Griffon Capital Newsletter October 2016

1
Asset Management and Private Equity
IN THIS ISSUE:
• Market uptrend regains intensity with increased volume
• First-half corporate results are generally solid
• A pickup in foreign deals
• An overview of one of the largest iron ore companies: Golgohar
MONTHLY NEWSLETTER
Please see the important Sanctions Disclaimer on pages 6 and 7 of this document.
OCTOBER 2016

Page| 2
IRAN EQUITY MARKETS OCTOBER 2016
II Indicies
MARKET AT A GLANCE
Improved market sentiment,
higher volumes and equity
inflows suggest a renewed
upward trend that began in
mid-September.
Solid company H1 reports and
company guidance upgrades
gave new impetus to the trend;
other factors included moves
higher in select commodities,
the nearing of the planned FX
unification, and the gradual
improvement in macro data.
The Average Daily Trade
Volume (ADTV) almost
doubled to $135m compared
to $73m in September. As in
September, retail activity
(59%) surpassed that of
institutions (41%). The most
active sectors were auto,
refineries, base metals, metal
products and investment
companies, together
comprising 49.8% of the value
traded (19.2%, 10.8%, 7.5%,
6.2% and 6.1%, respectively).
The larger banks remain
suspended due to delayed
AGMs and CBI-led reforms.
Based on our screening of 378
companies, H1(a) corporate
results conveyed the following
headline industry trends: Iron
ore, tyres and base metals
provided the most bullish
guidance, increasing full-year
profit forecasts by 22%, 14%
and 13%, respectively;
whereas other miners, tiles
and ceramics, and cements
published the most negative
outlooks, downgrading profit
forecasts 20%, 15% and 9%,
respectively.
II TEDPIX Index & P/E Ratio
All market data represents the period from October 1 to October 29, 2016.
a) H1 period corresponds to Iranian calendar year which is from March to September 2016
Sources : Tehran Stock Exchange, Bloomberg, MSCI, Griffon Asset Management Team.
As of the date of this report, 1 USD = 35,878 IRR (The average free market exchange rate for the
period Oct 1 to Oct 29 2016).
II Market Capitalisation
Monthly traded value (million $)
5.8
5.6
6.2
7.2
7.5
7.5
7.4
6.9
7.3
7.4
7.2
55,000
60,000
65,000
70,000
75,000
80,000
85,000
5.00
5.50
6.00
6.50
7.00
7.50
8.00
Index
P/ERatio
P/E Ratio Index
671 514
2,314
3,905
2,863
2,177 1,850 1,263 1,412 1,722 1,492
2,570
N D J F M A M J J A S O
1,144
TSE Farabourse
92,437 16,797
1,427
Market Cap
(million $)
Value traded
(million$)
TSE Farabourse Frontier Market Emerging Market
(TEDPIX) (IFX) (MSCI FM) (MSCI EM)
3.9% 2.7% 0.8% -0.2%
80,341 839 499 911
27.6% 20.4% -6.2% 13.2%
30.2% 22.8% -1.5% 14.7%
7.5x 8.7x 13.0x 12.4x
10.6% 9.4% 4.3% 2.6%
810
820
830
840
490
495
500
505
Past month
monthly
performance
Past 12
months
Last close
77,000
78,400
79,800
81,200
Year todate
890
900
910
920
930
P/E
Div. Yield

Page| 3
II Sector Performance
SECTOR NEWS
Petrochemicals
Total, France's oil giant, is
expected to sign a $2 billion
contract with the Persian Gulf
Petrochemical Industries
Company (the largest listed
company on the TSE) to build a
petrochemical complex for
olefin production in Iran. Olefin
is a synthetic compound used
in a wide variety of products
including vehicle interiors,
carpeting and wallpaper.
Autos
The Industrial Development &
Renovation Organization of
Iran (IDRO) and Renault signed
a strategic agreement to
create a new joint venture. The
French automotive group will
be the majority shareholder. In
2015, Renault’s sales to Iran
increased by 56.1% (versus
2014) to a total of 51,500
vehicles, for a market share of
4.8%. The joint venture will
include an engineering and
purchasing centre which will
work with and support
domestic auto parts suppliers.
The manufacturing plant will
have an initial production
capacity of 150,000 vehicles a
year, which will be added to
Renault’s current (domestic JV)
capacity of 200,000 vehicles.
Renault has been present in
Iran since 2003 through a joint
venture with Iran Khodro and
Saipa.
II Top Gainers and Losers
As of the date of this report, 1 USD = 35,878 IRR (The average free market exchange rate for the
period Oct 1 to Oct 29 2016).
Sources : Financial Tribune, Mehr News, Tehran Stock Exchange , Griffon Asset Management.
Best Performing sectors Worst Performing sectors
Leather  20.6% Sugar & by-products  -6.6%
Metallic ore  19.3% Metal products  -5.0%
Cements, limes & plasters  14.9% Electric machines  -4.7%
IT & computers  13.2% Oil & gas extraction  -3.2%
Rubber & tire  13.0% Telecommunication  -1.6%
Lia co.  96.0% Arfa Iron & Steel  -21.4%
Chemicals Base metals
Pegah Golestan  82.5% Isfahan Sugar  -16.3%
Food stuff excl. sugar Sugar & by-products
Ardekan Ceramic  71.4% Hegmatan Sugar  -16.2%
Ceramics & tiles Sugar & by-products
Asan Pardakht Persian  46.2% Shahd  -14.4%
IT & computers Sugar & by-products
Kordestan Cement  45.7% Neyshabour Sugar  -14.1%
Cements, limes & plasters Sugar & by-products

Page| 4
In the first half of this year,
production at IKCO and Saipa
(the two largest vehicle
manufacturers, together
representing 91% of domestic
production) has grown 10.6%
and 28.5%, respectively, year
on year.
Cement
Due to the ongoing oversupply
(and depressed domestic and
export demand) in the cement
sector, companies are agreeing
to cap production and reduce
discounts offered to buyers.
October saw the first notable
uptick in the price of cement.
Engineering
An agreement between Iran’s
MAPNA Group & Iran Railroad
Organisation was made jointly
with Siemens for the
procurement and
manufacturing of 50 diesel and
70 electric locomotives.
Siemens is to supply the
components and
manufacturing technology and
the agreement is expected to
enable the transfer of
technology to MAPNA.
IPO
This month there was an IPO in
the payment service providers
(PSP) industry. Asan Pardakht
Persian (free float 8%, market
capitalization $285m, forward
P/E of 6.8x) was listed on the
TSE and was trading 46%
higher as of the close of the 29
October session.
a) The shares have been suspended until such time that the AGM is reset.
Sources : cement association, Mehr News, Tehran Stock Exchange, Griffon Asset Management.
II Top 10 companies by market capitalisation
II USD/IRR Exchange rate
USD/IRR 36,080
+360
+1.0% 
USD/IRR 31,750
+291
+0.92% 
Market Cap
(million $)
Last price Year to date 52 w/h 52 w/l
Khalij Fars Petrochem 6,949 4,950  3.1% 2.9% 5,836 4,427
Chemicals 6.0%
TCI 3,960 2,305  -3.7% 42.9% 2,394 1,550
Telecoms 3.4%
MCI 3,866 34,220  -0.4% 44.0% 34,910 23,428
Telecoms 3.3%
Marun Petrochemical 3,283 29,650  -0.9% 5.7% 32,784 27,879
Chemicals 2.8%
Bank Mellat 2,733 1,896 →(a) 0.0% 22.3% 2,046 1,506
Banking 2.4%
Mobarakeh Steel 2,663 2,305  -3.7% 42.9% 2,394 1,550
Base metals 2.3%
MAPNA Group 2,580 9,100 →(a) 0.0% 33.8% 9,890 6,330
Engineering 2.2%
NICICO 2,484 1,842  10.8% 79.5% 1,842 996
Base metals 2.1%
Ghadir Investment 2,413 1,938  3.0% 21.2% 2,360 1,599
Conglomerates 2.1%
Tapico 2,383 1,770 →(a) 0.0% -9.4% 2,335 1,733
Chemicals 2.1%
1-month
Price values in IRR

Golgohar and TEDPIX — last 2 years
Page| 5
Golgohar Mining & Industrial Co. (Kegol)
Symbol: GOLG1 Exchange: TSE Listed since: 2004 Last close: IRR 1,920 90-day change: ↑ 13%
Market cap.: $1,618m P/E (16-17E)(a): 8.0x 12-month return: 26%↑
Enterprise value: $1,760m 5-yr (avg.) dividend payout ratio: 96% EV/revenue (16-17E)(a): 2.4x
% of market (TSE): 1.5% Dividend yield (16-17E)(a): 12.3% EV/EBITDA (16-17E)(a): 6.6x
Free float: 20% Avg. daily trade value: $412K ROCE (hist.): 18%
Shares outstanding: 30bn 52-wk high / low (IRR): 2,129/1,308 ROE (hist.): 17%
The Golgohar Mining & Industrial Company was established in 1991
to produce iron ore concentrate and iron ore pellets for steel
companies. The company’s market share of iron ore concentrate is
about 30% in Iran. It is one of the two biggest iron ore mining
companies in Iran, the other being Chadormalu Mining and Industrial
Company; but Golgohar’s mines are newer, and its reserves less
depleted, than Chadormalu’s. Its cost of goods sold (COGS) comprises
mainly extraction costs (paid to contractors), government royalties
and utility costs; it recently adopted an assertive negotiation policy to
better manage contractor extraction costs. Most steel producers in
Iran use the electric arc furnace (EAF) method (which makes greater
use of iron ore), as opposed to the blast furnace method. Because
Iran’s government plans to significantly increase domestic steel
production to from 31m tonnes to 55m tonnes by 2025, demand for
iron ore concentrate and pellets is expected to accelerate. Golgohar,
which currently has the capacity to produce 12.5 million tonnes of
concentrate annually, plans to increase this capacity by 2m tonnes in
2017. Although Golgohar’s iron ore pellets are sold in the domestic
market, it expects to export up to about 50% of its iron ore
concentrate (to take advantage of better pricing in the global
market). Its main revenue driver is the domestic bloom price; the
prices of concentrate and pellets are announced annually and set as a
fixed percentage of Khuzestan Steel Company’s (2nd largest steel
producer in Iran) bloom price (currently concentrate is set at 13% and
pellet at 21.5% of the bloom price). Golgohar does not own mines
and pays an annual royalty to Iran’s government for a long-term
licence (royalty fees are based on the degree of value-add of the
product and expressed as a percentage of the concentrate price).
2013A(a)
2014A(a)
2015A(a)
2016E(b)
2017E(b)
Production
(Thousand tonnes)
7,792 8,175 10,787 12,500 14,500
Revenue 891.8 737.9 521.2 738.9 936.0
% of growth -12.6% -17.3% -29.4% 41.8% 26.7%
EBITDA 451.3 271.8 155.3 266.6 380.5
% of growth -36% -40% -43% 72% 43%
EBITDA margin 51% 37% 30% 36% 41%
Net Income 476.5 269.8 164.2 203.4 305.9
% of growth -29% -43% -39% 24% 50%
NI margin 53% 37% 32% 28% 33%
Net Debt (57.1) 101.4 141.6 66.5 (27.5)
Capex 183.9 235.2 124.0 54.5 41.1
Dividend 465.4 278.6 160.4 198.6 298.7
Financial Overview ($m) Company Overview
This is not a stock recommendation. The above is an introductory information overview.
The reference currency rates are based on the yearly average of the free market exchange rates.
All share prices are adjusted for corporate actions.
a) Actual results.
b) Griffon Asset Management forecasts.
Sources: Company Financial Statements, Griffon asset management team.
Revenue and EBITDA margin Cash Flow
51%
37%
30%
36%
41%
0%
20%
40%
60%
80%
100%
0
150
300
450
600
750
900
1,050
2013A 2014A 2015A 2016E 2017E
$(million)
Revenue EBITDA Margin
(600)
(400)
(200)
0
200
400
600
2013A 2014A 2015A 2016E 2017E
$(million)
Operating Investing Financing
1000
1500
2000
2500
3000
3500
10/25/2014 4/13/2015 9/30/2015 3/18/2016 9/4/2016
Kegol TEDPIX rebased

Page| 6
Disclaimer
Please read this disclaimer carefully as it contains important
information about the Griffon Iran Flagship Fund SP ("Fund"),
a segregated portfolio of GIF SPC, its proposed investments in
Iran and the current international sanctions and restrictive
measures in relation to Iran.
This newsletter is strictly private and confidential, has been
prepared by Griffon Asset Management ("Investment
Manager") and is being provided to investors in the Fund on a
confidential basis. This newsletter is for information purposes
only and should not be construed as investment advice. All
information provided herein is as of the date set forth on the
cover page (unless otherwise specified) and is subject to
modification, change or supplement in the sole discretion of
the Investment Manager. This information is neither complete
nor exact and is provided solely as reference material with
respect to the Fund.
This material does not constitute an offering of any security,
product, service or fund, including the Fund, for which an
offer can be made only by the Fund’s Confidential Private
Placement Memorandum (the “Confidential Memorandum”).
The terms and risk factors of the Fund are set out in its
Confidential Memorandum which is available to qualified
prospective investors upon request. The contents hereof are
qualified in their entirety by the Confidential Memorandum
and subscription agreements of the Fund.
The purchase of shares in the Fund is suitable only for
sophisticated investors for whom an investment in the Fund
does not constitute a complete investment program and who
fully understand and are willing to assume the risks involved
in the Fund’s investment program. The Class A Shares of
the Fund are subject to restrictions on redemption,
transferability and resale as provided in the Confidential
Memorandum and the Fund's constitutive documents. There
is no secondary market for an investor’s shares in the Fund
and none is expected to develop. There is no obligation on the
part of any person to register the shares under any statute.
The performance results of certain economic indices and
certain information concerning economic trends contained
herein are based on or derived from information provided by
independent third party sources. The Investment Manager
believes that such information is accurate and that the
sources from which it has been obtained are reliable. The
Investment Manager cannot guarantee the accuracy of such
information, however, and has not independently verified the
assumptions on which such information is based.
No reliance may be placed for any purposes whatsoever on
the information contained in this newsletter or on its
accuracy, completeness or fairness. No representation or
warranty, express or implied, is given by or on behalf of the
Fund, the Investment Manager or any of their respective
affiliates or partners with respect to the accuracy or
completeness of the information contained in this newsletter.
The aforementioned persons disclaim any and all
responsibility and liability whatsoever, whether arising in tort,
contract or otherwise, for any errors, omissions or
inaccuracies in such information or respective subsidiaries or
affiliates may differ significantly, positively or negatively, from
forward-looking statements made herein. Due to various risks
and uncertainties, actual events or results or actual
performance may differ materially from those reflected or
contemplated in such forward-looking statements.
As a result, you should not rely on such forward-looking
statements in making any investment decision.
No representation or warranty is made as to the
achievement or reasonableness of, and no reliance should
be placed on, such forward-looking statements. Nothing in
this newsletter should be relied upon as a promise or
representation as to the future.
(Continued on the next page)
About Griffon Capital
Griffon Capital is an Iran-focused asset management and private equity group established to unlock value from
the country’s public and private equity markets. Among Griffon’s primary objectives is providing local and
international institutional investors with a way to seamlessly access and maximise opportunities in Iran through
purpose-built vehicles and investment products spanning traditional and alternative assets.
Our strength is rooted in a robust operating platform developed by leading international advisors and
supported by internationally recognised administrators and auditors. The platform consists of a high-calibre
team with deep local-market expertise and international financial pedigrees at the board, management and
execution levels. This includes a management team with extensive experience in investment banking, wealth
and asset management, and corporate finance. Griffon is also distinguished by on-the-ground local research
and primary-source thinking and a governance culture defined by global best practices in risk management,
compliance and reporting.
Modaberan Homa is fully licensed and regulated by the Securities and Exchange Organization (SEO) of Iran.

Page| 7
Disclaimer (Continued)
Certain figures contained in this newsletter have been
subject to rounding adjustments. Accordingly, in certain
instances, the sum or percentage change of the numbers
contained in this newsletter may not conform exactly to the
total figure given.
This newsletter may include track record information
regarding certain investments made and/or managed by the
Investment Manager or its affiliates and/or certain other
persons. Such information is not necessarily comprehensive
and potential investors should not consider such information
to be indicative of the possible future performance of the
Fund or any investment opportunity to which this document
relates. The past performance of the Investment Manager or
its affiliates is not a reliable indicator of, and cannot be relied
upon as a guide to, the future performance of the Fund.
The Fund will not accept investments from any US Persons
(as defined in applicable legislation) or persons whose
conduct is subject to US economic sanctions (unless and until
such investments are authorised by the relevant US
authorities).
This newsletter is only addressed to and directed at: (a)
persons in member states of the European Economic Area
("Member States") who are "qualified investors" within the
meaning of Article 2(1)(e) of the Prospectus Directive
(Directive 2003/71/EC, as amended (including amendments
by Directive 2010/73/EU to the extent implemented in the
relevant Member State)) provided that the giving or
disclosing of this newsletter to such person is lawful under
the applicable securities laws (including any laws
implementing Directive 2011/61/EU of the European
Parliament and of the Council of 8 June 2011 on Alternative
Investment Fund Managers (the "AIFM Directive")) in the
relevant Member State ("Qualified Investors"); (b) within the
United Kingdom, to persons who (i) have professional
experience in matters relating to investments and who fall
within the definition of "investment professionals" in Article
19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 (as amended) (the
"Order"), or (ii) are persons who are high net worth entities
falling within Article 49(2)(a) to (d) of the Order, and/or (iii)
persons to whom it may otherwise be lawfully
communicated and (iv) are "qualified investors" as defined in
section 86 of the Financial Services and Markets Act 2000, as
amended; and (c) other persons to whom it may otherwise
lawfully be communicated (all such persons referred to in (a)
to (c) above together being referred to as "Relevant
Persons"). This newsletter must not be made available to
persons who are not Relevant Persons. No person should act
or rely on this newsletter and persons distributing this
newsletter must satisfy themselves that it is lawful to do so.
No steps have been taken by any person in respect of any
Member State to allow the Shares to be marketed (as such
term is defined in the relevant legislation implementing the
AIFM Directive) lawfully in that Member State. By accepting
this newsletter you represent, warrant and agree that
you are a Relevant Person.
The representative of the Fund in Switzerland is Hugo Fund
Services SA, 6 Cours de Rive, 1204 Geneva. The distribution
of Class A Shares in Switzerland must exclusively be made to
qualified investors. The place of performance for Class A
Shares in the Fund distributed in Switzerland is at the
registered office of the Hugo Fund Services SA.
On July 14, 2015, the P5+1, the European Union, and Iran
reached a Joint Comprehensive Plan of Action ("JCPOA").
Subsequently, following confirmation that relevant JCPOA
commitments had been delivered, certain of the
international sanctions and restrictive measures relating to
Iran were eased or lifted on 'Implementation Day', 16
January 2016, including the majority of previous EU and UN
sanctions on Iran. While this represented a significant
relaxation of the sanctions in place against Iran, a number of
important restrictions remain in force (including certain
sanctions which may affect financial and investment activity).
In particular, notwithstanding the relaxation of sanctions on
'Implementation Day', certain categories of persons may be
prohibited from investing in the Fund. The Fund and
Investment Manager's policy is to comply with all applicable
sanctions, and not to engage in activity that would be
sanctionable under the sanctions applicable to non-US
persons. Before making or managing any investments in
Iranian securities, the Fund and the Investment Manager will
put in place a robust compliance framework based on
professional advice with a view to ensuring that its activities
and investments are compliant with EU and applicable US
sanctions and restrictive measures in force from time to time
regarding Iran.
It is the responsibility of the recipient of this newsletter to
satisfy itself as to its compliance with the legislation of any
relevant jurisdiction or territory, including in particular
regarding international sanctions and restrictive measures,
and to assess the risk of the imposition of additional
sanctions (including under the JCPOA 'snapback' mechanism)
that might affect any investment in the Fund or its valuation
or liquidity. It is the responsibility of the reader to satisfy
themselves that any business activities will not expose them
to liability under the laws of any state to which they are
subject.

Griffon Capital
Unit 101,
No. 38, Golfam Street,
Africa Boulevard,
Tehran, Iran
Iran
T: +98 21 26231278
F: +98 21 26231275
E: info@griffoncapital.com
W: www.griffoncapital.com

Griffon Capital Newsletter October 2016

Recommended

Recommended

More Related Content

What's hot

What's hot (19)

Viewers also liked

Viewers also liked (20)

Similar to Griffon Capital Newsletter October 2016

Similar to Griffon Capital Newsletter October 2016 (20)

More from Griffon Capital

More from Griffon Capital (11)

Recently uploaded

Recently uploaded (20)

Griffon Capital Newsletter October 2016