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Dec 16 2007

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Meanwhile, Minister of Investment Mahmoud Mohieldin announced that public enterprise debts to the banking sector will be settled in 2008, noting that public enterprises posted a combined profit of LE 1.7 billion for FY2005-06 after incurring a combined LE 3 billion loss during the previous one.

Then the proverbial bomb dropped. At the end of October, President Hosni Mubarak announced Egypt's renewed commitment to the nuclear program that it first started in the 1950s, but put on hold in the wake of the 1986 Chernobyl accident in the then-Soviet Union. And -- whisper it -- 'plant' has been pluralized in occasional utterances, indicating more than one nuclear plant could be in the cards. While officials assure us that these plants will be built for electricity production only and that the US approves these plans, one cannot escape the ghosts of nuclear power plants past, and the cost of the smallest of mistakes.

At press time, the exact location of the first plant had yet to be revealed. El-Dabaa region in the Matrouh governorate is still on the cards but with such high tourism revenues at stake, one gets the faint impression that hidden forces are hell-bent on pushing that plant as far away as possible from the North and Red Sea Coasts and from any civilization at all.

Almost without warning, the US dollar exchange rate dropped to below LE 5.50 from LE 5.75, with speculators quickly warning of irreparable damage if the dollar sinks below LE 5.35. Investors who depend on dollar inflows bemoaned their fate, while those depending on US dollar outflow danced the night away.

CASE

The once distant dream of 9,000 points is now considered poor performance as Cairo and Alexandria Stock Exchange peaked the month above 9,500 points before leveling off at the 9,400 mark. Observers are speculating that the CASE could touch the 10,000 mark before 2008.

In other news, CASE is teaming up with the Egyptian National Postal Organization to launch a new postal savings account, accessible at all the nation's post offices. The returns on this new account, which can be opened with as little as LE 100 with no ceiling value, are based on stock market investments overseen by experienced fund managers to minimize risk to the account owner.

CASE Chairman Maged Shawky was re-elected for a second consecutive term as the president of the African Securities Exchanges Association (ASEA) during its latest General Assembly. CASE has presided over the African entity since September 2005, a tenure that has seen the launch of both a new website and a first-ever ASEA Yearbook that includes a wealth of information about ASEA members, annual and monthly trading data and comparative statistics along with the latest news from ASEA and member exchanges.

At the micro level, CASE dropped Al-Watany Bank of Egypt (WATA.CA, bt100 number 29) and Alexandria Real Estate (AREI.CA, bt100 number 71) from the CASE30 Index since their free float is under the 15% cutoff. They will be replaced by Egyptian Financial & Industrial Company (EFIC.CA) and Nile Cotton Ginning (NCGC.CA, bt100 number 94). On the international front, Dow Jones Indexes announced that Egyptian Tourism Resorts (EGTS.CA, bt100 number 54) will replace Al-Watany Bank on the Dow Jones CASE Egypt Titans 20 Index.

Capping this off was the ongoing buzz from the Nilex SME stock exchange's official launch in late October, with hopes it will attract those firms ineligible for listings on the CASE.

Construction

For once, Orascom Construction (OCI, OCIC.CA, bt100 number 2) is not the top headline grabber in the sector. This honor goes to Talaat Mostafa Group, which was arguably the biggest construction / housing company outside the CASE. Not any more: the company headed by Executive Chairman Hisham Talaat Mostafa, has decided to go public with an expected LE 3.1-3.7 billion IPO, possibly the biggest in CASE history. Analysts expect that TMG could wedge itself between the two Orascom giants, Orascom Telecom (OT, ORTE.CA, bt100 number 1) and OCI, though, admittedly, the same was said about Telecom Egypt when it had its IPO a couple of years ago.

OCI is not resting on its laurels; the company has signed a LE 604 million contract with the New and Renewable Energy Authority (NREA), which falls under the Ministry of Electricity and Energy, to establish a solar power plant. The new plant will be based in the Kureimat region with a 62-megawatt integrated solar combined cycle power station. The project will be co-financed by Global Environment Facility through the International Bank for Reconstruction and Development and the National Bank.

In other news, OCI has acquired the remaining 50% of National Steel Fabricators for a reported $13.5 million, making OCI the sole owner of the largest steel fabrication business in the Middle East. OCI has also divested Egyptian Container Handling Company (ECHC.CA) for an estimated $372 million to Dubai Ports World, which acquired OCI's 50% stake.

Telecom

CASE30 and bt100 leader Orascom Telecom has further reduced its stock share in Hutchison Telecommunications International (HTIL) by 5%, resulting in a cash inflow of $327.4 million to OT. The company's share currently stands at 14.2%. The sale, according to a company statement, "is in line with its strategy to monetize part of its stake in HTIL while retaining its governance rights and board seats (i.e. OT to maintain a minimum 12% stake in HTIL)."

Meanwhile, Telecom Egypt (TE, ETEL.CA, bt100 number 4) has signed a $36 million dollar contract with Middle East Western Europe (IMEWE), a consortium of 13 international telecom administrations, among them TE. The agreement allows IMEWE to use TE's Transit Corridor infrastructure to connect its submarine cables in the Red Sea and Mediterranean; the connection is set to be operational by mid-2009. The submarine cable is 3.84 terabytes per second (one tera = 1,000 giga), with a total length of 10,000 kilometers and three fiber pairs.

TE has also signed a $90 million contract with SEACOM and VSNL related to its North Submarine Cable Project, which will extend its TE Transit Corridor service to the Mediterranean. Telecom Egypt North is expected to cost $140 million and will be operational in the first half of 2009.

Financial Services

The Egyptian Kuwaiti Holding (EKHO.CA, bt100 number 38) has announced a joint venture with South Valley Cement Company (SVCE.CA, bt100 number 55) to establish a new cement company with a capital of LE 600 million. EKHO's stake in this new factory will be 10%, while South Valley Cement will hold a 46% ownership stake. This new factory, with an expected annual production capacity of 1.5 million tons of cement, will be located in Assiut governorate.

Economy Bytes

As the bourse presses upward, two things have remained stable: the overnight deposit and lending rates, as the Monetary Policy Committee decided to leave them unchanged at 8.75% and 10.75%, respectively.

The Central Bank of Egypt (CBE) announced that Egypt's foreign reserves reached $30.9 billion at the end of October 2007, versus $29.9 billion at the end of September 2007. In the IMF's latest report issued in November, Egypt was praised for its economic performance; the star of the show was the country's 7% annual growth rate for the last two years, one of the highest growth rates in the region. The report also noted that the Egyptian stock market has been one of the best performers in the region. Additionally, the IMF said that the government is moving toward its goal of cutting the budget deficit to 3-4% of GDP by FY2010-2011 as the budget deficit declined from 10% of GDP in FY2004-05 to 8% of GDP in 2006-07.

De-listed companies

Forced De-listing

13-11-2007

North Africa Motors (NAMO.CA)

Egyptian Engineering Housing Projects (EEHP.CA)

Egyptian Engineering Trading Centers (EETC.CA)

Ridcon Development (RIDE.CA)

Raghbco Engineering Consulting & Reconstruction, (RECR.CA)

Cataract Nile Cruise (CANC.CA)

Bishara (BSHR.CA)

Al Qafelah Trade & Construction (KATE.CA)

Super Touristic Transport (STTC.CA)

Transport Works Company (TWOC.CA)

Afak Touristic Investment (EETI.CA)

Regina Food Industries (REFI.CA)

Fadco for Investment Projects (FCCO.CA)

Arabian International Construction (EICD.CA)

Accor Hotels (ACHO.CA)

El Alameya Furniture (ELFU.CA)

Union Video & Film Makers (UVFM.CA)

Misr Shebin El Kom Spinning & Weaving (SKSW.CA)

General Electrical Projects (Elject) (GEPC.CA)

Egyptian Contracting (El Abd) (EGCN.CA)

El Mareyah Trade Pharmaceuticals (EMTP.CA)

Modern Clothes (MOCL.CA)

Youth National Investment & Development (YTHA.CA)

National Upper Egypt Contracting & Building (NUEC.CA) Arab Real Estate Investment (RREI.CA)

Ismailia National Food Industries (INFI.CA)

Souhag National Food Industries (SNFI.CA) 7-11-2007

Egypt Kuwait Real Estate Development (EKRE.CA)

Saudi Egyptian Construction (SECN.CA)

Misr Iran Tourist & Office Building (MITO.CA)

Engineering Petroleum & Chemicals (EPCC.CA)

Petroleum Air Services (PASV.CA)

PICO Housing & Real Estate Investment (PICO.CA)

PICO Engineering Services (PICE.CA)

Unifert Misr for Agricultural Supplies (UMAS.CA)

International Pipes and Ceramics (IPAC.CA)

Egyptian Espanish for Aspestos Products CO. (URAMISR) (EEAP.CA)

Kato Investment (KAIN.CA)

Americana Group for Food & Tourism Projects (AGFT.CA)

Techno Group Holding Co. (TCNO.CA)

International Plastics Co. (IPCO.CA)

Urbanization Horizon for Touristic & Real Estate Investment (UHTR.CA)

Suez Canal For Development and Arab Real Estate Investment (SCDA.CA)

Petroleum Safety and Environmental Services Co. (Petrosafe) (PSES.CA)

Egyptian International Gas Technology Company (EIGTEC) (EIGT.CA)

Almaza For Real-Estate And Development Company (AREC.CA)

Dallah For Real-Estate Investment Co. (DRED.CA)

Skam International Chemicals And Plastic Co (SICP.CA)

Nesco Egypt For Tourism Investments (NETI.CA)

El Sarh Real Estate Development (SARH.CA)

Voluntary de-listing

31-10-2007

Orascom Hotel Holdings (OHH) (ORHC.CA) bt100 number 51)

Middle East Textiles Industries (METEX) (MIDT.CA)

13-11-2007

Misr Poultry (MIPO.CA) Orascom Construction (OCI) is the largest construction company on the CASE30 and second largest overall, trailing only Orascom Telecom, which employs 40,000 people. OCI is active in 100 projects in 20 countries from Europe to Africa to Central Asia, with a combined cement production capacity of 42 million tons per year. OCI also invests in natural gas, fertilizers and infrastructure. The banking sector shows massive fluctuations with a slightly downward trend over its October levels. This comes due to the quiet period experienced over the past 30 days, with all players closing up their 2007 operations and preparing for 2008, which promises to see more and more foreign investments, which inevitably means more and more financing. And with the sale of Banque Du Caire quickly becoming a distant memory, speculations have been inconsistent, leading to wilder-than-usual movement of the sector index. The index has been floating over the 1,500 point for the first half of the period, but has dropped to 1,450 levels and settling just below it by the end of the period. The real estate sector and its supporting sector, construction, have been in the spot light for some time now, with the spiraling cement prices and the cement anti-trust lawsuit still in vivid in memory. On a more micro-level the Emaar fiasco in the Marasy resorts has also put the wrong kind of light on the sector. Despite recent events casting a shadow over future prospects, companies and investors are still pretty optimistic. DAMAC has been highly publicizing its Park Avenue Project, while Talaat Mostafa's CASE listing has indirectly boosted the real estate sector. Adding to the significance of the Talaat Mostafa Group IPO is that it is the biggest in CASE history and has been covered an eye-popping 40 times. In addition, the slew of new investors wanting to enter the construction market (via the cement and steel licenses) has also indirectly boosted the sector to break the 2000 point barrier, almost touching the 2,100 levels.

© Business Today Egypt 2007