The country may be at the proverbial crossroads, but the CASE is shaping up to be one of the most attractive investment destinations in the region
Despite a number of economic hurdles facing both the stock exchange and the Egyptian economy over the past month, both foreign and local investors are reaping profits and pushing the CASE higher than ever.
Last month Finance Minister Youssef Boutros-Ghali said the Ministry of Finance is considering selling state-owned assets to meet the 20% salary increase (up from the annual 15% increase) promised to public-sector employees. The sales would act as a hold-over while the ministry searches for a long-term income for the annual salary. The first general strike in recent memory was staged as a reaction to massive price hikes and static wages, while presidential decrees have both reduced and removed tariffs on basic imported goods in an attempt to keep prices stable. The governor of Cairo has also banned all loading vehicles from entering the city before 8pm, with immediate repercussions for retailers, hospitals, hotels, and government agencies, many of which require two deliveries per day.
But oddly enough, the CASE, for the second reporting period in a row, has managed to stay afloat, soaring towards 12,000 point, with experts forecasting that this 12,000 mark will be reached sooner rather than later.
Case
The Capital Market Authority licensed CI Capital Investment Banking to act as nominated advisor to small and medium enterprises (SMEs) that want to list on the Nile Stock Exchange (Nilex), bringing the number of licensed nominated advisors to seven.
In the beginning of April, the CASE held Borsa Step X Step, an educational forum at Mansoura University. The forum, attended by almost 1,000 students, included a series of lectures about the basics of investment and trading on the stock market, as well as fundamental and technical analysis. Borsa Step X Step is part of the CASE's ongoing investor education and public awareness campaign.
Bourse officials were also out drumming up new business last month. In collaboration with the Egyptian Information Telecommunications Electronics & Software Alliance (Eitesal), the CASE held a workshop for Information and Communication Technology (ICT) SMEs early in the month. The forum highlighted the benefits of being listed on the Nilex, and was attended by representatives of 70 ICT companies, the nominated advisors and a number of ICT associations and funding agencies.
Real Estate
Recent entrant to the CASE, Talaat Mostafa Group (TMG, TMGH.CA), announced that their subsidiary Arab Company for Hotel and Touristic Investments has presented an offer to acquire the Al Soltana Malk piece of land in Luxor under the haq interfeya (long-term lease) system. The offer states that Arab Company will pay an annual fee of LE 6.8 million starting in 2012, with a 5% annual increase until 2034, at which point the contract will end. The company plans to build a Four Seasons Hotel in addition to a pontoon boat between Luxor and Aswan, adding a new attraction to both cities.
TMG also announced that its 1Q2008 combined operations resulted in a net profit of LE 425 million, while operations between April 2007 and March 2008 made a net profit of LE 621 million. The company said that it is targeting a 25% profit margin in FY2008-09. Accordingly, stock prices have stayed in the neighborhood of LE 11.6 per share, though they fell on April 13 to end the reporting period at LE 11.
Mena Touristic and Real Estate (MENA.CA, bt100 number 83) recently announced that it has acquired 12 acres of land in New Cairo as an extension of the Mena project facing the new American University in Cairo campus. The acquisition cost stands at LE 80 million and was done via Mena Plaza, a Mena Touristic subsidiary. Mena Touristic reported that its 2007 operations resulted in a net profit of LE 23.4 million, supplementing a planned 100% increase in capital to LE 110 million. The capital increase will come from the distribution of a free share for every existing share held, though the company is yet to decide if the issue will be financed from provisions or retained earnings. On March 23, the company's stock stood at LE 27 before shooting up to LE 29.34 on March 28, collapsing to LE 26 on April 3, then bouncing up again to LE 28.34 before finally resting near the LE 26.5 at the end of the reporting period.
Another real estate company looking to make big changes is Rowad (RMTV.CA), which announced the sale of its 99% stake in Pioneers Hotels Company whose issued captial currently stands at LE 30 million.
Pyramisa Hotels (PHTV.CA, bt100 number 81) has announced a slew of new projects for 2008. The first is its second Pyramisa Resort in Sharm El-Sheikh -- the company announced it has signed an agreement with the governorate to secure 52,500 square meters of land valued at LE 1.2 million. The second project is the purchase of a 96,800 square meter block of land from the Egyptian Company for Touristic Resorts for $7.75 million (LE 42.6 million). The land will be used to build a residential tourist resort. The third project is a low-cost housing project in Sixth of October, while the fourth and final project is the purchase of 2,800 square meters of land in Dubai valued at AED 8.8 million (LE 12.9 million) to build a hotel slated for completion in the second half of 2009. The company's stock prices have been fluctuating throughout the reporting period, from a high of LE 38.94 to a low of just under LE 36.94.
Financial Services
Egypt-Kuwaiti Holding (EKHO.CA, bt100 number 38) announced that its subsidiary TriOcean has co-signed a contract with Sudapet, a Sudanese petroleum company, to buy a 5% share in Sudan-based Petrodar for a combined cost of $400 million (LE 2.2 billion). Petrodar, which operates in oil excavation, has long-term usage rights to 74,000 square meters of land, as well as to a 1,300-kilometer petroleum pipeline that connects Port Sudan with Petrodar excavation sites; Tri Ocean will have access to that pipeline as part of the deal. Stock prices have reached an all-time high of LE 4.5, remaining stable over the course of the reporting period.
In an effort to increase transparency, EFG-Hermes' AGM (HRHO.CA, bt100 number 23), appointed a non-Executive Chairman of the board, Mona Zulficar. Zulficar is a well-known lawyer with a background in human rights and social responsibility. EFG-Hermes also announced that it will make a 51% limited liability acquisition of Vision Securities (Omani) for $15 million (LE 82.5 million), with the remaining 49% held by Omani Vision Investment Services Company. Vision Securities has a 9.2% market share, with net profits of $2.6 million (LE 14.3 million) in 2007. EFG-Hermes' stock continued to decline, reaching a three-month low of LE 53.27, but hovering at LE 56.27 throughout most of the reporting period.
Olympic Group Financial Investments (OLGR.CA) announced that a new transportation company currently under development, will be created through Namaa Real Estate Investment, a 52% subsidiary of Olympic Group. Namaa specializes in business-to-business projects, but Olympic Group is turning to Naama as part of the group's overall plan to separate real estate operations from its core business. The company's stock prices grew exponentially over the reporting period, starting at LE 73.46 and soaring all the way to LE 84.46.
Telecommunications
Orascom Telecom (OT, ORTE.CA, bt100 number 1) has announced it intends to re-acquire 10.3% of its free-float shares, representing 106 million shares at LE 83 each. OT justified the acquisition based on the need to invest surplus cash sitting on the company's books. The move is expected to force stock prices up as a result of lower supply. The repurchase will be financed from the company's re-financing returns, which currently stand at LE 2.5 billion. OT's stock has been struggling to reach LE 85.5 -- at the start of the reporting period it was just under LE 73.87, and jockeying to eventually reach LE 81.87 at the end of the period.
Mobinil (EMOB.CA, bt100 number 7) has been in conflict with the National Telecom Regulatory Authority (NTRA) over the commencement of its 3G services, the payment of the first LE 750 million installment and the date for 3G bandwidth delivery. According to Mobinil's agreement with the NTRA, bandwidth should have been delivered by January 17, so testing could commence until the service was publicly offered on May 1. The first installment of LE 750 million was to be paid one month prior to the public launch of 3G services. The dates were determined by Mobinil, which says it needs two months and 13 days to pay the first installment and three months and 13 days to properly test the bandwidth.
The problem arose when the NTRA delivered the bandwidth on March 27, just three days before the first installment was to be paid under the original agreement. MobiNil in turn is delaying both the LE 750 million payment and the public launch of 3G services.
Stock prices, consequently, have not been doing so well, hovering just below the LE 200 mark for most of the reporting period. Apart from a brief surge to LE 210 in the first 10 days of April, prices quickly returned to below LE 200.
Economy Bytes
April was all about the Central Bank of Egypt's (CBE) bid to deflate the current stratospheric inflation rate. It started with the CBE's decision to raise the overnight deposit and lending rates by 0.5 % to stand at 9.5 % and 11.5 %, respectively. Meanwhile, a presidential decree was issued to reduce import duties on 111 items. The new customs and tariffs structure includes reduced or removed import tariffs on basic food products and construction materials such as cement, steel and several glass products. The CBE also announced that Egypt's foreign reserves reached $33.7 billion (LE 185.35 billion) at the end of March 2008, up from $32.9 billion (LE 180.95 billion) at the end of February.
Prime Minister Ahmed Nazif released the draft of the government budget for FY2008-09, set at LE 312.6 billion versus LE 244 billion in FY2007-08; an increase of 26%. The new budget targets an economic growth rate of 7.5% versus 2007's 7.1% figure. According to Cabinet sources, this rate will be achieved via increased private-sector participation in the implementation of the public investment plan. The aim is to increase private-sector contribution to 70% of GDP, compared to 2007's 62%
Orascom Hotels and Development
Sector leader Orascom Hotels and Development (ORHD.CA, bt100 number 24) is under the threat of acquisition by Orascom Development Holding AG, which has presented a tender offer to fully acquire ORHD for LE 17 billion via direct stock purchase or a 1:10 stock swap with Orascom Development Holding.
Orascom Development Holding is 100% owned by Sameh Sawiris and was established on January 17, 2008, under Swiss law with a paid-in capital of 100,000 Swiss francs (LE 534,000). Orascom Hotels and Development has 38.13% of its capital in free float, while Sawiris owns 32%, TNT Holding 26.9% and SOS Holding 2.36%. The remaining shares are divided among various other members of the Sawiris family. Stock prices plummeted after April 5, to the around LE 84, after starting the reporting period over LE 87.
New companies traded without price limits
Egyptian for Developing Building Materials (EDBM.CA)
Cairo Medical Tower Laboratory (Alborg Laboratory, ALAB.CA)
Suez Canal Company for Technology Settling (SCTS.CA)
Nozha International Hospital (NINH.CA)
Amoun (AMUN.CA)
Suez Canal Automotive Repair And Maintenance (SCAR.CA)
PIRAEUS Bank Egypt (PREG.CA)
Delta Industries (IDEAL, IDEA.CA)
El Obour Metallurgical Industries (Galvametal, OBMI.CA)
National Navigation (NANA.CA)
Societe Arabe Internationale de Banque (SAIB.CA)
Universal for Paper and Packaging Materials (Unipack, UNIP.CA)
National Real Estate Bank for Development (NRPD.CA)
South Cairo & Giza Mills & Bakeries (SCFM.CA)
Arab Banking Corporation - Egypt (S.A.E) (ABCE.CA)
Arab Banking Corporation - Egypt (Less Rights) (ABCEA.CA)
Pens & Plastic Industries (Sicep, PPIS.CA)
Guezira Hotels & Tourism (GIZF.CA)
Memphis Pharmaceuticals (MPCI.CA)
Orascom Hotel Holdings (OHH, ORHC.CA bt100 number 51)
Alexandria Cement (ALEX.CA)
AJWA for Food Industries Company - Egypt (MGOI.CA)
Nile Pharmaceuticals (NIPH.CA)
Suez Bags (SBAG.CA)
Cairo Development and Investment (CIRF.CA)
Food & Beverage
With news that bottled water and fizzy drinks giant Coca-Cola Egypt is expected to go public, the sector is bracing itself for growth thatwould see it comfortably reach the 2,500 point mark, if predictions are true. Otherwise, the index is showing that it is truly over the bird flu crisis, and poultry companies, which make up a large part of the sector, have healed their wounds and are starting to look ahead. The sector boomed in the last reporting period, growing from 1,141 points to a high of 1,967 points and showing unparalleled stability with the index hovering between 1,806 and 1,950 points. The major companies in the sector include Delta Sugar (SUGR.CA, bt100 number 33), which has seen its stock price spike to LE 58.78, but overall maintaining LE 55 throughout the reporting period.
By Tamer Hafez
© Business Today Egypt 2008
