Pitch: SKPC | New Gas Formula Improves Margins Substantially; Upgrade FV to EGP22.35. New gas formula announced in October translates into USD5.4/mmbtu of SKPC’s feed gas, way lower than what they used to pay for feed before. Thus, margins are expected to increase remarkably during the coming years.Currency devaluation comes at the right time to offset decline in petroleum and petroleum products prices.We forecast SKPC to post net profits of EGP1,731 million, marking a 40% YoY growth in FY23. We expect the company to pay out 60% of FY23 net profit, which translates into EGP1.46/share, or a 9% dividend yield. SKPC is currently trading at FY23e P/E of 6.6x and EV/EBITDA of 4.9x.

Urban inflation jumped in Egypt for January to 25.8% YoY and 4.7% MoM, compared to 21.3% YoY and 2.1% MoM in December, due to currency depreciation and food prices.

Prime Minister Moustafa Madbouly said that the state will offer shares in 32 companies to strategic investors, offerings on the EGX and a mix of both over the next 13 months. The privatization program will begin during the current quarter and continue through to the end of 1Q24. Offerings include various sectors: Banking and financial services, Oil and petrochemicals, Industrial and manufacturing, a plastic and a pharma producer, Military firms Safi and Watania, Real Estate and Hospitality, Logistics, Construction, and Tech firm MTS. 

The government decided to extend the period given to the informal sector for reconciliation for one year starting 6 April 2023.

EGX Chairman said that a trading platform for carbon certificates will be launched within six months, at maximum. The Social Fund for Development plans to inject EGP6 billion to finance small, medium and micro enterprises during the current year.

The Social Fund for Development plans to inject EGP6 billion to finance small, medium and micro enterprises during the current year, compared to EGP6.8 billion in 2022.

SKPC is close to finalize the acquisition of Ethydco and is expected to increase its capital by USD100 million after the acquisition.

Belayim Petrobel Company intends to inject USD1.2 billion in Zohr well development during FY23/24. 

Oil rose for a third straight day, Brent crude settled up 1.7% to USD85.09/bbl.

CICH has executed a securitization bond issue for Aman Financial Services worth EGP 403.4 million, as part of the first 3-year program with a total value of EGP5 billion.

EFIH announced signing a contract with The Ministry of Agriculture and Land Reclamation (MALR) to provide services for the development implementation, management, and operational support of an electronic system responsible for monitoring the trade of fertilizers.

The Cabinet approved exempting a 5% development fee on imported mobile-phone components to localize the industry.

Xiaomi intends to establish a factory in 6th of October City, at an initial investment cost of EGP1.0 billion.

The consortium behind the 3-GW Greece-Egypt Interconnector (GREGY) is putting together the final technical and financial surveys ahead of a financial investment decision.

The Ministry of Electricity and Energy agreed to amend the value of the financial contract for the global alliance implementing overhead lines in Egypt-Saudi electrical interconnection line, to be worth c. EGP540 million, due to the rise in the exchange rate of the dollar against the Egyptian pound, and the economic repercussions of the Russian-Ukrainian war.