The rapid growth has been particularly spectacular in the metals and minerals group.
The minerals group registered a growth of over 40% from early September. Base metals index also experienced a growth of 20%. During this period, Middle East Mines & Mineral Industries Development Holding Company's (MIDHCO) stock, in line with TEDPIX, had a 31% growth.
In the most recent trading session, MIDHCO shares were in high demand which bodes well for the future of this stock. Although MIDHCO has been rather slow in implementing its projects in the past, but it appears that the company's projects are back on track. The company approved paid-up capital increase of 5.2 trillion rial ( $35.13 million) equivalent of 22% in the last days of the previous calendar month. Under current conditions, a rights issue is expected to begin soon.
Based on the feasibility plan of capital increase, MIDHCO will use those resources to inject capital into promising companies such as Sirjan Iranian Steel Co. and Zarand Iranian Steel Co. Among the positive points of the feasibility plan is implementing the operational phase of the Bardsir Steel Factory with a production capacity of one million tons and Zarand Steel Project with production capacity of 1.7 million tons from March 2018.
Based on this, it seems that tangible changes about MIDHCO's profitability can be perceived from the net profits of the aforementioned companies from next year (starts March 21). In addition to this, MIDHCO's copper cathode project has gone on stream from May and is expected to show the effect of copper products on the company's financial statements.
One Positive Side
The delay in implementation of mineral and metal projects was among the significant problems that MIDHCO shareholders faced in the past years. Under the current circumstances, however, a considerable portion of the of the company's profit-making projects are in implementation phase. The company's projects have gradually become operational and are showing their effects in the company's profits. Among the positive features of MIDHCO compared to its peers is the fact that it is still far from maturation, meaning that the companies' current projects can be sustained up until 2020.
This is while many of MIDHCO's peer companies have merely grown due to the surge in the price of foreign companies and inflationary signals. This is also true for MIDHCO's subsidiary companies as they are wrestling with the issue. Despite this, the point that must be taken into account in starting new projects that in addition to the foreign exchange leverage, would have a long-term view on production increase and profitability.
This becomes all the more important after the recent giddy rise in stocks and concern about the future of companies' shares. This concern was addressed in plans about profitable ventures in the coming year but the production increase vision is not limited to the next year and will continue in the coming years as well.
The Missing Puzzle
One of the major problems TSE shareholders face is lack of transparency about the production process and costs such as foreign currency loans. Perhaps if MIDHCO managers published the company's earnings reports on a monthly basis, market analysts would have a more accurate estimate of the company's direction. As mentioned before, MIDHCO is on a path of increased production and in the past year succeeded in producing about 3.65 million tons of concentrates and 3.1 million tons of pellets.
In addition to this, an industry that has gained the attention of investors in recent months is the coal industry. From August this industry has had a 120% growth on TSE. MIDHCO has produced 155,000 tons of coal concentrate and 163,000 metallurgical coals. The nominal capacity for coal production in MIDHCO reaches around 1.1 million tons and the production capacity for metallurgical coals 1.2 million tons. It is anticipated that a 540,000-ton coal project would become operational in winter.