Market overview 


Prepared by: Mayada Amin - CETA, CFTe

The Hidden Good in the Bad: MSCI might reclassify Egypt to a frontier market. MSCI has said it could launch a consultation to reclassify its Egyptian indexes from “emerging” to “frontier” or “standalone” status “in the event of further deterioration of market accessibility in Egypt.”  If Egypt was downgraded to a frontier market, it might get similar or better allocation from global funds, depending on its weight within the frontier index. The negatives might be very short-lived or just a reaction. In reality, neutral or positive. 

The CBE kept interest rates unchanged on Thursday, in line with consensus expectations, as global inflationary pressures begin to ease.

According to Minister of Planning, there are privatization transactions that have already been done and will be announced after the Eid holiday.

The government is reportedly in talks with the Asian Infrastructure Investment Bank (AIIB) to guarantee an upcoming green bond issuance of undetermined size. 

Egypt and India are set to sign new investment agreements, as Indian Prime Minister starts a two-day trip to Egypt. Several sectors are on the table for potential partnerships including infrastructure, green industries, EV manufacturing, and pharma.

The government disbursed EGP 7.4 bn in net export subsidies in the first tranche of the sixth phase of its export subsidy program, the Trade Ministry said in a statement. (ORWE)

Egypt’s hedging contracts guarding against oil market fluctuations will expire at the end of June, as per an unnamed Finance Ministry source. 

A Saudi medical company, Al Nahdi, is interested in entering the Egyptian market through an acquisition of one of the pharmaceutical distributor companies, and, according to local press, ISPH is at the top of their list; however, ISPH hasn't received any offer yet. ISPH ownership structure is distributed between Faisal Islamic Banks by 12.6%, EBRD by 8.7%, Abdel Gawad Family by 5.0%, 10% treasury shares, and 63.7% free float; it is worth noting that there are 13.5% blocked shares.

PHAR’s phase 2 rights issue subscription will take place starting 25 June till 10 July after subscription was covered by 98.3% in phase 1.

El Sewedy Electric T&D, a subsidiary of SWDY (FV: EGP22.87, OW), won a EGP380 million contract for executing an overhead electricity line Abu Matamir - Wadi Natroun and connecting it to Borg Al Arab station.

ABUK issued FY23/24 budget estimates. Top line is estimated to come in at EGP13.987 billion, net profit before taxes is expected to be EGP6.569 billion. However, we expect ABUK to achieve FY23/24 top line of EGP20 billion, net profit before taxes of EGP16 billion, and net profit after taxes of EGP12.569 billion. Our estimates are based on urea prices of USD300/ton, natural gas cost of USD4.5/mmbtu and EGP/USD FX rate of 35.00. 

State-owned Egyptian Chemical Industries (Kima) and Chemical Industries Holding Company (CIHC) agreed with Cadence Energy and Engineering Consultancy and Project Development to establish a holding company, Pure Dive, to construct, manage, and operate a factory producing chlorine pellets. 

A consortium of industrial gas producer Gulf Cryo and Emex for Engineering and Construction will establish a unit to process hydrogen gas for various uses, and market and sell it under an agreement with Kima.

Motorcycle and three-wheeler manufacturer, Bajaj Auto, wants to establish a vehicle factory in the SCZone’s East Port Said industrial zone for easy access to export markets across Africa and the MENA region.

The subscription to BTFH’s capital increase has changed to end on Tuesday, 11 July 2023, while the last trading day for the subscription right is on Thursday, 6 July 2023.

EgyptAir has started offering travelers transit visas to Egypt without charge for stays of up to 96 hours. 

PRDC is negotiating obtaining a EGP6.0 billion loan to cover

• Market Overview 
• ISPH
• SKPC
• ORHD
• ORAS
• CCAP
• AMOC

• Prepared by: Mayada Amin - CETA, CFTe

*Key news articles for today*

In a bid to level the playing field between state and private entities, the cabinet approved several draft bills and amendments, including the elimination of tax exemptions granted to some state entities, extending incentives granted to private projects, and streamlining dispute resolution in economic and district courts. 

Egyptian non-oil exports recorded a decline of 6.4% YoY in 1Q23, to reach USD8.8 billion, while non-oil imports declined 20.5% to USD17.1 billion. Accordingly, the non-oil trade deficit declined by 31.4% to USD 8.3 billion. 

Suez Canal achieved revenues of USD 9.4 billion in FY22/23, +35% YoY.  

Minister of International Cooperation said that the OPEC Fund for International Development has supported sustainable development efforts in Egypt with USD1.5 billion. 

The Suez Canal Authority’s (SCA) Canal Company for Mooring and Lights (CCML) is set to sell a 20% stake in an IPO on the EGX. 

EGX Head stated that consultations are underway with the Financial Supervisory Authority regarding the listing of startups, with fewer requirements in terms of disclosures and listing conditions. 

EAST is abandoning plans to invest in heated tobacco production lines due to the shortage of foreign currency.

CNFN is finalizing a securitization transaction worth EGP1.85 bn (divided into 3 tranches) after it obtained the FRA approval.

Businessman Ahmed Abu Hashima bought about 5% of Beltone Financial Holding through subscription rights.

MNHD launched its Elan project on 356k sqm of its Sarai land plot. Elan offers over 2,800 residential units at a BUA of 347k sqm and 9k sqm of commercial area.

We remind you that EGTS’s next court date for the 20.0 million sqm third phase Sahl Hasheesh land plot lawsuit is, if not further postponed, on 24 June 2023.

Market Overview 

The IMF is having good discussions with the Egyptian government. Director of the International Monetary Fund, said that Egypt has taken the right steps in its economic reform agenda and said she was confident there would be progress in the IMF’s talks with the government. 

The cabinet will form a special unit to fast-track the government’s privatization program and work directly with the International Finance Corporation (IFC). 

The private-sector minimum wage is rising by 11% to EGP 3k from July, marking its second increase this year amid persistently high inflation.  

President El-Sisi has approved the amendment of some items within the tax law, to cancel the exemptions on the returns of treasury bills and bonds or related capital gains, in addition to approving the amendment of some items of the stamp tax. 

EGX should launch the futures exchange, and a shariah compliant index by 3Q 2023. 
 

GACO (FV: EGP7.50, OW) announced yesterday the launch of their new subsidiary under GB Capital, "Kredit". It obtained the necessarily regulatory approvals from the FRA to provide financing services to small and medium enterprises. We would like to remind you that GB Capital and its subsidiaries continue to hold the majority of the value within the group’s valuation, forming 78.8% of our FV. 
 
Orascom Industrial Parks, a subsidiary of ORAS (FV: EGP181.70, OW), signed a contract with plastic manufacturer Flex PET for its storage area expansion in its industrial area near Sokhna, the zone said. The expansion is worth USD120 mn. 

eCards, a subsidiary of EFIH, signed a Contract with Visa and Banque Misr to launch Nexta’s new mobile banking application in the Egyptian market. Under this agreement, “Nexta” will offer prepaid Visa cards issued by Banque Misr throughout the country, alongside the application. eCards, will be responsible for the issuance, management, and operation of the cards. We remind you that EFIH led a USD3 million financing round for a minority stake in “Nexta” in 4Q22. 
 
 
According to local media, OCDI (FV: EGP23.30, OW) expects to finalize land expansion plans in 2H23.

According to local media, ARAB (FV: EGP0.65, EW) achieved sales of EGP1.4 billion from selling 729 units in the first phase of its Nyoum Mostakbal project.
 
 
The government is studying ways to boost tourism in Taba and Nuweiba. ORHD (FV: EGP20.38, OW) would be a beneficiary given its Taba Heights destination.
 
 
CNFN is finalizing the process of launching a new consumer finance company, awaiting the approval of the FRA. The new company (an alliance with Global Auto, the BMW agent in Egypt) will be specialized in Auto-loans. Its operations are expected to start by 3Q23, with a paid in capital of EGP75 mn and a financing capacity of EGP1 bn.
 
Aman for Financial Services, a subsidiary of RAYA, postpones EGX listing to next year.
 
 
AMOC’s (FV: EGP8.85/share, EW) BoD approved FY23/24 budget with investments worth EGP779.5 million and a net profit of EGP603.5 million. The BoD also approved فخ start reducing carbon emissions. In light of Brent's forecasts and the current FX rate, we think that the budget released is too low. We expect AMOC's profit in FY22/23 to be around EGP1.7 billion, and EGP1.9 billion in FY23/24.

 
Steel company Jindal Steel and Power wants to establish an environmentally friendly iron and steel plant with a production capacity of 5 million tons a year in the Suez Canal Economic Zone (SCZone). The project aims to export its products to foreign markets, yet with no announced investment cost. 
 
 

- Market Overview 

- CLHO

- ORHD

- JUFO

- GBCO

Prepared by: Mayada Amin - CETA, CFTe

Qatari investor could announce it will buy a significant minority stake in a state-owned hotels holding company in the coming days. ORHD (FV: EGP20.38, OW) generally reacts positively to the news.

A 30% stake in Egyptian Drilling Company (EDC) has been transferred to the Sovereign Fund of Egypt’s pre-IPO fund in preparation to sell the EDC stake to a strategic investor in 4Q 2023.

National Bank of Egypt and Banque Misr are reportedly studying the launch of USD certificates of deposit (CDs) that would pay out 10% interest in USD or 17% interest in EGP. 

World Bank expected remittances to Egypt to record USD29.2 billion in 2023. 

Egypt’s credit default swaps (CDS), with a tenor of 5 years, fell by more than 20%, to 1451 bps, from a peak on May 18. 

Emirati Burjeel is interested in acquiring an indirect stake in CLHO through acquiring a stake in a shareholding entity of CLHO.

ESRS (FV: EGP54.6, OW) has not made any offers to acquire additional shares in its subsidiary IRAX (FV: EGP1,357.5, OW).

Steel producers have been reporting that weak foreign currency availability and the difficulty of importing raw materials have pushed manufacturing capacities to their lowest in 5 years. 

MNT-Halan, 49.5% owned by GBCO's affiliate, launched a fund that offers savings products to their customers. 

GBCO's auto segment will stop the local production of Hyundai Elentra HD before the end of the year and is currently in talks with Hyundai to replace it with another model.

FRA has handed COMI’s subsidiary Commercial International Finance a license to offer mortgage financing and factoring products.

HRHO’s valU has issued EGP 1.42 bn worth of securitized bonds, its first issuance in a new EGP 4 bn securitization program.

CICH’s Reefy targets to pump financing worth EGP 4.25 billion this year. The company has 154 branches and aims to reach 200 branches.

CNFN’s Contact Creditech has signed an agreement to launch consumer financing products for Vodafone Egypt customers.

MOIL shareholders voted for continuing operations despite the fact that net losses accounted for more than 50% of the shareholder’s equity. 

MPRC declared EGP0.50/share cash dividends (DY of 4.2%). Record date is 9 July 2023. Distribution date is 12 July 2023.

Market Overview 



Prepared by: Mayada Amin- CETA, CFTe

The International Finance Corporation (IFC) will come on board as an advisor to the Egyptian government on the state’s privatization program.

SCZone Chairman is in New Delhi to kick off a promotional roadshow looking to attract Indian investments to the economic and industrial areas in Ain Sokhna and Port Said.

The Suez Canal Authority intends to establish a new holding company, which includes 7 affiliated entities, with the aim of accelerating the process of offering stakes in those entities on the EGX.

Sovereign Fund of Egypt (SFE) has received a preliminary valuation of ESRS subsidiary IRAX that puts the company’s worth at some EGP1,060/share. We remind you that our FV for ESRS is EGP54.6/ share and EGP1,357.5/share for IRAX. Thus, we see the deal, if executed, to be value accretive for ESRS. ESRS should make a mandatory tender offer for IRAX's remaining outstanding shares, which raises the question of how the deal will be funded. 

Abu Dhabi Ports (ADP) and its subsidiary Transcargo International (TCI) are planning to launch a tender for the construction of nine silos for storing cement and dry bulk cargo at a cost of some EGP1 billion. 

The companies under our coverage in the Food and Beverages sector all witnessed an outstanding quarter when it comes to enhanced profitability and margins: Rising top-line levels backed by prices rather than volumes. Lagging cost rises due to stocking-up of low-priced inventory. Rise in GPMS backed by the price increases and lagging costs. Higher EBITDA margins backed by cost cutting initiatives. Higher net interest expense levels due to higher working capital financing needs and higher effective interest rates. FX losses rising. EFID is our top pick (FV: EGP22.80, OW). 

EFID decided to raise their FY23 capex plan to EGP800 mn from a previous EGP400 mn, and raise the newly acquired Fancy Foods paid in capital by EGP400 mn.

We updated our valuation for EKHO to USD1.86/share (EGP57.00/share) with an overweight recommendation. The company distributes USD-denominated dividends, even for the EGP-traded stock, which are expected to reach 7 cents in 2023, with a dividend yield of 6.9%. EKHO’s share is currently trading at 2023e PE of 6.4x and EV/EBITDA of 3.6x.

Trading of TAQA shares was postponed until after eid Al Adha holiday. 

MICH's EGM approved increasing the company’s authorized capital form EGP400 million to EGP1 billion. 

The Real Estate Development Chamber intends to hold a meeting with the Central Bank during the next few days to review mechanisms for real estate financing.

ZMID AGM approved the distribution of EGP0.15/share cash dividends (DY of 2.5%) to be distributed over two installments: EGP0.05/share and EGP0.10/share.

Weekly Commodities | Last Price           WoW Change, %

Brent, USD/bbl  76.6      2.4%

Diesel-HSFO Spread, USD/ton     310.0    13.9%

Egypt Urea, USD/ton      300.0    -6.3%

Polyethylene, USD/ton  990.0    -3.9%

Polypropylene, USD/ton              910.0    -1.6%

Steel/Iron Ore Spreads, USD/ton             414.4    -1.0%

Aluminum, USD/ton       2,230.7 0.1%

Copper, USD/ton            8,555.0 2.5%

Egyptian Retail Cement, EGP/ton             1,735.0 -1.1%

Steam Coal, USD/ton      128.5    -5.3%