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Volume I—Issue 3 April –June 2010 EGYPT QUARTERLY MARKET REVIEW Table of Contents Egypt’s Economic Highlights….…………………………………….……….1 Macroeconomic & Corporate News……………………………………….…2 Stock Fundamentals………………………………………………………….3 Feature Story: Egypt’s Juhayna IPO 6.8 times Oversubscribed………..............4 Egypt’s Economic Highlights A. Real GDP Growth Real GDP growth (market prices) during July-March 2009 /2010 was driven by the resilience of both private and public consumption growth, recording 3.8 percent and 4.4 percent respectively. Total investment spending also increased by 1.4 percent. On the other hand both exports and imports of goods and services have declined by 3.9 percent and 7.7 percent respectively. From a sectoral perspective, Growth was led by manufacturing (5.0 percent growth, 15.7 percent of GDP), wholesale and retail trade (6.2 percent growth, 10.8 percent of GDP), construction (13.7 percent growth, 5.1 percent of GDP), and tourism (12.0 percent growth, 4.4 percent of GDP). B. Fiscal Performance The notable decline in spending on “subsidies, grants and social benefits“ during July– June 2009 /2010 is mainly due to the drop in subsidy payments to GASC and EGPC by 28 percent and 39.2 percent, recording LE 14.9 billion and LE 33.7 billion respectively (resulting from the decline in international food and energy prices). C. Domestic Debt Profile Gross domestic debt of the general government amounts to LE 726 billion (60.6 percent of GDP) at end of March 2010, compared to some LE 596.6 billion (57.4 percent of GDP) at end of March last year. Also, net domestic debt of the general government reached some LE 572.2 billion (47.8 percent of GDP). The increase in general government debt at end of March 2010 was driven by the increase in consolidated budget sector debt, in addition to the increase in consolidated debt of the National Investment Bank by nearly LE 16.4 billion amounting to LE 156.8 billion at end of March 2010. D. Monetary Developments Total liquidity has increased slightly by 0.2 percent during April 2010, registering LE 890.4 billion, compared to LE 888.2 billion in March 2010. Moreover, year-on-year growth in M2 at end of April 2010 increased to 9.6 percent, compared to 6.8 percent at end of April 2009. E .Prices CBE decided to keep its overnight deposit and lending rates unchanged- for the sixth month in a row- during the Monetary Policy Committee meeting on June 17th, 2010. The overnight deposit and lending rates currently stand at 8.25 and 9.75 percent respectively. The MPC explained that current policy rates are appropriate and supportive with recent recovery in domestic economic activity while maintaining core inflation rates within its comfort zone. F. External Sector With respect to the External Sector, Balance of Payment statistics for July-March 2009 /2010 depict notable improvement in the overall balance that has accumulated a surplus of US$ 3.1 billion, compared to a deficit of US$ 2.3 billion during July-March 2008 /2009. G. Stock Exchange As for the performance of Domestic Capital Market, the EGX-30 index decreased by 903 points during May 2010, reaching 6549 compared to 7452 last month; however it has increased by 623 points compared to May 2009. Market capitalization decreased over the previous year by 9.6 percent, reaching LE 426 billion (35.6 percent of GDP). Egypt’s Key Economic Indicators Key Indicators Population GDP Real GDP growth (%) Consumer price inflation (%) Budget balance (% of GDP) Current-account balance (% of GDP) Inward Direct Investment (% of GDP) Total External Debt (% of GDP) Exchange rate EGP vs. US$ 2008a 81.5 159.7 7.2 18.3 -7.0 -0.8 26.3 87.8 5.43 2009b 83.1 189.1 4.7 11.8 -6.6 -2.0 -17.7 80.1 5.55 a: Actual, b: Economist Intelligence Unit Estimate, c: Economist Intelligence Unit Forecast 2010c 84.7 227.9 5.2 12.2 -8.7 0.4 5.6 80.1 5.50 2011c 86.3 260.1 5.4 9.9 -7.6 1.7 10.4 77.1 5.58 Volume I—Issue 3 April - June 2010 EGYPT QUARTERLY MARKET REVIEW Money Market Statistics Rate Overnight Int. bank Rate 91 T-Bill Rate 182 T-Bill Rate 365 T-Bill Rate CBE Discount Rate Deposit Rate Lending Rate EGX30 Three-Month Chart GDR Trading 8.270 10.791 10.542 9.932 8.500 6.800 11.200 Date 30/06/10 30/06/10 30/06/10 30/06/10 02/08/09 30/06/10 30/06/10 30/06/2010 Local L.E GDR (USD) P/D% CIB (1:1) EFG (1:2) Palm Hills (1:5) OCI (1:1) OT (1:5) Telecom Egypt (1:5) Suez Cement (1:1) 33.77 29.20 4.89 227.44 4.98 15.74 35.73 6.10 11.11 4.7 38.70 4.40 14.00 5.80 -0.61 4.69 5.78 -6.36 -2.76 -2.11 -10.67 EGX 30 Index 8200 7700 7200 6700 6200 5700 5200 Value Traded (L.E mn) 68,152 Close Prev. Close %Chg High Low YTD% 6,033.09 6,806.11 -11.36 7,693.46 5,936.49 -4.60 Yr. H 7,279.91 Yr. L 3,380.33 Volume Traded (L.E mn) 8,848 Macro News Corporate News Egypt jumped 11 places to rank 70th in the Global Competitiveness Index (GCI), up from 81 in 2009. However, the overall improvement was largely based on deteriorating conditions in other countries, according to the seventh annual Egyptian Competitiveness Report (ECR) titled “Green Egypt: A Vision for Tomorrow.” A joint venture of Egypt's Orascom Construction Industries (OCI) has won a contract worth $750 million to expand Qatar's international airport. Contracting via BESIX Group's fully-owned unit Six Construct Qatar to provide all structural, mechanical and electrical works and design coordination for the airport's lounge and retail area. Egyptian customs revenue rose to 15.03 billion Egyptian pounds ($2.6 billion) in the fiscal year that ended on June 30. That would equate to a rise of 6.6 percent, as an economist with an Egyptian investment bank said the government collected duties of 14.10 billion pounds for 2008-09. The World Bank's investment arm said it will invest $120 million to fund a refinery project near Cairo through Egyptian private equity firm Citadel Capital. The $3.7 billion refinery will be used to convert fuel oil into lighter products such as diesel. Following a three year absence from global financial markets, Egypt is now having a comeback with two Eurobonds for a nominal value of US $ 1.5 billion issued in two tranches. A 10 year tranche for US $ 1 billion carrying 5.75 % coupon and a 30year tranche for US $ 0.5 billion with a 6. 875 % coupon. It is the first time Egypt to issue a 30 year Eurobond. Egypt's core annual inflation rose to 6.70 percent in the year to June from 6.69 percent in May. Egypt's producer price index rose 9.92 percent in May from a year earlier, based on index figures released by Egypt's Central Agency for Public Mobilization and Statistics (CAPMAS). Egypt aims to attract about $8 billion in foreign direct investment (FDI) and boost economic growth to 5.8 percent in the fiscal year that begins July 2010. Egyptian investment bank EFG-Hermes had agreed to buy Jordanian brokerage firm Tadawol for Securities and Financial Services for 3.85 million Jordanian dinars ($5.4 million). Egypt's state-owned Food Industries Holding Company (FIHC) received offers from German and Japanese company's to build a 1.2 billion Egyptian pound ($211 million) sugar refinery. The Egyptian unit of global mobile network operator Vodafone approved a 12.50 Egyptian pound ($2.26) per share dividend. Egypt's landline monopoly has a 45 percent stake in the Vodafone unit, allowing it to receive 1.35 billion pounds from the dividend. Stock Fundamentals Powered by: Price Stock Telecommunications Orascom Telecom Holding MobiNil Telecom Egypt Construction and Materials Orascom Construction Industries Banking Commercial International Bank Credit Agricole Egypt Housing & Development Bank Financials EFG-Hermes Holding Pioneers Holding Real Estate TMG Holding 6th Oct. Development Heliopolis Housing Medinet Nasr Housing Palm Hills Development Oil and Gas Maridive & Oil Services* Sidi Kerir Petrochemicals Egyptian Financial & Industrial Tourism, Travel & Leisure Egyptian for Tourism Resorts Orascom Development Holding (EDR)** Industrial Goods El Swedy Cables El Ezz Steel Rebars Consumer Goods Delta Sugar GB AUTO Oriental Weavers Reuters Code Close Yr. H P/E Yr. L Market Cap (mn) Target Price Recommendation ROA ROE EV (m) 10 11 12 10 11 12 10 11 12 23.87 ORTE.CA 4.98 8.03 4.57 26,125 7.34 Hold 52,667 5.28 3.88 2.76 23.97 28.30 35.59 21.13 20.90 EMOB.CA 168.63 242.50 159.56 16,863 195.00 Hold 21,992 8.91 9.00 8.53 11.34 9.13 10.24 50.06 48.75 52.40 ETEL.CA 15.74 20.59 14.88 26,869 20.08 Accumulate 26,150 9.93 9.93 9.36 NA NA NA 11.87 11.23 11.51 OCIC.CA 227.40 287.90 194.31 47,053 290.00 Accumulate 57,299 15.61 10.81 8,97 5.25 7.42 8.07 17.89 23.07 25.65 COMI.CA 33.07 39.75 24.00 19,515 39.60 Accumulate 8,495 11.17 9.70 8.26 2.80 3.10 3.10 25.34 25.50 24.47 CIEB.CA 11.50 14.08 10.00 3,300 15.11 Buy (2,590) 8.04 7.22 6.17 1.64 1.65 1.62 20.25 21.50 23.60 HDBK.CA 18.73 28.30 18.0 1,584 29.76 Buy 2,580 NA NA NA 1.65 2.20 3.10 22.80 25.55 29.30 HRHO.CA 29.20 37.29 23.40 9,598 36.55 Accumulate 5,155 12.74 15.11 12.37 NA NA NA 11.01 6.57 8.67 PIOH.CA 3.51 8.27 3.20 1,755 11.00 Buy 1,050 NA NA NA NA NA NA NA NA NA TMGH.CA 7.34 8.63 5.36 14,900 10.60 Accumulate 17,719 8.19 5.04 5.63 2.15 5.39 10.94 8.31 10.68 9.50 OCDI.CA 83.42 103.00 64.17 3,025 137.50 Buy 1,769 20.15 6.06 4.15 3.80 5.50 10.20 7.14 18.53 19.69 HELI.CA 25.76 45.58 24.10 1,910 64.40 Accumulate 2,107 24.74 20.67 17.35 7.44 8.30 9.26 31.02 31.08 24.04 MNHD.CA 30.70 38.43 23.60 3,070 50.00 Accumulate 2,944 34.06 22.37 17.98 8.70 11.70 12.60 35.10 38.20 31.50 PHDC.CA 4.89 7.10 4.25 5,125 7.80 Accumulate 7,590 6.60 5.34 3.96 4.93 10.04 10.71 20.00 26.00 23.00 43.42 MOIL.CA 3.16 4.80 2.98 808 5.40 Hold 966 8.96 6.63 5.58 14.80 18.50 18.50 26.60 45.70 SKPC.CA 12.04 15.80 9.60 6,321 16.25 Buy 4,764 6.90 7.69 6.98 28.00 22.00 22.00 43.35 38.55 40.10 EFIC.CA 16.61 26.98 15.70 1,151 26.40 Accumulate 2,073 9.83 7.14 6.40 4.56 6.70 6.26 10.91 14.42 11.31 EGTS.CA 1.89 3.13 1.62 1,984 4.10 Buy 1,672 190 22.35 17.27 0.67 3.56 7.23 0.82 7.33 10.33 ODHR.CA 15.43 23.00 13.01 7,165 29.50 Buy 1,264 0.81 0.69 0.83 6.60 7.00 NA 12.10 12.67 12.89 SWDY.CA 67.04 94.96 43.80 8,862 84.40 Accumulate 12,995 10.65 7.80 6.11 9.04 9.71 10.05 18.08 20.70 20.29 ESRS.CA 17.58 26.00 12.57 9,550 25.00 Accumulate 17,192 14.46 9.83 7.32 4.15 6.87 7.51 12.56 15.00 22.50 SUGR.CA 15.07 27.40 14.00 1,862 20.70 Buy 1,949 6.57 7.52 7.56 20.39 16.86 17.93 27.51 21.67 24.51 AUTO.CA 39.22 44.47 21.01 5,059 46.95 Buy 5,590 11.82 8.78 6.29 7.7 8.47 10.08 21.06 23.80 25.48 ORWE.CA 30.53 37.30 24.89 2,748 36.89 Hold 4,792 9.18 8.81 7.97 6.66 6.62 6.37 11.54 11.96 12.54 *All figures are quoted in USD **ROA, ROE, EV, Target Price are quoted in Swiss Franc (CHF) Volume I—Issue 3 April - June 2010 EGYPT QUARTERLY MARKET REVIEW Highlight of the Quarter: Contacts & Disclaimer Egypt's Juhayna $34mln IPO 6.8 times Oversubscribed A public share offer by Egyptian dairy and juice maker Juhayna Food Industries, worth 192 million Egyptian pounds ($34 million), was oversubscribed 6.8 times. Cairo-based Mideast investment bank EFG Hermes said Juhayna's public offering lasted for four days. The shares were priced at 4.66 Egyptian pounds each ($0.83), 5 percent less than the company's private placement price. EFG Hermes also received subscriptions for 279.97 million shares for the offering of 41.19 million shares. CCFC Team Director: Dr. Eskandar Tooma Editor In Chief: Shaheen Pasha Program Manager: Aliaa Bassiouny Program Executive: Ghada El Eraqi Research Associate: Diana George Research Associate: Jasmin Abu El-Dahab For more Information regarding CCFC Services, contact us on: +(202) 2615-3443/3469/3680/3442 or The public offering, Egypt's first since 2008, was part of a plan to raise about 1 billion pounds. The plan included a private placement that earlier closed 1.75 times oversubscribed. Juhayna was offering 206 million shares, with some 165 million offered privately at 4.90 pounds. That private placement raised about 808 million pounds. The total offering represents 39.6 percent of the capital of the company, which has said it will use the extra funds to expand food output, including investments in dairy production. The global financial crisis put a stop to IPOs in Egypt after oil services company Maridive and real estate company Palm Hills Developments sold shares in mid2008. Disclaimer: This newsletter has been prepared by Citadel Capital Financial Center staff and undergraduate students at the American University in Cairo. This review is based on information available to the public. This review is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The information and opinions in this review were prepared by CCFC from sources we believe to be reliable and information available to the public. CCFC makes no guarantee or warranty to the accuracy and thoroughness of the information mentioned in this review and accepts no responsibility or liability for losses or damages incurred as a result of opinions formed and decisions made based on information presented in this review. CCFC does not undertake to advise you of changes in opinion or information.