Download EGYPT QUARTERLY MARKET REVIEW July–September 2010

Volume I—Issue 4
July–September 2010
EGYPT QUARTERLY MARKET REVIEW
Table of Contents
Egypt’s Economic Highlights….…………………………………….……….1
Corporate News…………………..……………………………………….…2
Stock Fundamentals………………………………………………………….3
Feature Story: Egypt’s Beltone, Pioneers Merger Scrapped……………….…..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 recent increase in fiscal revenues items comes from the step up in revenues from taxes on
goods and services, recording an increase of 14.9 percent, leveling LE 9.8 billion compared to LE
8.6 billion during July-August last year. Total expenditures increased during July-August
2010/2011 by 10.5 percent, recording LE 52.3 billion compared to LE 47.4 billion last year.
C. Domestic Debt Profile
Gross domestic debt of the general government amounts to LE 733.5 billion (61.2 percent of
GDP) at end of June 2010, compared to some LE 615.9 billion (59.3 percent of GDP) at end of
June last year. Also, net domestic debt of the general government reached some LE 574.2
billion (47.9 percent of GDP). The increase in general government debt at end of June 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 17.7 billion amounting to
LE 168.7 billion at end of June 2010.
D. Monetary Developments
Total liquidity has increased by 0.6 percent during July 2010, registering LE 922.6 billion, compared to 2.4 percent at the end of the previous month to LE 917.5 billion. Moreover, year-on-year
growth in M2 at end of July 2010 stabilized at 10.4 percent, compared to June 2010.
E .Prices
CBE decided to keep its overnight deposit and lending rates unchanged- for the eighth time
in a row- during the Monetary Policy Committee meeting on September 16th, 2010. The overnight deposit and lending rates currently stand at 8.25 and 9.75 percent respectively. MPC is considering the risk of possible second-round effect shocks related to food items that can have an impact
on other prices.
F. External Sector
With respect to the External Sector, the Balance of Payment statistics for the fiscal year 2009/2010
depict notable improvement in the overall balance that has accumulated a surplus of US$ 3.36
billion, compared to a deficit of US$ 3.38 billion in the fiscal year 2008 /2009.
G. Stock Exchange
As for the performance of Domestic Capital Market, the EGX-30 index increased by 601.63
points, reaching 6,634.27 in September compared to 6,033.04 in June; however it has decreased
by 127 points compared to September 2009. Market capitalization decreased over the previous
year by 19.4 percent, reaching LE 431 billion (31.3 percent of GDP).
Egypt’s Key Economic Indicators
Key Indicators
Population (mn)
Nominal GDP (US$ bn)
Real GDP growth (%)
Consumer price inflation (%)
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
2008a
81.5
159.7
7.2
18.3
-7.0
-0.8
14.8
32.6
2009a
83.1
189.2
4.7
11.8
-6.6
-1.5
-10.2
29.5
2010b
84.7
224.8
5.3
11.8
-8.7
0.4
8.2
30.2
2011b
86.3
261.4
5.4
12.0
-7.6
1.3
11.2
31.2
Volume I—Issue 4
July-September 2010
EGYPT QUARTERLY MARKET REVIEW
Money Market Statistics
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
Rate
Date
30/06/2010
Local
L.E
GDR
(USD)
P/D%
6800
8.260
9.252
9.759
10.259
8.263
7.200
10.900
29/09/10
CIB (1:1)
EFG (1:2)
Palm Hills (1:5)
OCI (1:1)
OT (1:5)
Telecom Egypt (1:5)
Suez Cement (1:1)
42.90
29.08
5.78
250.35
5.04
17.48
42.32
7.61
10.39
4.50
44.99
4.34
15.10
7.70
-2.38
-1.69
-14.31
-1.11
-5.23
-4.93
0.13
6400
29/09/10
29/09/10
29/09/10
02/08/09
31/08/10
31/08/10
EGX 30 Index
6600
6200
6000
5800
5600
5400
5200
Value Traded (L.E mn)
41,243
Close
Prev. Close
%Chg
High
Low
YTD%
6,634.27
6,033.09
9.97
6,781.26
5,814.24
-2.29
Yr. H
7,603.04
Yr. L
5,850.38
Volume Traded (L.E mn)
6,221
Corporate News
Corporate News
Egypt's EFG Hermes entered into an agreement with majority shareholders to buy 65 percent
of Credit Libanais. EFG will pay cash consideration of $542 million for 65 percent interest in the Lebanese bank and will finance the acquisition from its own cash resources, and will
not need external funding.
Mo'men Group plans to sell 40 percent of its shares in an initial public offering (IPO) in late
2012. The company is expected to increase its revenue to about LE 1 billion ($176 million) in 2011
from a targeted LE 750 million this year.
Egyptian private equity firm Citadel Capital invested $40 million to grow crops in Sudan,
acquiring agricultural land under long-term leases of up to 25 years from Sudan's government via
two subsidiaries, Sabina and Concord. On a different note, the company is considering listing two
of its existing portfolio companies in the next 12 to 24 months, a senior executive at the private equity
firm said. The listings could take place in Egypt and would be in the range of between $175 million
and $250 million.
Egyptian group El Sewedy Cables is increasing output this year and the next on the back
of growing demand for its products in Europe, the Middle Eastern and Africa. They plan to
capture 2-3 percent of Europe's market over the next three years. The firm is eyeing wind
markets in Brazil, Turkey, Pakistan and Libya, and is also negotiating for a 50-megwatt wind
power project in Pakistan, in a bid to open a new market in Asia.
Egyptian billionaire Naguib Sawiris is in talks to sell a majority stake in mobile firm Orascom Telecom and Italy's No. 3 operator Wind to telecoms group Vimpelcom.
Citigroup Inc's venture capital arm and two other investors are planning to sell Amoun, one of
Egypt's biggest drug-makers. The owners are close to hiring Goldman Sachs to run the sale. The
trio bought Amoun, which makes off-patent branded drugs, for about $450 million in 2006 and it
could now be worth roughly $1 billion.
El Sewedy Cables signed a contract amounting to EUR82 million where the company is assigned to supply and install 60 megawatt in Libya.
The Holding Company for Natural Gas acquired 80% of Egypt Gas (EGAS) in a deal worth
LE674.2 million which is equivalent to LE70.23/share. The seller was the General Authority for
Petroleum.
Orascom Construction Industries approved a two-tranche, five-year bond worth 1.65
billion Egyptian pounds ($289 million) with a fixed coupon of 11.75 percent. Its coupon
will be paid semi-annually and 90 percent of the bond will be offered via a private placement
while rest will be offered to the public in a second tranche.
Stock Fundamentals
Powered by:
Price
Stock
Reuters
Code
P/E
Close
Yr. H
Yr. L
Market
Cap (mn)
28650.99
7.01
ROA
ROE
Target
Price
Recommendation
EV (m)
10
11
12
10
11
12
10
11
Outperform
60229.85
9.49
6.90
5.19
21.13
21.30
29.22
123.60
86.01
12
Telecommunications
Orascom Telecom Holding
ORTE.CA
5.04
7.92
4.27
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
EMOB.CA
177.54
242.50
156.06
19036.00
193.30
Outperform
24303.25
11.58
11.92
10.69
9.00
8.70
8.90
43.30
33.70
113.9
2
30.90
ETEL.CA
17.48
20.59
14.88
30232.24
20.10
Outperform
29157.45
9.69
9.73
9.36
NA
NA
NA
11.50
10.70
10.46
OCIC.CA
250.35
287.90
217.00
52852.08
276.30
Hold
64814.08
16.98
12.91
10.58
6.30
8.00
8.80
17.97
23.00
25.00
COMI.CA
42.90
45.98
24.50
25734.15
41.01
Hold
13993.18
13.42
11.48
9.59
2.80
2.90
3.05
25.47
25.68
25.66
CIEB.CA
12.98
14.08
10.00
3733.87
15.36
Buy
(1105.01)
10.00
8.93
7.80
1.60
1.65
1.70
20.08
22.15
24.90
HDBK.CA
21.30
28.30
18.00
1785.58
29.10
Buy
2696.45
NA
NA
NA
1.65
2.20
3.10
22.80
25.55
29.30
HRHO.CA
29.08
37.29
23.60
11424.01
33.80
Outperform
6420.20
18.45
14.12
11.28
7.10
7.30
9.50
6.78
7.33
9.51
PIOH.CA
3.70
8.27
3.20
1782.50
11.00
Buy
1469.51
NA
NA
NA
NA
NA
NA
NA
NA
NA
Oriental Weavers
TMGH.CA
7.02
8.63
5.71
14675.07
9.65
Outperform
17893.17
9.58
6.88
5.35
2.43
2.43
2.48
5.76
6.85
8.52
OCDI.CA
92.09
103.00
75.00
2639.84
118.50
Buy
1816.54
19.12
9.30
6.16
3.80
5.50
10.20
9.62
12.54
17.28
HELI.CA
33.05
45.58
24.10
2447.66
53.40
Outperform
2516.00
15.45
14.69
13.17
10.91
9.23
9.17
46.56
32.93
26.87
MNHD.CA
30.98
37.00
23.60
3102.00
50.00
Outperform
3072.04
20.20
18.19
16.45
8.70
11.70
12.60
30.40
34.00
31.50
PHDC.CA
5.78
7.10
4.25
6132.67
7.55
Outperform
8518.73
10.33
6.58
5.95
4.72
7.02
7.86
15.96
22.30
16.21
MOIL.CA
2.84
4.00
2.48
884.74
3.96
Outperform
1117.43
10.20
7.08
6.42
16.21
18.91
19.01
27.60
43.95
42.01
SKPC.CA
12.96
15.80
9.60
6693.75
16.00
Buy
5946.55
8.24
8.93
8.61
30.10
22.00
22.00
34.20
28.00
27.00
EFIC.CA
19.16
26.98
15.70
1335.44
26.40
Outperform
2303.67
12.47
8.81
8.02
4.56
6.70
6.26
10.91
14.42
11.31
EGTS.CA
1.92
3.13
1.62
2215.50
4.10
Outperform
2013.34
1055
26.38
14.91
0.67
3.56
7.23
0.82
4.65
10.33
ODHR.CA
14.58
512.03
278.35
8557.80
89.92
Outperform
1968.71
11.42
11.06
9.12
6.60
6.90
NA
11.57
12.65
12.61
SWDY.CA
54.446
63.80
42.54
9264.97
65.20
Outperform
13580.31
11.04
8.50
6.50
7.70
9.00
10.25
18.08
20.70
20.29
ESRS.CA
19.25
26.00
13.63
10163.60
25.00
Outperform
19446.13
16.17
13.78
7.77
3.80
4.80
7.14
11.18
15.00
22.70
SUGR.CA
17.21
26.97
14.00
2104.53
21.55
Buy
2413.80
7.07
7.87
8.32
23.78
19.02
17.93
30.61
26.22
25.26
AUTO.CA
43.80
55.00
21.01
6188.18
46.95
Outperform
7662.31
15.70
12.61
9.52
7.70
8.47
10.08
18.66
22.35
25.73
ORWE.CA
33.00
37.30
24.89
2920.19
37.34
Outperform
5256.10
9.26
8.50
8.05
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 4
July-September 2010
EGYPT QUARTERLY MARKET REVIEW
Highlight of the Quarter:
Egypt's Beltone, Pioneers merger scrapped
A $62 million acquisition by Egypt's Pioneers Holding of investment bank Beltone
Financial has been scrapped after the two sides failed to agree on a strategy for
the merged firm.
Under the plan, announced in November and approved by shareholders of both companies, Pioneers would have acquired Beltone in an all-share deal creating an entity with 29.2 billion Egyptian pounds ($5.13 billion) under management. Pioneers
was to have issued 100 million new shares for Beltone, whose owners would have
held 17 percent of the combined entity. Beltone CEO Aladdin Saba was to have
headed the firm.
Based on the Pioneers share closing price on June 30, the last day it traded before
the announcement, the deal would have valued Beltone at 351 million Egyptian
pounds ($61.6 million), about half the deal's value when it was first announced last
year.
Contacts & Disclaimer
CCFC Team
Director: Dr. Eskandar Tooma
Program Manager: Aliaa Bassiouny
Program Executive: Ghada El Eraqi
Research Associate: Diana George
Research Associate: Jasmin Abu El-Dahab
Research Associate: May Farag
For more Information regarding CCFC Services, contact us on: +(202)
2615-3443/3469/3680/3442 or
[email protected]
Beltone's head of investor relations, Osama Rashad, told Reuters the deal fell through
due to "lack of agreement on future strategy for the new entity".
Pioneers has a wide retail distribution network with smaller research and investment
banking operations. Analysts had said when the merger was announced that the tie-up
would have been complementary, given Beltone's institutional client base.
Some Egyptian media had reported disagreements in the make-up of a new
board. However, Pioneers board member Khaled El Tayeb dismissed such talk.
As a result of the merger scrap, Pioneers shares were trading down 2.9 percent and
the benchmark index (EGX 30) was down 1.1 percent.
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.