Download EGYPT QUARTERLY MARKET REVIEW January-March 2010 Egypt’s Political Highlights Volume I—Issue 2

Volume I—Issue 2
January-March 2010
EGYPT QUARTERLY MARKET REVIEW
Table of Contents
Economic and Political Highlights..……….…………………………1
Macroeconomic & Corporate News…………………………………2
Stock Fundamentals………………………………………………….3
Feature Story: Morgan Stanley Joint Venture with OCI…...…………4
Egypt’s Economic and Business Highlights
The government seeks to boost corporate bond market through simplified regulations for issuing corporate bonds, in a fresh bid to develop the capital market and to
diversify the sources of finance for companies and for infrastructure projects. This has
encouraged the car manufacturer GB Auto to announce its intention to issue bonds.
Government talks on health insurance costs through introducing a new law which
will extend compulsory health insurance to all Egyptians, is proving controversial. The
law’s opponents have accused the government of planning to bring healthcare services
under the umbrella of a holding company before privatizing the sector.
After a decade-long hiatus, Private developers are invited back into power sector. In
late January, the state-owned Egyptian Electricity Holding Company (EEHC) launched a
new independent power project at Dairut in Beheira governorate.
The government has made a final decision to locate Egypt’s first nuclear power
station at Al Dabaa, 160 km west of Alexandria, on the basis of a recommendation of
Worley Parsons, an Australian consultancy.
Government plans return to 7% growth as prime minister, Ahmed Nazif, stated that
government plans to achieve this level of GDP growth within two years, returning to
2004-08 levels.
Government’s budget deficit target of narrowing the budget deficit to 3% of GDP by
2012 has been postponed for two years. The fiscal deficit is expected to reach 9.4% of
GDP for the current fiscal year, up from 6.6% in the previous year.
ECMS and EGPC plan new debt issuance as Mr Mohieddin’s decree came shortly
after the EFSA had approved plans by the Egyptian Company for Mobile Services
(ECMS), the operator of the Mobinil mobile-phone network, to issue a E£1.5bn bond.
Egypt’s Political Highlights
Mr Mubarak implements a minor reshuffle of the cabinet through replacing the transport minister,
Mohammed Mansour who resigned after a fatal train crash, with Alaa Fahmy and appointing a new education minister, Ahmed Zaki Badr, the dean of Ain Shams University.
Government is criticized over flood response as at least ten people were killed when flash floods hit
Egypt in mid-January. Some of the worst affected areas included Abu Sweira and Al Arish in Sinai and Aswan in Upper Egypt.
Mohamed ElBaradei, the former head of the UN’s International Atomic Energy Agency (IAEA) and a potential candidate in the 2011 presidential election, returns and launches reform initiative through forming
the National Association for Change to campaign for the amendment of the constitution to facilitate free and
fair presidential elections in 2011 with opposition from the Muslim Brotherhood.
The General Assembly of the State Council, Egypt’s highest legal body, ruled against the appointment of
female judges within the council in an emergency meeting on February 15th.
The US and European states urged Egypt to lift its state of emergency "which has been in place since
1981, and under which up to 10,000 people are believed to be being held without charge" at a UN Human
Rights Council meeting in Geneva, Switzerland on February 17th. Egypt accepted 119 of the Council’s
165 recommendations, including the release of administrative detainees, changing the penal code to abolish
impunity in torture cases and ensuring that the new terrorism legislation complies with international human
rights standards.
Egypt’s Key Economic Indicators
Key Indicators
Population
GDP
Real GDP growth (%)
Consumer price inflation (%)
Budget balance (% of GDP)
Current-account balance (% of GDP)
Total External Debt (% of GDP)
Exchange rate EGP vs. US$
2008a
81.5
158.8
7.2
18.3
-7.1
-0.8
86.4
5.43
2009b
83.1
188.8
4.7
11.8
-6.6
-1.5
78.7
5.55
a: Economist Intelligence Unit Estimate, b: Economist Intelligence Unit Forecast
2010b
84.7
225.4
5.5
10.1
-9.4
-0.8
80..2
5.50
2011b
86.3
253.6
5.6
7.6
-7.6
0.0
78.2
5.58
Volume I—Issue 2
January-March
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
31/03/2010
8.260
9.707
10.030
10.436
8.500
8.250
9.750
30/03/10
CIB (1:1)
EFG (1:2)
Lecico (1:1)
OCI (1:1)
OT (1:5)
Telecom Egypt (1:5)
Suez Cement (1:1)
30/03/10
30/03/10
30/03/10
02/08/09
30/03/10
30/03/10
Local
L.E
65.06
31.76
22.07
263.9
5.63
17.01
44.28
GDR
(USD)
P/D%
11.70
11.52
3.40
47.61
5.12
15.01
8.25
-1.00
-0.20
-13.5
-0.70
0.10
-2.90
2.50
EGX 30 Index
7200
7000
6800
6600
6400
6200
6000
5800
Value Traded (L.E mn)
58,674 Close 31/03/10
Open 03/01/10
High
Low
Prev. Close
% Change
6,806.11
6,214.28
7,076.60
6,208.34
6,208.77
9.52
Yr. H
7,249.55
Yr. L
4,193.94
Volume Traded (L.E mn)
5,893
Macro News
Corporate News
Egypt's unemployment rate edged up to 9.4 percent in the fourth quarter of 2009, from
9.36 percent in the third quarter. The world economic downturn hurt Egypt's key revenue
earners such as tourism, Suez Canal receipts and remittances from Egyptians abroad.
First public-private partnership scheme secures financing as the NewCairo wastewater
treatment project, closed in the first week of February. A team of a local firm, Orascom
Construction Industries, and Aqualia of Spain secured a E£570m (US$110m) loan for
the project from a consortium of local banks.
Egypt's current account deficit shrinks to $1.28 billion in the six months to the end of
December from $2.51 billion a year earlier. The trade deficit also narrowed to $11.93 billion
from $14.63 billion in 2008/09. FDI dropped 35 percent to $2.63 billion, while net private
transfers, or remittances, fell 16.5 percent to $3.46 billion.
Egypt's net foreign reserves were $34.32 billion in February, up from $34.21 billion a month
earlier, the Central Bank of Egypt stated.
Egypt's state-owned Egyptian General Petroleum Corporation (EGPC) is looking to
secure a $2 billion, 58-month debt financing that will be used for export finance. The
company invited banks in mid-December to pitch for an either a pre-export syndicated loan,
a bond or a mix of the two, a banker at a European lender said.
Private equity firm Citadel Capital expects to close a $2.2 billion financing related to an
Egyptian refinery in the second quarter. Financing for the project, a green-field refinery
Egypt's budget deficit rose to 65 billion Egyptian pounds ($11.88 billion) in July-Jan of fiscal year
in partnership with Egyptian General Petroleum Corp, will include $900 million from
2009/10, citing a report from the finance ministry. The figure represents 5.5 percent of Egypt's
state-run Japan Bank for International Cooperation.
GDP, the report added, and compares with 39 billion pounds in the same period a year earlier. PubEgypt's Orascom Construction Industries (OCI) unit BEXIS Group won a $1.3 billic spending declined by 6.2 percent in July-Jan of fiscal year 2009/10 to 173.8 billion pounds.
Corporate income tax slumped 34.7 percent to reach 19.1 billion pounds, the report said, com- lion contract to build a medical centre in a joint venture with Samsung in Abu
pared with 29.3 billion in the same period a year earlier. Taxes on international trade dropped 6.9 Dhabi. BESIX's share of the contract was $780 million, or 60 percent. The client is
Mubadala Healthcare, owned by the Abu Dhabi government and the project is due to be
percent to 7.7 billion pounds.
completed by the first quarter of 2013.
Egypt sees GDP growth at 5.5 pct in fiscal 2010/11. The growth forecast matches the consensus
of 15 independent economists polled by Reuters and is stronger than projections for any of the Gulf Egypt's Orascom Telecom has pushed back the date on which its newly created 871
million depositary receipts (GDRs) will begin trading in London until March 26, citArab states apart from Qatar and for neighbors Turkey and Israel.
ing "unexpected delays". The regional operator has raised $800 million to ensure liquidity as
it challenges an Algerian claim for back taxes.
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 for Hotels & Development
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
Target
Price
Recommendation
EV (m)
09
10
ROA
11
09
10
ROE
11
09
10
11
24.51
ORTE.CA
2.63
8.03
4.57
39,709.80
7.08
Hold
68,025.7
18.05
11.60
6.86
4.65
5.70
NA
31.75
26.82
EMOB.CA
214.61
242.5
183.0
20,500.0
229.80
Hold
24,665.0
10.11
10.05
10.00
15.15
14.75
11.50
64.02
55.13
45.96
ETEL.CA
17.01
20.59
15.12
31,768.6
20.15
Hold
30,400.4
10.95
10.25
9.79
9.20
9.85
10.50
11.90
12.26
12.03
OCIC.CA
263.9
287.9
148.0
57,426.08
284.6
Hold
66,123.7
NA
17.53
12.12
5.10
6.25
8.10
13.09
18.77
23.10
COMI.CA
65.06
76.00
37.01
21,416.85
73.63
Hold
9,430.3
14.47
11.75
10.25
2.50
2.90
2.90
25.05
24.99
24.62
CIEB.CA
12.16
15.00
9.40
3,630.55
15.0
Outperform
(4,092)
9.58
9.44
8.21
1.39
1.58
1.60
18.10
20.30
21.60
HDBK.CA
24.11
28.30
18.87
1,814.34
29.76
Buy
2,314
NA
NA
NA
2.30
1.80
2.00
21.80
20.60
23.15
HRHO.CA
31.76
37.29
18.29
13,988.2
37.0
Buy
11,404
25.38
18.42
19.58
NA
NA
NA
7.94
11.28
7.76
PIOH.CA
4.62
9.50
4.38
2,642.76
11.0
Buy
2,046.7
7.54
NA
NA
NA
NA
NA
NA
NA
NA
TMGH.CA
7.67
8.49
3.70
16,801.46
10.24
Buy
19,659.6
15.20
8.36
6.21
2.05
4.00
4.70
4.91
9.70
10.26
OCDI.CA
97.57
103.0
39.75
3,409.8
124.75
Buy
3,186.8
103.8
NA
23.66
(1.00)
3.80
5.50
(2.57)
7.05
18.35
HELI.CA
32.24
45.89
24.88
2,628.87
57.00
Outperform
2,702.78
26.51
27.32
27.32
8.03
9.30
9.10
32.15
26.30
29.20
MNHD.CA
32.63
42.50
23.60
3,529.0
57.85
Hold
3,511.7
NA
39.21
35.65
NA
NA
NA
35.00
39.80
42.40
PHDC.CA
6.57
7.16
4.70
6,835.05
7.50
Outperform
8,758.7
12.93
7.42
6.10
NA
NA
NA
14.00
NA
NA
MOIL.CA
25.43
26.37
15.71
6,540.26
26.92
Outperform
7,376.58
16.61
12.24
8.53
12.90
21.10
18.70
25.20
38.40
36.80
SKPC.CA
14.62
15.80
8.22
7,302.70
15.80
Buy
6,137.47
NA
8.04
9.03
NA
30.00
21.00
NA
43.25
36.20
EFIC.CA
23.97
27.97
18.67
1,654.92
31.0
Buy
2,623.44
7.24
11.85
14.93
NA
NA
NA
1.20
1.70
10.00
EGTS.CA
2.16
ORHD.CA
3.23
1.62
2,740.5
3.00
Buy
2,331.26
NA
30.71
16.31
NA
NA
NA
1.20
1.70
10.00
23.87
15.88
4,286.30
455.14
Outperform
6,885.18
NA
0.83
0.74
NA
NA
NA
11.40
11.90
8.90
SWDY.CA
75.18
94.96
53.00
9,996.96
83.9
Outperform
13,838.6
NA
10.96
8.59
8.00
10.00
12.00
17.52
19.00
20.70
ESRS.CA
21.13
26.00
8.93
12,950.04
25.16
Outperform
20,622.3
NA
16.17
11.92
1.00
4.90
6.80
1.89
14.20
15.75
SUGR.CA
19.45
27.40
14.61
2,408.71
27.70
Hold
2,212.98
NA
9.46
9.84
9.80
17.00
14.70
11.80
19.80
16.90
AUTO.CA
35.94
37.90
15.25
4,521.07
40.00
Buy
5,441.40
22.15
12.98
8.99
5.60
8.10
8.80
10.00
19.10
22.10
ORWE.CA
39.89
45.00
25.07
2,922.47
39.26
Hold
4,941.8
9.35
8.47
7.45
7.80
8.05
8.40
13.31
14.56
15.58
Data Retrieved from
Volume I—Issue 2
January-March 2010
EGYPT QUARTERLY MARKET REVIEW
Highlight of the Quarter:
Contacts & Disclaimer
Morgan Stanley in Infrastructure Joint Venture with OCI
Morgan Stanley (MS) and Orascom Construction Industries (OCI) announced their
agreement to set up a 50/50 joint venture to
develop and invest in infrastructurerelated assets across the Middle East and
Africa regions.
Nassef Sawiris, CEO and Chairman of OCI,
said, “This proposed joint venture is positioned to capitalize on Morgan Stanley
Infrastructure’s investing expertise and its
global reach as well as our local and regional awareness of infrastructure needs. Bringing together both entities will result in significant investing and execution capabilities,
which we believe are unparalleled in the region.”
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
For more Information regarding CCFC Services, contact us on: +(202)
2615-3443/3469/3680/3442 or
[email protected]
Sadek Wahba, Global head of Morgan Stanley Infrastructure, added, “The coming decade
will require higher investment rates in infrastructure to sustain economic growth in the
Middle East and Africa.”
The deal will help OCI juggle more work by providing a partner willing to absorb some
of the risk associated with long-term projects. On the other hand, Morgan Stanley
would benefit from OCI's regional expertise. The venture is studying investments in
power generation, port construction, waste water management and other projects.
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services.
Morgan Stanley Infrastructure, with $4 billion in equity under management, is a leading infrastructure investment platform that focuses on long-term investments in infrastructure.
Orascom Construction Industries is a leading international construction firm based in
Cairo. The Construction Group ranks among the top global contractors, providing a range of
services in key markets in the Middle East and North Africa in addition to Europe, Africa and
Central Asia.
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.