The re-opening of the British Embassy in Tehran marks another step on the path to lifting trade sanctions on Iran. While there are undoubtedly still hurdles to overcome from a political perspective, an agreement could come to fruition in early 2016 — opening the 19th most populous country in the world to the full extent of the global marketplace.
Oil and Carpets
Major exports from Iran, as listed by the CIA World Factbook, include oil, chemicals and carpets. With oil making up such a large percentage of the production, much of the focus will be towards crude pricing pressure, as well as the potential impacts and first-mover opportunities for the oil companies and those that support them.
One angle is to identify companies who have experience and assets in the region, not just those looking to increase investment. DNO ($DNO.NO) was asked in a recent earnings call about Iran and indicated a possible geographical advantage, “We surround Iran in terms of our assets,” and “we deal with some of the same challenges, and we have infrastructure and opportunities.” Another company expressing experience in the region is Technip ($TEC.FR), who stated, “Technip has had a long history in Iran until, of course, the sanctions were put in place.”
Aviation and Logistics
Outside of the headline sectors, who else might be impacted by an Iran deal? According to Avolon ($AVOL), there is a huge opportunity for Iran’s domestic airlines to re-fleet, drawing a comparison with Turkey. “The in-service fleet in Iran at the moment of airplanes is just over 200 airplanes, but the average age of that fleet is 26 years. The in-service fleet in Turkey is almost 500 airplanes with an average age of 6.5 years, with 300 airplanes on order.” Assuming manufacturers like Boeing ($BA.US) or Airbus ($AIR.NL) cannot meet the possible demand, this could create opportunities for smaller manufacturers, external airlines or financial leasing companies.
Irrespective of the fleet upgrade cycle, companies servicing airlines and airports are likely to find new business, such as Aeroports de Paris ($ADP.FR) who recently said, “I think [our Iranian counterparts] are willing to start the extension works for the airport quite soon.”
Should the Iranian market become more open to technology, demand for telecom equipment and related services would certainly grow. Again, it may be those with first-mover advantage who may benefit. MTN Group ($MTN.ZA) identified this in their latest earnings call, “We intend to continue to focus on CapEx in Iran, to make sure that we are able to capture the growth in the data traffic.”
Wait and See?
Unquestionably, the economic potential in Iran is significant. In many cases however, it appears to be a case of “wait and see.” A trade deal, while on track, is by no means a certainty, and many of the companies we looked at deferred analysts’ questions until a later date.
If you are interested in discovering and monitoring companies discussing Iran and their take on the opportunities there, or their concerns for the broader market, get in touch with one of our AlphaSense team members.
1. DNO ASA Earnings Call Transcript. Thomson StreetEvents, Q2 2015 DNO ASA Earnings Presentation, August 20, 2015
2. Technip Earnings Call Transcript. Thomson StreetEvents, Q2 2015 Technip Earnings Call, July 30, 2015
3. Avalon Holding Ltd Earnings Call Transcript. Thomson StreetEvents, Q2 2015 Avolon Holdings Ltd Earnings Call, August 5, 2015
4. Aeroports De Paris Earnings Call Transcript. Thomson StreetEvents, Half Year 2015 Aeroports De Paris SA Earnings Presentation, July 30, 2015
5. MTN Group Ltd Earnings Call Transcript. Thomson StreetEvents, Half Year 2015 MTN Group Ltd Earnings Presentation, August 5, 2015