Market Overview 
HRHO
MFPC
CCAP
AMOC
EKHO
ESRS
ASCM


Prepared by: Mayada Amin - CETA, CFTe

ORHD| Your USD-Based Asset Pick

ORHD (FV: EGP20.38, OW) is one of our top picks in light of the usual rush to real estate as a store of value amid potential EGP depreciation, especially since units and land in El Gouna are priced in USD, and the company’s exposure to incoming tourist arrivals, fueling its recurring income portfolio by virtue of its hotel business and commercial town management business. We select ORHD given the following points:

• Solid sales; 2023 witnessed impressive sales and we expect 2024 to witness growth in sales.
• Exposure to increase in tourism.
• Large residual land bank; we estimate ORHD’s residual land area at around 22.8 million sqm, rendering it one of the largest across the sector.
• Stock offers one of the widest valuation gaps among sector peers at 65.8%.
• Stock trading at one of the lowest FY24 P/E multiples among sector peers at 5.7x.
• Stock trading at one of the lowest FY24 EV/EBITDA multiples among sector peers at 3.7x.

An IMF team is currently in Cairo for ongoing discussions on the first and second reviews of Egypt’s reform program.

Egypt’s budget deficit recorded 4.95 percent of GDP during the first half of FY2023/2024, July-December 2023.

Moody's revised its outlook on Egypt to "negative" from "stable". On another note, Moody's expects Egypt's IMF program could reach USD10 billion.

IDSC has initiated the first comprehensive national dialogue sessions on the document that outlines the key strategic directions for the Egyptian economy in 2024/2030.

Egypt's issuances of government debt instruments in local currency jumped by about 59% in 1H2023/24 to record up to EGP2.7 trillion.

El-Sisi approved a JPY100 billion loan to fund the first phase of the Cairo Metro Line 4. 

ESRS (FV: EGP97.02, OW) raised its rebar price, for the third time since the beginning of the year, by EGP3,800/ton to EGP48,300/ton as of 20 January 2024.

ETEL (FV: EGP51.00, OW) intends to roll out 5G network by the end of the year and trial operations within the coming three months, according to local press.

ETEL denied the submitted offers related to tower sales and is currently in negotiations with another four entities, according to local press.

NBE lowered credit card limits on foreign exchange transactions executed at home and abroad. 

The new high-yield CDs have attracted a combined EGP380 billion in NBE and Banque Misr as of last Thursday.

COMI has rolled out a trio of fixed high-yield three-year certificates of deposit (CDs). 

The CBE is extending the deadline requiring banks to provide 25% of the credit facilities portfolio to SMEs and 10% to finance small companies for an additional year ending 31 December 2024.

KIMA is in talks with a consortium of banks to increase a syndicated loan from EGP4 billion to EGP7 billion. The loan will be used to finance the investment cost of the rehabilitation of the company's old factory in Aswan.

NBE and Banque Misr, which collectively own 20.8% of Alexandria Specialty Petroleum Products Company (ASPPC), are studying the sale of their stakes to EGPC. 

The government is studying the establishment of a phosphate fertilizers complex in Qena governorate. 

GB Corp’s automotive assembly and distribution unit GB Auto has inked an EGP1.2 billion long-term financing agreement with a banking consortium led by Banque Misr.

OLFI announced a price increase in its cheese products for the second time this year ranging from EGP20-83/pack.

Supreme Holding has formed a joint venture with an undisclosed British company that will invest USD30 million into setting up four animal feed factories in 10th Ramadan City. 

Market Overview 
TMGH
SKPC
DOMT
SKPC
CIEB
ADIB
BINV
SPMD


Prepared by: Mayada Amin - CETA, CFTe

ETEL| 5G License Granted without Spectrum; Triggers FV upgrade to EGP51/share

Telecom Egypt acquired a 5G license from the government yesterday at USD150 million with no spectrum fees. Accordingly, we upgraded our FV for ETEL to EGP51.00 per share up from EGP45.00 per share, given that we had accounted for USD500 million of 5G related capex (instead of USD150 million), assuming USD350 million of spectrum fees which is not the case now. At current market price, ETEL is trading at a significant discount to peers’ average with 2024f P/E of 5.3x and EV/EBITDA of 3.4x, at a discount to peers’ average of 13.5x and 6.0x.  

AMOC| A Beneficiary of Political Tension in the Region and a Play on Local Currency Weakness

AMOC represents a good short-term play as one of our tier II picks for 2024 with an 15% upside potential and a FV of EGP12/share. Our FV is highly sensitive to GPM margin assumptions and local currency weakness, which are currently more on the conservative side. Thus, FV can be revised upwards to EGP14.67/share based on relative valuation and depending on local currency, oil prices, and margin performance. 

Our view is supported by:

• The expected currency devaluation bodes well for the company’s revenues, which we forecast to grow by 52% YoY over FY3/24.
• Net profit is expected to increase by 69% YoY to EGP2.25 billion in FY23/24.
• We expect to distribute a DPS of EGP0.96/share in FY23/24f, implying a dividend yield of 9%, the highest among its sector peers.
• AMOC is trading on a FY23/24e PE of 6.0x and EV/EBITDA of 3.4x, one of the lowest among its sector peers.

Cargo flights are filling up as Red Sea disruptions continue. 

Traders are rushing to unwind their bets on a big depreciation of the EGP, as the country’s government is nearing a deal with the IMF to boost the size of a rescue package. 

The number of tourist arrivals to Egypt during 2023 increased by 27.3% to reach 14.9 million tourists.

The Commodity Exchange plans to launch new products on its trading platform during the current year.

Ministry of Supply, represented by the Egyptian Holding Company for Silos and Storage EHCSS, got a USD110 loan from the WB to complete the national project for field silos.

ETEL secured a 5G license from the NTRA at USD150 million for 15 years.

Bayut has contracted with FWRY to provide its customers with instalments services through consumer financing. 

Alshaya Group, one of the region's biggest retail operators will be downsizing their business in Egypt due to FX pressure and economic conditions.

OPEC estimated the world's demand for oil to increase to 2.25 million bbl per day in 2024 and another 1.8 million bbl per day in 2025, on the back of a strengthening Chinese economy.

EFG Finance, the non-bank financial services arm of HRHO, might look into acquiring a stake in Saudi’s PayTabs, through giving up its 50% stake in PayTabs Egypt.

 HRHO’s microfinance arm Tanmeyah has teamed up with the Egyptian arm of GIG to roll out new micro-ins. products. 

COMI has signed an agreement with the Housing Ministry’s Social Housing and Mortgage Finance Fund to provide EGP3 bn in financing to support the fund’s initiative to give out loans to low- and middle-income home buyers at 3%, 7%, and 8% interest rates.

Yesterday's announced EGP4.2 billion finance agreement inked between ORAS (FV: EGP233.65, OW) and Arab Bank is not a loan, but bank guarantees to the National Tunnels Authority.

Damietta port Authority reported an increase in number of ships handled by 14.2% YoY and an increase of 11.6% YoY in cargo handling in 2023.

Market Overview 


Prepared by: Mayada Amin - CETA, CFTe

ESRS | The top beneficiary within EGX of weaker local currency

Despite the recent rally in the stock price, we still believe ESRS (FV: EGP97.03, OW) has untapped value. We included ESRS in our Top Picks for 2024 given not only its solid operational performance in the past few quarters, which was supported mainly by the recovering global steel cycle and currency fluctuations, but also confirmed by its low multiples when compared to latest steel transactions executed as well as emerging markets peers group multiples. Using an equal-weighted relative valuation method for median P/S, P/E and EV/EBITDA multiples for FY24e and applying a 50% discount for Egypt’s macro challenges, ESRS’s implied FV is estimated at EGP224.12/share implying a significant upside potential of 150% to the current market price of EGP89.58/share and 131% to our DCF valuation FV of EGP97.02/share . The stock is currently trading at FY24e P/E of 2.0x and EV/EBITDA of 2.3x,

We published this morning Commodity and Material Prices presentation, in which we present the average material prices for 4Q23 and depict the impact of such changes on the financial performance of the relevant listed equities in Egypt. 

Egypt is seeking the US guarantee to issue bonds in the international debt markets.

Egypt will receive a USD250 million sharia-compliant trade loan facility from the Africa Finance Corporation (AFC) and International Islamic Trade Finance Corporation (IFTC) to support Egypt’s food and oil security.

Shell has suspended shipments through the Red Sea indefinitely amid fears of further escalations in the waterway. Japanese shipping giant Mitsui OSK Lines also paused transit through the waterway. On the other hand, Four Qatari vessels carrying liquified natural gas have resumed their course along the Red Sea after several days’ pause.

Suez Canal Authority (SCA) head dismissed rumors about securitizing the canal revenues as mere media speculation. He estimated that the current 30% drop in traffic will last until the end of the month.

According to the Tax authority, the income tax draft law will keep the maximum limit for tax rate at 22.5% for corporates and 27.5% for individuals. The draft law will not amend tax brackets.

The Egyptian Mercantile Exchange (EMX) plans to list 13 new commodities spanning agricultural, oil derivatives, and food categories.

EGAL (FV: EGP77.75, OW) extended the deadline for submitting technical and financial offers for the rehabilitation of the company’s facilities until March 31, 2024, originally scheduled for January 15. 

 Egypt’s exports of cement increased by 18% YoY in 11M23 to reach USD721 million, up from USD611 million in 11M22.

German cement manufacturer Heidelberg Materials has set up a waste heat recovery system at its factory in Helwan with a USD30 million investment. The new system will supply 30% of the factory’s electricity needs.

ORAS (FV: EGP233.65, OW) signed a EGP4.2 billion cooperation agreement with Arab Bank to help fund the fourth phase of Cairo Metro Line 4 

TALM released strong 1Q23/24 results showing: Net profit climbed to reach EGP221 mn from a previous EGP108 mn (+104% YoY). Enhanced profitability came trickling down from higher revenues and enhanced gross profitability. TALM is currently trading at an annualized FY23/24 P/E of 4.8x.

New Motors are planning to locally assemble Kaiyi cars, with the first production line to be operational before 2024 end. The project is expected to be 50% financed by a Kuwaiti investor.

Valu, HRHO’s consumer finance arm is targeting 1.5x growth in its financing portfolio in 2024 while shifting towards larger ticket sizes, such as financing cars or furnishings to minimize risks.

US private equity firm General Atlantic has agreed to acquire London-based, emerging markets-focused infrastructure fund manager Actis.

- Market Overview 
- ETEL
- ORWE
- HRHO
- CCAP
- BTFH
- SWDY
- GBCO
- JUFO
- TMGH
- ABUK
- ELEC
- ISPH
- MCQE


Prepared by: Mayada Amin- CETA, CFTe

GBCO (FV: EGP12.86, OW) made it to our top-picks list, mainly backed by GB Capital, as it forms 71% of our final valuation, while GB Auto holds only 29%. GBCO is currently trading at a FY24 P/E of 3.2x and an EV/EBITDA of 3.2x.

Economic growth slowed to 2.65% YoY in 1QFY2023-24, according to new data by the Planning Ministry. That is down from 4.4% YoY in 1Q2022-23 and 2.9% YoY in the final quarter.

The General Authority for Investment and Free Zones has agreed with the CBE that foreign companies will not waive transfers in foreign currencies in banks that are intended to increase the company’s capital only.

The Suez Canal Authority has started to collect an increase in fees for transiting ships by rates ranging between 5% and 15% for specific types of ships, as per their decision issued last October.

The Ministry of Finance expects public debt to decline by FY2023/24 end to 92.2% of GDP, and continue to decline to 91.9% of GDP next fiscal year, and 88% in FY2025-26.

Kuwait’s Ali Alghanim & Sons Automotive, Saudi’s Mohamed Yousuf Naghi Group, and Egypt’s Organi Group have launched a joint venture dubbed Auto Mobility that will invest USD100 million into localizing the production of cars from Chinese automobile giant Geely. 

No fewer than five Qatari vessels carrying liquefied natural gas (LNG) making their way to the Bab El Mandeb strait have been stopped in their tracks since Friday. Around 209 oil tankers or 4% of the world’s oil fleet have started rerouting away from the Red Sea over the weekend.

The Egyptian Stock Exchange aims to launch a new electronic disclosure system by 2025 aiming at developing the technological structure of the market by modernizing the electronic trading system.

The Egyptian National Railway Authority intends to borrow EGP18 billion from a consortium of local banks to finance two railway projects, which it plans to launch during the second half of this year.

The House of Representatives approved the seventh structural adjustment facility agreement between Egypt and the Arab Monetary Fund, worth USD614.3 million.

A government official estimated Egypt's total imports of Israeli natural gas at about 900 million cubic feet per day in January 2024. 

The government plans to double the capacity of Cairo International Airport. The new terminal will accommodate an additional 30 million passengers per year.

SAUD and EGBE have disabled credit card withdrawals abroad. EGBE has also cut monthly credit card limits on foreign exchange transactions executed abroad to the equivalent of EGP3k.
 
HRHO’s ValU signed a partnership agreement with the Damietta Chamber of Commerce to enhance the furniture industry in Damietta by providing an integrated package of buy now and pay later solutions.
 
Local mobile operators are planning to launch eSIMs in 1Q24, with pre-launch trials currently underway.
 
ETEL and Zain Omantel International (ZOI) are joining forces to build a digital corridor. This corridor will connect the Mediterranean Sea to the Arabian Sea and Arabian Gulf, creating an unprecedented data highway. Telecom Egypt will develop new infrastructure across Egypt from the Red Sea to the Mediterranean and onwards to Europe.
 
CBE is studying linking InstaPay to four BRICS countries including India, Russia, Brazil, and South Africa.

ARCC (FV: EGP13.01, OW) is to undertake a filter upgrade conversion project with a total estimated cost of EUR8 million. 

The winner of the tender to install the signaling and control systems for the Cairo-Alexandria freight railway bypass will be announced next July. 

RMDA achieved 31% YoY increase in revenues (including injectable antibiotics) in November 2023. 

Egypt’s exports of medicines and pharmaceutical products increased by 11.7% YoY in 10M23 to reach USD276.68 million.

- Market Overview 
- COMI
- ADIB
- CIEB
- AJWA 
- ARAB
- EGAL



- Prepared by: Mayada Amin- CETA, CFTe

EAST: New Owner, New Terms, New Norms, and High Yield
EAST’s (FV: EGP38.68, OW) recent company developments pushed it to our top-picks list with the support of new more-flexible pricing strategies and raw materials availability.

Below are the detailed reasons for our call:

• The newly implemented tax law allows EAST to increase selling prices by 12% per annum, leaving room for EGP4/pack more to be added during FY23/24, if needed.
• With the presence of the new strategic investor, raw materials are expected to be made available.
• We expect EAST to pay a DPS of EGP4.35/share out of FY23/24 profits, with a DY of 14%, which is amongst the highest in the market.
• EAST is currently trading at a FY23/24 P/E of 6.0x and an EV/EBITDA of 4.9x, which is at a significant discount to emerging market peers. 

The government plans to increase the funds allocated for education over the coming six years, with plans to increase pre-university education spending to EGP1.8 trillion. 

The government received several applications from Gulf and foreign investors to get golden licenses for green energy projects worth over USD6 billion.

Chevron will start producing gas from the offshore Nargis gas field during 1H25. 

Egypt could issue bonds in the local currencies of New Development Bank (NDB) member countries. Founded by BRICS countries, the NDB expanded to include Egypt in April 2023.

Centamin Company expects to obtain final approval from Parliament for the mining exploitation agreement with the Egyptian government during 1H 2024.

Government sources revealed that the expected cost of extending the exemption of industrial and poultry projects from real estate tax until the end of 2025 amounts to EGP4 billion.

A government official said that Egypt received 1.1 million tourists from the Arab Gulf countries during the past year, including 800,000 Saudi arrivals.

The government is studying the extension of the expat car import initiative for another three months to end on 30 April 2024.

HELI (FV: EGP18.84, OW) AGM approved a protocol agreement with the Holding Company for Cotton, Spinning, and Weaving to acquire a land plot for EGP2.0 billion. The AGM also approved bringing forward the distribution date of the last EGP0.12/share installment of the EGP0.22/share cash dividends to 31 January 2024 instead of 30 June 2024.

Egypt's iron and steel exports surged 62% YoY to USD2.1 billion in the 11-month period of 2023.

The second gold fund in Egypt was launched in partnership between Evolve and Beltone Financial Holding, with Beltone holding a 51% share in the fund and Evolve holding 49%.

EFG Finance, the non-banking financing platform affiliated with EFG Holding Group, aims to complete the new technological infrastructure that serves all financing activities, anticipating that the infrastructure will be completed by 2025.

Qatar National Bank Al-Ahli signed a cooperation agreement with Al-Tadhamon Microfinance Corporation under which it can renew a credit facility of EGP195 million to enhance the financing of microenterprises. 

Weekly Commodities Update

 |   | Last Price | WoW Change, %
| Brent, USD/bbl | 78.3 | -0.60%
| Diesel-HSFO Spread, USD/ton | 375 | 11.00%
| Egypt Urea, USD/ton | 356 | 4.60%
| Polyethylene, USD/ton | 1,010 | 2.00%
| Polypropylene, USD/ton | 940 | 0.50%
| Steel/Iron Ore Spreads, USD/ton | 376 | 4.00%
| LME Aluminum Cash Price, USD/ton | 2,172 | -7.40%
| Egyptian Retail Cement, EGP/ton | 2,128 | 0.40%
| Steam Coal FOB Newcastle Australia, USD/ton | 131 | -10.60%
| SMP, USD/MT | 2,613 | -2.20%
| Last price may vary week over week in some indices due to time difference