Market Overview 
COMI
CIEB
SWDY 
ETEL 
FWRY
EFIH
PHDC
MFPC
SKPC
ALCN


Prepared by: Mayada Amin- CETA, CFTe

All in ORWE's Favor: Local Currency Weakness, Export Rebates, Low Global PP Prices, and Attractive Distributions 

ORWE (FV: EGP23.42, OW) is one of our top picks in the consumer sector, especially in light of the expected local currency depreciation, given that nearly 65% of its revenues are dedicated to exports, which also translates into higher export rebates, coupled with resilient local market and declining polypropylene prices.  

The Egyptian government is preparing to introduce a social protection package that encompasses various improvements, including wage and pension adjustments and an increase in the tax exemption threshold.

Minister of Finance said the Ministry also submitted a draft decision to the Cabinet, proposing an extension of the state treasury's responsibility for bearing the real estate tax burden on industrial projects, poultry farming, and other sectors until the end of 2026.

The IMF is discussing with the Egyptian authorities a set of policies that would support the completion of the first and second reviews of the Extended Fund Facility (EFF) that Egypt has with the Fund.

Suez Canal revenues since the beginning of the year are down 40% YoY. 

At least three firms — Torm, Hafnia, and Stena Bulk, who direct around 350 tankers between them — paused transit through the Red Sea, Bloomberg reported.

ADQ and ADNEC announced the signing of definitive agreements for the strategic acquisition of a 40.5% stake in TMGH’s (FV: EGP42.95, OW) hospitality arm, ICON, through a capital increase. 

PHDC (FV: EGP5.59, OW) achieved stellar 4Q23 sales of EGP24.5 billion, up 189.0% y/y and 59.8% q/q, bringing FY23 sales to an impressive EGP59.5 billion, up 128.8% y/y. The company is planning to invest EGP15.0 billion in FY24.

QNBA’s (FV: EGP 55.00, OW) 4Q23 net profit post-minority interest recorded EGP3.7 billion (+23% y/y, -4% q/q), bringing FY23 bottom line to EGP16.2 billion (+57% y/y). The stock is currently trading at 2024 P/B of 0.8x and P/E of 3.9x.  

COMI and ADIB have lowered credit card limits on foreign exchange transactions executed locally and abroad last week.

The high-yield CDs recently offered by NBE and Banque Misr have attracted a combined EGP205 billion since their launch eight days ago. 

NBE and Banque Misr have reportedly increased the interest rate on loans secured by the three-year 19% CDs to 25.5%, up from 21%, following the CBE’s signal to all banks to increase rates on secured loans.

ADIB is putting together EGP5.8 billion worth of Sharia-compliant financing for local tech consultancy firm Giza Systems to help it repay outstanding loans and pivot towards a Sharia-compliant capital structure.

ESRS (FV: EGP97.02, OW) raised rebar and flat prices by EGP2,500/ton to EGP44,500/ton and EGP45,500/ton, respectively, as of 14 January 2024. On a different note, ESRS recorded exports sales of USD1.5 billion in 2023 which are expected to reach USD1.75 billion in 2024.

EGAL (FV: EGP77.75, OW) is to inject investments worth EGP850 million, out of the budgeted figure of EGP1 billion, through the rest of FY23/24 to execute a number of projects and purchase machinery and equipment, according to local press. 

The government plans to build a USD50 million logistics area behind the Safaga sea port to load and unload goods aboard the high-speed electric rail linking the Red Sea to the Mediterranean. 

The Social Fund for Development revealed the establishment a new company, tentatively called “Khatwa”, in partnership with ETEL and Egypt Post with a capital of EGP150 million. The company will be specialized in financing small, medium, and micro enterprises, according to local press.

- Market Overview 
- CIEB
- HDBK
- EKHOA
- BINV
- ORAS
- GBCO
- ORWE
- ETEL
- ABUK


prepared by: Mayada Amin- CETA, CFTe

PHDC (FV: EGP5.59, OW) is a top pick especially in light of potential EGP depreciation and expected inflation given the usual rush to real estate as a store of value. We select PHDC given a number of factors:

• Solid sales in 2023 and 2024 should be further supported by PHDC’s upcoming launch of its new project, whose proximity to Palm Hills October is expected to dictate a premium in pricing.
• Large residual land bank and a solid development track record.
• Stock offers one of the widest valuation gaps among sector peers at 78.0%.
• Stock trading at one of the lowest EV/sqm multiples among sector peers at EGP835/sqm, below the sector average of EGP1,168/sqm.
• Stock trading at one of the lowest FY24 P/E multiples among sector peers at 5.6x, below the sector average of 13.3x.

Egypt's annual core inflation rate decelerated by 1.7% in December to 34.2%, down from 35.9% in November, monthly core inflation rate rose to 1.3% in December 2023 from 1% in November.

Annual urban inflation retreated for the third consecutive month, recording 33.7% YoY in December, down from 34.6% YoY in November. On the other side, monthly urban inflation inched marginally up to 1.4% MoM in December, up from 1.3% MoM in November.

JPMorgan announced on Wednesday its decision to exclude Egypt from its index for government bonds of emerging markets (GBI-EM), effective January 31, 2024. 

The US Treasury Secretary Janet Yellen and the Managing Director of the IMF Kristalina Georgieva vowed full support for the Egyptian economy. 

The government plans to increase natural gas connections to more than 15 million households by the end of 2024, up from 14.2 million at the end of June 2023. 

Ministry of Electricity intends to raise electricity prices for MNOs by 20-21%, according to local press. We already factoring in higher energy prices in our ETEL numbers.

The General Authority for Investment and Free Zones intends to begin granting the golden license to investors in the healthcare sector next month.

The Egyptian Stock Exchange Registration Committee approved the temporary registration of the shares of City Lab Company with an issued capital of EGP64 million distributed over 640 million shares.

The FRA BoD has issued a decision to amend granting a license and the rules for owning shares in companies operating in non-banking financial activities. The decision regulates the percentage of contribution and ownership. 

Market Overview 


Prepared by: Mayada Amin- CETA, CFTe

ADIB Egypt offers the best value amongst Egyptian Banking Stocks 

ADIB‘s (FV: EGP70.00, OW) potential has been unleashed after resolving the capital increase issue which has been acting as a key overhang on share price performance. We expect the market price of the stock to rally further on strong fundamentals and solid business operations:
•The bank is able to achieve maintains strong margins above peer group average.
•The bank has the highest provisions coverage and the lowest NPL’s ratio among our coverage universe.
•ADIB is delivering RoE24 north of 30% and is currently trading at 1.0x P/B24, in line with peer group average, and 3.8x P/E24, below peer group average of 4.4x, on expected bottom line growth of 28% in 2024, which is higher than sector average of 17%.

The government has identified some 61 additional state-owned companies that it plans to add to the state’s privatization list and exit via stakes sales to either strategic investors or through EGX offerings. Priority will be given to four main sectors: airports, telecommunications, banking, and insurance.

A high-level delegation from the Egyptian government has arrived in Washington DC to push forward Egypt's almost standstill loan program with the IMF.

The World Bank expects a global slowdown in 2024 with GDP growth dropping to 2.4% from 2.6% in 2023 and 3% in 2022.

The World Bank has downgraded its Egypt growth outlook for the current fiscal year due to the country’s ongoing economic problems. The lender expects real GDP growth to slow to 3.5% in FY23/24, down 0.2% from its last forecast in October. Growth is forecast to accelerate to 3.9% in FY24/25.

The Ministry of Finance targets achieving a primary surplus of 2.5% of annual GDP during the medium term. The ministry also targets reducing debt to GDP to less than 85% by the end of June 2028.

The government aims to launch new international tenders for oil, gas, and gold exploration this year, with a new gold tender slated for the second half of the year.

Egypt’s average daily natural gas production hit 5.8 billion cubic feet per day in 2023. That’s 6.8% less than the 6.2 billion cubic feet produced per day in FY22/23.
 
Prime Minister Moustafa Madbouly ordered the establishment of a ministerial task force to set a plan for increasing the number of skilled workers abroad.

The government is currently looking into reforming laws governing tourism. These include issuing a new law regarding the establishment of a tourism chambers and an adjacent union, a draft law dealing with foreign tourists, and preparing the general framework for a draft law regulating tourism companies.

President El-Sisi has instructed the government to increase spending on improving Egyptians’ quality of life in the upcoming fiscal year 2024/2025, Minister of Finance said.

The government is considering exiting its stake in the Arab International Bank and is in the process of appointing financial advisors to do so. The government is looking into exiting a second unnamed bank at the same time, with local press sources saying that the banking sector is expected to see several deal transactions in 2024.

EGBE’s net profit has increased by 75% over 2023, recording EGP1.5 bn versus EGP845.8 mn in 2022. EGBE is currently trading at P/E24 of 5.3x and P/B24 of 0.9x

Halan, the consumer finance arm of MNT-Halan, has closed an EGP971.5 mn securitized bond issuance, the third and final of an EGP3 bn securitization program, according to a release published by the company.

Local private equity firm Ezdehar Management has purchased above 80% stake in clothing company SETA Textiles, the company which owns clothing brands Dalydress and Premoda, according to local media. The value of the transaction is not disclosed.

ADIB
ASCM
SWDY
FWRY
BTFH
HELI



Prepared by: Mayada Amin- CETA, CFTe

The CBE has instructed all banks to charge a minimum interest rate of 24% on secured loans. The new rule that came into effect yesterday is intended to clamp down on the carry trade following the issuance of high-yield CDs by the country’s two largest banks.

The government is planning to launch a central bank digital currency (CBDC) by 2030. The government is also aiming to achieve 100% financial inclusion by 2030 — up from 67.3% recorded in June.

The government wants to help 1 million Egyptians access labor markets in developed countries by 2030 by ensuring they receive the needed certificates, with a focus on AI, IT, nursing, and biotechnology, according to the Cabinet’s IDSC's Strategic Economic Directions recent report.

Egypt's renewable energy output is expected to make up almost 12% of total electricity output for the current fiscal year. The government aims to transform Egypt into a regional hub for green hydrogen production by 2026 and a global hub by 2030.

The FRA seeks to reduce the costs on trading on the EGX.

The government is conducting an audit of the number of refugees and the costs the state incurs to care for them. Cabinet spokesperson said that the measures are not aimed to increase the burden on “guests,” but rather to help rationalize resources.

The disbursements of the Russian loan allocated for the Dabaa nuclear power station has exceeded USD1 billion. Government officials said that Egypt did not receive this amount, but it was disbursed in batches of different values to the implementing companies of various works at Dabaa station.

AMIC released its numbers for November 2023: Personal cars volumes climbed by 13.6% MoM and 52% YoY to record 7,916 units during the month, which is the highest number recorded since September 2022. The auto market has been showing initial signs of recovery towards the second half of 2023, which is expected to continue with the same momentum.

The Saad El Din Group is currently studying acquisition offers from four unnamed foreign companies for its Spanish Egyptian Cement factory (Spegyco), with two Gulf firms in the mix, given the Group's plan to exit non-core businesses.


Weekly Commodities Update 

  |   | Last Price | WoW Change, %
| Brent, USD/bbl | 76.4 | -0.8%
| Diesel-HSFO Spread, USD/ton | 337.9 | 1.3%
| Egypt Urea, USD/ton | 340.0 | 0.3%
| Polyethylene, USD/ton | 1,010.0 | 2.0%
| Polypropylene, USD/ton | 940.0 | 0.5%
| Steel/Iron Ore Spreads, USD/ton | 368.9 | -1.0%
| LME Aluminum Cash Price, USD/ton | 2,227.8 | -5.0%
| Egyptian Retail Cement, EGP/ton | 2,119.0 | 2.1%
| Steam Coal FOB Newcastle Australia, USD/ton | 131.6 | -10.1%
| SMP, USD/MT | 2,613.0 | -2.2%

Market Overview 
COMI
ADIB
CANA
HRHO
OIH
EFID
EKHO
CCAP
ORWE
PHDC

Where Is EGX Heading in 2024? Which Stocks Offer Best Value Post 2023 Rerating?

We believe that the market will continue to advance as long as foreign currency availability and the local exchange rate weakness continues to linger, thus driving earnings momentum.

Our report also includes an appendix of all data tables for your reference.

What if the electricity tariff increase is confirmed for industrial usage?

Electricity tariff for energy-intensive industries reportedly increased to EGP1.32 per kWh up from the previous rate of EGP1.10 per kWh. The still-not-confirmed price increase would drag related companies operating margins down and ultimately fair values if not balanced by sufficient price increases of their final products. We ran a scenario analysis for the reported electricity tariff increase into our models, given all other assumptions constant, to capture the effect on our fair values for the stocks. 

The CBE earlier released the balance of payments data for 1QFY2023/24. 

• The overall BoP recorded a surplus of USD229 million in 1QFY2023/24, compared to a surplus of USD524 million a year before.
• Current Account (CA) deficit shrank in 1QFY2023/24 to USD2.8 billion compared to USD3.2 billion a drop of 12% YoY, mainly due to a 13% drop in trade deficit to USD7.9 billion from USD9.1 billion in 1QFY2022/23.
• Egypt’s Ministry of Electricity announced an increase in electricity prices for both residential and commercial use, ranging from 7% to 20% across various usage categories.

The IDSC issued a document explaining the strategic directions for the Egyptian economy for the new presidential term (2024-2030). 

Egypt’s Ministry of Transport raised ticket prices for the three-line Cairo Metro.

Net International Reserves reached USD35.22 million at the end of December 2023, up from USD35.17 billion in November, on higher value of gold.

Egypt's PMI posted 48.5 in December, marginally higher than the reading of 48.4 in November.  

Egypt’s wheat imports increased by over 14.5% to 11 million tons in 2023 compared to 9.6 million tons in 2022, Deputy Minister of Supply said.

AD Ports inked a USD3 million initial agreement with the Red Sea Port Authority to operate and manage three cruise terminals in Hurghada, Safaga, and Sharm El Sheikh.

An Emirati-led consortium has been awarded the bid to develop the former HQ of the now-defunct National Democratic Party in Tahrir Square, Sovereign Fund of Egypt (SFE) head said.

Russian EV manufacturer Concordia is setting up an electric vehicle components factory in GV Investments’ Tarboul industrial project in Giza.

The government is preparing to amend the fees for using the national natural gas network for 2024, in preparation for implementing the new tariff during the current year. 

Around EGP11 billion have been invested in the newly introduced CDs (with yields up to 27%) during the first 24 hours of issuance on Friday. 

The Oman Investment Authority is in negotiations with the government regarding the acquisition of a majority stake in EXPA after it was included in the government IPO program at the end of 2023. 

The FRA is studying 5 applications to establish small, medium, and micro enterprise financing companies. 

LCSW (FV: EGP23.33, OW) will distribute its 3,200,000 treasury shares as bonus shares to shareholders (0.042 share for each original share held). Record date is 10 January 2024, and distribution date is 11 January 2024.