Download EGYPT QUARTERLY MARKET REVIEW April - June 2011 Volume II—Issue 2

Volume II—Issue 2
April - June 2011
EGYPT QUARTERLY MARKET REVIEW
Table of Contents
Egypt’s Economic and Political Outlook….………………...……….………1
Corporate News…………………..…………………………………………2
Stock Fundamentals…………………………………………………………3
Feature Story: Citadel’s Green Transport Platform attracts $21mn investments………...4
Egypt’s Economic and Business Outlook
The interim government released the draft budget for fiscal year 2011/12 in early June. The
plan foresees a fiscal deficit of 10.95% of GDP, based on revenue of L.E350.3bn (US$58.8bn)
and expenditure of L.E515.8bn, marking a 25% increase in expenditure.
Egypt’s Political Outlook
Egypt has entered a period of heightened political instability. The popular uprising, which
led to the ouster of Hosni Mubarak, the former president, was a momentous event unparalleled
in the modern history of Egypt. Mr Mubarak’s resignation on February 11th was expedited
after the Supreme Council of the Armed Forces put pressure on him to stand down.
The military council, headed by Field Marshal Mohammed Tantawi, has said that it will oversee the transition process until new parliamentary and presidential elections are held. The
military council has dissolved parliament and issued a constitutional decree, which will remain
in force until the elections. The interim constitution includes a package of amendments,
which was approved by more than 77% of voters in a referendum held on March 19th.
Given Egypt’s track record of missing budgetary targets and the forecast of a deficit of 10.4%
of GDP in 2010/11, however, the Economist Intelligence Unit expects the fiscal gap next year
to widen to 12% of GDP.
Egypt has received pledges of political and economic support from key international players as it makes the transition to a more democratic system of governance. The US, World
Bank and IMF have committed to provide Egypt with billions of US dollars of financial assistance.
Higher spending, particularly on subsidies, and a fall in tax and customs receipts are expected
to push the fiscal deficit up to an average of 11.2.% of GDP in 2010/11-2011/12. The deficit
will edge downwards thereafter.
Egypt’s Key Economic Indicators
The Egyptian pound is expected to depreciate in 2011-12, which will add to inflationary
pressures.
The loss of tourism revenue’s anticipated results include a large increase in the current account deficit in 2011. The interim government is expected to abandon plans for further
economic reform and liberalization while it focuses instead on stabilizing the economy. If the
transition process is successful, some of these policies may be revived.
Although inflation is likely to accelerate owing to the expected depreciation of the Egyptian
pound and fast-rising international commodity prices, the Central Bank of Egypt (CBE)
might be reluctant to raise interest rates. In mid-March, the CBE announced that it would start
issuing regular seven-day repurchase agreements (repos) with a fixed rate to be decided by
its Monetary Policy Committee.
Key Indicators
2009a
2010a
2011b
2012c
Population (mn)
Nominal GDP (US$ bn)
Real GDP growth (%)
Consumer price inflation (%)
83.1
189.2
4.7
11.8
-6.6
-1.5
-10.2
29.5
84.6
217.2
5.1
11.1
-8.7
-2.0
8.2
35.0
86.2
232.4
1.2
16.2
-10.4
-3.4
3.2
40.2
87.8
264.6
4.6
11.6
-11.9
-1.4
9.5
42.4
Government Balance (% of GDP)
Current-account balance (% of GDP)
Gross Fixed Investment (% real change)
Total External Debt (year-end; US$ bn)
a: Actual, b: Economist Intelligence Unit Estimate c: Economist Intelligence Unit forecasts
Volume II—Issue 2
April - June 2011
EGYPT QUARTERLY MARKET REVIEW
P/D%
5.10
6.99
5.30
45.78
3.44
12.74
7.50
-4.91
-2.80
155.41
-4.58
-5.51
-5.98
6.82
EGX 30 Index
5800
5600
5400
5200
5000
4800
4600
Value Traded (L.E mn)
35,035
26‐Jun‐11
19‐Jun‐11
12‐Jun‐11
5‐Jun‐11
29‐May‐11
22‐May‐11
15‐May‐11
4400
8‐May‐11
29.98
20.10
2.32
268.2
4.07
15.15
39.25
GDR
(USD)
1‐May‐11
CIB (1:1)
EFG (1:2)
Palm Hills (1:5)
OCI (1:1)
OT (1:5)
Telecom Egypt (1:5)
Suez Cement (1:1)
Local
L.E
24‐Apr‐11
28/06/11
29/06/11
29/06/11
29/06/11
02/08/09
30/06/11
30/06/11
30/06/2010
17‐Apr‐11
9.13
11.91
12.41
12.64
8.50
8.25
9.75
Date
10‐Apr‐11
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
3‐Apr‐11
Money Market Statistics
Close
Prev. Close
%Chg
High
Low
YTD%
5,373.00
5,386.84
-0.26
5,666.65
4,850.41
-11.92
Yr. H
7,693.46
Yr. L
4,794.88
Volume Traded (L.E mn)
5,960
Corporate News
Corporate News
An official in The Holding Company for Petrochemicals declared that the company injected
LE758.5 million investments in 15 companies. He added that approximately 70.5% of the investment was directed to Eastern Tobacco. It is worth mentioning that EAST plans to reallocate its
plants to 6th of October City with total investment cost of LE5.4 billion by FY12.
Amer Group Holding ended the procedures for establishing 4 companies in tourism development and real estate. Riad Refaat, Director of Investor Relations, declared that the four companies are 99% owned by the holding company, pointing out that New companies are located in
Saudi Arabia and Syria. He said that both companies will execute a project of the Holding Company. He added that one of the companies will develop the project "Porto Pyramids" which is located over 102k sqm and designed to create 240 residential villas near the pyramids in Giza.
The Managing Director of Lecico Egypt announced that his company has succeeded to penetrate
the Finnish and Swedish markets and is targeting to increase the amount of exports to 100k pieces
per annum. In the mean time, Lecico received LE41 million from Mohandes Insurance for the
damages from fire in one of the company’s factories.
National Bank of Egypt announced it will reduce the interest on small business loans to 1.5%
annually according to Central Bank directives to exempt banks from reserve requirements for small
and medium size project loans. Noteworthy is that the national bank has a portfolio of LE
11 billion as loans for small size businesses.
Orascom Construction Industries announced that it had won a contract to perform civil works
on the north Giza electrical plant. Furthermore, the civil works contract is estimated at a value of
LE1 billion and to be financed by the Cairo Company for Electricity through a loan from National Bank of Egypt.
Arabiyya Lel Istithmaraat, 51% owned investment of “Misr Mechanical & Electrical Projects –
Kahromika,” has successfully signed an EGP100Mn contract for the mechanical installation
works of the first 2X650 MW Super Critical boiler in Egypt and the Arab region in Ain El Sukhna
Power Station with Dosan of Korea. Preparation works have been commenced.
The Egyptian Company for Mobile Services (MOBINIL) denied that it had reached an
agreement with Telecom Egypt regarding the rates of international calls and leasing the infrastructure of the latter according to Al Shorouk newspaper. In the meantime, Mr. Mohammed Abdel Rahim, CEO of Telecom Egypt, declared the company’s intention to compete for the fourth
mobile license if the government decides to tender. He stated that TE would not borrow to finance its ongoing expansions due to the sheer size of its cash position. He added that TE lost
LE75 million due to cables stolen after the revolution.
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
Reuters
Code
Close
Yr. H
P/E
Yr. L
Market
Cap (mn)
Target
Price
Recommendation
ROA
ROE
EV (m)
11
12
13
11
12
13
11
12
13
ORTE.CA
4.07
1.11
0.76
21,349962
5.77
Outperform
6,945.77
3.47
3.73
9.89
9.54
2.82
2.80
12.01
8.54
6.60
EMOB.CA
128.04
230.00
120.00
12,804000
170.99
Hold
20.129.86
8.94
8.28
9.52
7.69
8.37
8.04
27.40
26.85
30.50
ETEL.CA
15.15
23.30
17.00
25,86214
19.50
Outperform
21,203.49
8.86
8.91
8.86
8.18
8.93
8.98
10.65
10.80
10.98
OCIC.CA
268.20
321.30
238.04
56,03717
280.92
Outperform
69,488.70
13.75
10.07
9.60
7.50
9.90
10.00
19.60
21.47
25.00
COMI.CA
29.98
53.00
27.00
17,69251
35.90
Hold
2,827.63
13.31
10.41
8.37
2.28
2.45
2.80
19.70
20.51
22.75
CIEB.CA
10.20
16.00
12.38
29,27400
16.9
Hold
-4,221.73
10.32
8.67
6.62
1.30
1.60
1.60
15.50
19.30
21.90
HDBK.CA
17.00
25.00
18.85
1,955,000
23.90
Outperform
3,019.83
8.52
6.47
4.74
1.20
1.85
1.80
9.15
14.60
15.35
HRHO.CA
20.10
36.50
21.60
76,92551
25.00
Hold
-1,857.06
16.52
10.28
8.23
1.55
1.90
1.80
5.80
8.63
11.56
PIOH.CA
4.35
11.00
11.00
21,75000
11.00
Buy
2,050.00
NA
NA
NA
NA
NA
NA
NA
NA
NA
TMGH.CA
4.92
11.02
3.60
10,15272
6.05
Hold
14,546.17
8.37
4.92
6.79
2.43
2.48
NA
4.52
4.80
5.42
OCDI.CA
61.11
137.50
67.00
22,16525
87.50
Outperform
2,322.40
6.34
4.83
4.48
5.50
10.20
10.50
15.35
16.12
15.52
HELI.CA
18.75
38.00
15.60
20,86068
21.40
Hold
2,259.78
13.81
13.86
16.18
6.73
7.10
7.10
38.70
39.54
32.54
MNHD.CA
20.57
38.90
24.76
21,59850
28.40
Outperform
2,339.16
29.87
17.70
14.06
6.06
6.74
6.74
24.70
32.68
26.18
PHDC.CA
2.32
11.30
1.70
24,32102
3.84
Outperform
5,514.94
4.12
2.62
3.66
4.41
5.21
3.00
10.80
13.90
10.50
MOIL.CA
3.40
4.20
3.60
10,44480
3.85
Outperform
1,324.39
12.21
10.69
9.24
10.40
11.55
13.20
26.66
30.17
33.10
SKPC.CA
14.64
18.00
14.00
7,686000
16.35
Outperform
6,763.41
10.07
8.22
7.44
21.00
23.00
19.00
47.40
48.00
42.50
EFIC.CA
14.50
24.00
21.49
1,004879
22.95
Outperform
1,860.93
9.27
6.18
6.65
4.58
6.29
7.39
8.94
11.85
13.00
Egyptian for Tourism Resorts
EGTS.CA
1.21
4.20
0.60
12,70500
1.86
1,079.03
29.50
NA
NA
-0.22
0.38
NA
-0.89
-0.42
-1.00
Orascom Development Holding (EDR)**
Industrial Goods
El Swedy Cables
El Ezz Steel Rebars
Consumer Goods
Delta Sugar
GB AUTO
Oriental Weavers
ODHR.CA
9.90
50.80
26.20
2,793,087
42.00
1,277.82
12.24
8.89
6.88
NA
NA
NA
6.27
8.01
9.25
SWDY.CA
36.60
75.00
31.00
62,90076
45.40
Hold
6,195.55
8.86
7.01
5.36
5.75
6.36
6.60
13.64
13.83
14.15
ESRS.CA
10.94
25.50
7.00
59,43319
12.80
Outperform
15,957.13
19.16
14.62
6.33
2.37
5.60
8.70
6.89
7.62
19.70
SUGR.CA
19.80
26.90
18.40
24,48289
26.60
Outperform
2,080.29
7.77
9.05
7.45
19.58
19.71
19.75
26.10
26.00
26.00
AUTO.CA
30.51
46.30
31.50
39,35790
33.45
Outperform
4,700.19
17.97
NA
NA
4.25
6.95
6.80
12.03
19.20
19.16
ORWE.CA
29.50
39.00
33.20
26,550000
36.20
Hold
5,305.09
8.76
7.84
7.03
5.75
5.90
6.60
11.82
12.10
12.25
*All figures are quoted in USD
**ROA, ROE, EV, Target Price are quoted in Swiss Franc (CHF)
Underperform
Outperform
Volume II—Issue 2
April - June 2011
EGYPT QUARTERLY MARKET REVIEW
Highlight of the Quarter:
Contacts & Disclaimer
Citadel’s green transport platform attracts $21 mln investment
The German development finance institution DEG and the European Investment
Bank (EIB) will jointly invest $21 million in the fund controlling private equity
firm Citadel Capital's river transport investments. DEG has contributed $14 million while
EIB has invested a further $7 million, for a combined 19 percent ownership of the fund,
with the balance held by Nile Logistics (69 percent) and Banque Misr (12 percent), the firm
said in a statement.
Citadel said the money will be pumped into the Citadel Capital Transport Opportunities II fund, which controls barge operator Nile Cargo and the National River Port Management Company. These operate "an environmentally-friendly network of ports and…fuel
efficient barges" in Egypt. Both fall under the umbrella of NMT, Citadel Capital's holding
company for investments in Egypt's logistics and river transportation sector. Citadel's river
transport investments in Sudan fall under the Nile Logistics Platform Company, which in
turn is a shareholder in CCTO II.
CCFC Team
Director: Dr. Eskandar Tooma
Program Manager: Aliaa Bassiouny
Program Executive: Ghada El Eraqi
Research Associate: Aya Abou Hussein
For more Information regarding CCFC Services, contact us on: +(202)
2615-3443/3469/3680/3442 or
[email protected]
"NMT will use this infusion of equity to rapidly scale-up its operations, building additional barges and procuring new handling equipment for its ports," said Citadel Capital
Managing Director and Co-Founder Hisham El-Khazindar.
Nile Cargo has 31 reconditioned 50-meter barges and four custom-designed 100meter barges (each with a capacity of 1,500 tons) presently in service. The company's goal
is to have an additional three pushers and six dumb barges in service by the beginning of 2012 and a further 10-18 pushers and barges by the end of that year.
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.