*Key news articles for today*

The OECD sees that phasing out the country’s broad-based energy subsidies to, eventually, reflect global energy prices is a must, adding that fully phasing out subsidies both for electricity and natural gas would help address inefficiencies in electricity use in manufacturing, transport, and logistics, which account for nearly 40% of domestic power demand.

Sources at the Ministry of Electricity estimated the arrears of foreign companies operating in the sector at more than USD500 million at 2023-end.

Egypt is looking to be re-listed in the JPMorgan Emerging Markets Government Bond Index, following its recent economic reform steps, according to the Minister of Finance.

Minister of Trade and Industry, revealed that Egyptian merchandise exports recorded c.USD6.12 billion during the months of January and February 2024, compared to USD5.7 billion during the same period in 2023. On the other hand, trade deficit during December 2023 recorded USD3.03 billion, compared to USD2.57 billion during the same month of the previous year.

The volume of transactions in the USD interbank market between Egyptian banks amounted to USD2.569 billion during the first 3 days of the flotation decision.

The Holding Company for Construction intends to offer majority shares from Al-Nasr Housing and Development, Al-Maadi Development and Construction, and Misr Reinforced Cement Works companies within the framework of implementing the government offerings plan.

COMI has raised the monthly maximum cap on FX transactions abroad to the equivalent of EGP75k-200k depending on account type, up from EGP25k-175k. Egyptians abroad can now also withdraw the equivalent of EGP3.5k-10.5k from ATMs abroad every month, up from EGP2k-6.5k. COMI also increased the monthly ceiling on FX transactions at home to EGP50k for all account types, up from EGP3.5k-12.5k.

DOMT (FV: EGP13.42, EW) reported 4Q23 results:

•                  Attributable net profit for the quarter recorded EGP100 million (-2.7% YoY, -2% QoQ), which is the weakest throughout the whole of FY23. FY23 attributable net profit recorded EGP454 million (+71% YoY).

•                  DOMT BoD proposed cash dividends distribution of EGP0.50/share, implying a payout ratio of 31% and a dividends yield of 3%.

•                  DOMT is currently trading at a FY24 P/E of 7.5x.

Norwegian renewables developer Scatec’s planned solar plant to power EGAL's Nagaa Hammadi industrial complex will be set up with investments of USD1.1 billion. The solar plant will produce 2-GW worth of green power. The developer will finance the project, conduct the required studies, develop the plant, and install the needed equipment.

Chems

The Ministry of Petroleum targets injecting investments worth USD535 million in Zohr field during the coming fiscal year. Meanwhile, Petrobel targets investing USD614 million during FY24/25 to increase crude oil and gas production rates to 179k BOE per day.

Market Overview 

Annual urban inflation skyrocketed to record 35.7% YoY in February, up from 29.8% YoY in January. Monthly urban inflation surged to 11.4% MoM, the highest on our records.

Annual core inflation — which excludes volatile items such as food and fuel — rose to 35.1% in February, up from 29% in January. Meanwhile, monthly core inflation surged to 6.1% from 2.2% in January.

The World Bank is expected to extend around USD3 bn in financing to Egypt, Finance Minister Mohamed Maait said.

Local banks have bought and sold over USD2.5 bn on the interbank market since the EGP float Wednesday morning.

Minister of Finance said that it was agreed with the New Urban Communities Authority (NUCA) that the public treasury would receive no less than 50% of any investment NUCA gets.

Minister of Finance stated that the total budget deficit rose to 6.7% of GDP during 8MFY23-24, up from 5% in the same period of the previous fiscal year.

Egyptian customs released basic goods worth USD780 million during the past Thursday and Friday, according to Customs Authority's head.

The CBE raised EGP94.4 bn in a nine-month t-bill auction — raising almost 4x its target EGP25 bn. It also sold EGP25 bn worth of three-month t-bills.

Minister of Finance also said that the government is now targeting a primary surplus of no less than 3.5% for the fiscal year 2024-2025.

Minister of Finance said that the government’s allocation to fuel subsidies will remain unchanged until the end of the fiscal year even if fuel prices change. 

The Finance Ministry is in talks with the Federation of Egyptian Chambers of Commerce to scrap the 11% subsidized loans for industry and agriculture introduced last year in light of the interest rate hikes introduced last week.

The Finance Ministry will allocate no more than EGP280 bn to public investment in next fiscal year’s budget.

ORHD (FV: EGP26.26, OW) reported 4Q23 results. Net profit in 4Q23 increased 255.0% y/y and 10.5% q/q to EGP1.0 billion, bringing FY23 net profit up 69.2% y/y to EGP2.8 billion. We raise our ORHD FV from EGP20.38/share to EGP26.26/share as a result of raising the EGP/USD FX rate embedded in our valuation of the residual land in El Gouna.

ARAB reported FY23 net profit of EGP99.8 million, compared to FY22 net loss of EGP18.2 million. 

According to local press, QIA has resumed negotiations to acquire ETEL’s stake in Vodafone Egypt. QIA and ETEL are still in negotiations on the size of the stake and are expected to reach an agreement within few weeks. 

The government is studying selling another 10% of its stake in ETEL this year or beginning of 2025, according to local press. 

SKPC’s general assembly approved the distribution of cash dividends of EGP1.25/share, implying a dividend yield of 3.7%. The general assembly also approved a stock dividend at a ratio of 1:5.

MOPCO’s general assembly approved the distribution of cash dividends of EGP2/share, implying a dividend yield of 3.2%.

CICH’s 2023 net income expanded 31% y/y to record EGP1.04 bn.

FAIT OGM approved distributing cash dividends of USD0.06/share, equivalent to EGP1.85/share. This implies a payout ratio of 27.8% and a dividend yield of 4.9%.

SODIC’s securitization subsidiary, SODIC for Securitization, is set to offload all its shares to Beltone Holding after its general assembly approved the decision on Thursday. 

HRHO’s micro-finance arm Tanmeyah and Egypt’s Micro, Small, and Medium Enterprise Development Agency (MSMEDA) will lend out a combined EGP200 mn to local microenterprises under an agreement inked between the two sides.

RAYA reported 2023 results. Net income stood at EGP441 million in 2023 (+27% YoY). Revenues grew by 53% YoY to record EGP31.3 billion.

Weekly Commodities Update

Market Overview 
COMI
BTFH
ABUK
HRHO
FWRY 
EKHO
PHAR



prepared by: Mayada Amin - CETA, CFTe

Moody’s Ratings has upgraded Egypt’s credit outlook from negative to positive following the country’s successful acquisition of fresh foreign funds.

The Ministry of Finance intends to raise its expectations for interest rates on Treasuries to reach 28.5% in the budget for FY2024-25.

The CBE raised EGP87.8 bn in a one-year t-bill auction on Thursday — receiving offers for almost 3x the amount sold. The bills were sold at an interest rate of 32.3%. International investors bought up USD825 mn (c. EGP 40.7 bn) of the EGP 102 bn-worth of bills sold.

Banks have bought and sold some USD1.9 bn on the interbank market since Wednesday morning, when the central bank unveiled its decision to move to a flexible EGP exchange.

NBE, Banque Misr, CIB, and the Arab African International Bank (AAIB) were among the banks who have revised their monthly credit card FX spending limits after the CBE instructed banks to gradually lift restrictions on credit card FX transactions.

The government signaled that it has the will and the ability to clear the backlog of goods in ports stemming from the FX shortage. 

The IMF said that the CBE is committed to use a large portion of the flows from Ras El Hekma deal to rebuild foreign exchange reserves.

GASC canceled a wheat tender it held last Thursday on high prices, with bid prices rising to between USD226 and USD235 per ton.

We raise our FV for EFIC to EGP89.00/share with an overweight recommendation. EFIC’s BoD proposed the distribution of EGP7/share in cash dividends from 2023 profits, implying a payout ratio of 73%. EFIC is currently trading at a 2024f PE of 4.7x and EV/EBITDA of 3.4x.

MBSC reported 4Q23 and FY23 consolidated financial results, recording a net profit of EGP125.4 million in 4Q23 (-48% YoY, -10% QoQ), bringing FY23 bottom-line to EGP369.1 million reversing last year losses of EGP145.9 million. MBSC is trading at FY24e P/E of 10.8x and EV/EBITDA of 7.8x.

According to local media, The Holding Company for Construction and Development intends to offer an additional stake of HELI on the Egyptian Stock Exchange or to a strategic investor, after completing the company’s development process. The Company received 4 offers for New Heliopolis development.

Al Ahly CIRA will commence operations at the Saxony Egypt University of Applied Sciences and Technology (SEU) in September after it received the greenlight from the cabinet. 

Market Overview 
COMI
ADIB
HRHO
SWDY
FWRY 
EFIH
ORAS

Prepared by: Mayada Amin- CETA, CFTe

The CBE decided on Wednesday morning to allow market forces to determine the value of the EGP, while simultaneously raising interest rates by 6%. That is, the overnight deposit rate, the overnight lending rate, and the rate of the main operation were raised by 600bps to 27.25%, 28.25%, and 27.75%, respectively.

The EGP formal rate traded at c.49.5 per USD after breaching the EGP50 border.

NBE and Banque Misr announced on Wednesday the launch and the amendments of high yield certificates of deposits (CDs).

IMF staff and the Egyptian authorities have reached staff level agreement on a set of comprehensive policies and reforms needed to complete the first and second reviews under the Extended Fund Facility arrangement. Staff also considered the authorities’ request for an augmentation of IMF support to Egypt from about USD3 billion to about USD8 billion. Prime Minister said that the agreement will be followed by more funding — in soft loans — from other international partners like the World Bank and EU, that could boost the total funds to USD20 billion.

Cabinet agreed with the IMF to implement structural reforms that would also include a new framework to slow down infrastructure spending, including projects that have so far operated outside regular budget oversight.

The CBE has instructed local banks to lift the spending limit on foreign currency credit cards.

The Cabinet approved launching phase 7 of the initiative to refund the arrears of export subsidies program, owed to exporting companies, up to EGP8 billion.

A government source revealed that the arrears owed to foreign oil companies declined in the recent period from USD6.5 billion to USD6.25 billion. 

The Central Bank will sell EGP110 billion worth of t-bills between today and Sunday.

Cabinet has given Nilus Hotel and Commercial Services and Nilus Residential Services approval to build two commercial and residential towers on the National Democratic Party’s (NDP) former headquarters, according to a decision published in the Official Gazette. The two projects, reportedly worth a combined USD5 billion, are due for completion in 2Q28.

FAIT (FV: EGP39.00, EW) released positive 4Q23 consolidated net profit of EGP650 million (-71% y/y, -25% q/q),  bringing FY23 bottom line to EGP4.5 billion (-7% y/y). The stock is currently trading at P/B24 of 0.8x and P/E24 of 7.0x, with ROAE of 12%.

TAQA Volt, a subsidiary of TAQA Power, the electricity operating arm of TAQA Arabia group, has signed a partnership with Wadi Degla Developments to address the surging demand for electric vehicles (EVs) and sustainable living solutions.

The Ministry of Petroleum is increasing fuel injection in the local market by 8-10% during the month of Ramadan. 

Market Overview 

*Key news articles for today*

CAPMAS is expected to release February inflation data on Sunday, 10th March. We expect annual urban inflation to drop appreciably to c.24% YoY, capitalizing on a particularly accommodative base effect.

A staff delegation from the IMF is reportedly in town. Sources said that a staff-level agreement with Egyptian officials will be signed as early as today.

Net Foreign Liabilities' position of the banking system deteriorated in January to c.USD29.0 bn from USD27.2 bn in December, based on CBE data.

Net International Reserves (NIR) inched up marginally in February to USD35.3 billion up from USD35.2 billion in January.

Egypt's fuel imports in 2M2024 stood at c.USD2 billion, a government official said, adding that petroleum products constituted between 60 and 70% of the import bill with a value of USD1.3 billion, while the rest of the bill went to other types of fuel.

OLFI (FV: EGP15.0, OW) reported 4Q23 results: 

4Q23 attributable net profit recorded EGP163 mn (+20% YoY, +70% QoQ). The rise came despite booking enormous FX losses and translation differences of EGP689 mn during the quarter. OLFI is currently trading at a FY24 P/E of 7.7x.

CNFN (FV:EGP8.45, OW) released positive 4Q23 results:

•                  Bottom-line recorded EGP261 million (+49% y/y, +111% q/q), bringing FY23 bottom-line to EGP692 million (+36% y/y). 

•                  We downgraded our FV to EGP8.45/share from EGP11.00/share and maintained our Overweight recommendation on an, reflecting the expected risks of higher interest rates, higher provisioning, and unstable macro-conditions. 

•                  CNFN is currently trading at P/B24 of 1.4x and P/E24 of 7.4x.

OFH BoD have decided to appoint Prime Capital as an independent financial advisor (IFA) to determine OFH and BINV fair values and communicate them to the shareholders 5 working days before the MTO expires.

According to local media, TMGH (FV: EGP73.80, OW) launched its Banan project in Riyadh.

TAQA targets acquiring natural gas filling stations operator in Mozambique before the end of 1H24. The company is allocating USD200-250k for expansions in Mozambique. 

The government has awarded 11 concessions to five international energy players to explore for natural gas in the western Mediterranean region. The companies are BP, ExxonMobil, TotalEnergies, Chevron, and Shell, while Abu Dhabi’s sovereign wealth fund Mubadala will partake via an indirect agreement with one of the primary companies. Exploration is scheduled to start between the end of 2024 and the beginning of 2025. This is expected to increase Egypt’s natural gas production capacity by 25% after one year from starting exploration.

Shelf Drilling was awarded a USD51 million, two-year contract extension for an oil rig in the Gulf of Suez with Egypt’s Gemsa Petroleum, according to a statement from Shelf.

Market Overview