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Volume II—Issue 1 October–December 2010 EGYPT QUARTERLY MARKET REVIEW Table of Contents Egypt’s Economic Highlights….…………………………………….……….1 Corporate News…………………..……………………………………….…2 Stock Fundamentals………………………………………………………….3 Feature Story: Egypt’s Amer IPO oversubscribed 5.58 times…………….…..4 Egypt’s Economic Highlights A. Real GDP Growth Real GDP growth for FY 2009/2010 has gained momentum and increased to 5.2 percent, an improved rate by all means in comparison to last year’s 4.7 percent realized growth, given the turbulent global economic and financial environment. Growth was driven mainly by strong local consumption and investment spending, the revival of export-oriented sectors, and the diversity of the sources of growth. Recently issued GDP statistics indicate an improvement in economic performance during the fourth quarter of FY 2009/2010. Real GDP grew at 5.4 percent in the fourth quarter of FY 2009/2010,compared to 5.6 percent during the preceding quarter, and 4.6 percent in the fourth quarter of 2008/2009. B. Fiscal Performance The Egyptian government successfully outperformed its deficit target of 8.4 percent of GDP, with the preliminary deficit standing at 8.1 percent of GDP. Figures for FY 2009/2010 show that the overall deficit to GDP increased by 1.2 percentage points to 8.1 percent. The primary deficit to GDP has increases by 0.3 percentage points, registering 2.1 percent of GDP. C. Domestic Debt Profile Gross domestic debt of the general government amounts to LE 780.6 billion (56.6 percent of GDP) at end of September 2010, compared to some LE 665.8 billion (55.2 percent of GDP) at end of September last year. Also, net domestic debt of the general government reached some LE 621.6 billion (45.1 percent of GDP) compared to LE 514.2 billion (42.6 percent of GDP) at end of September 2009. The increase in general government debt at end of September 2010 was driven by the increase in consolidated budget sector debt. D. Monetary Developments Total liquidity has stabilized during October 2010, for the third month in a row, at 1.4 percent, registering LE 961.4 billion, compared to LE 948.2 billion at end of the previous month. Year-on– year growth in M2 at end of October 2010 picked up recording 13.4 percent. E .Prices Domestic consumer prices, annual CPI inflation for urban areas decreased, unexpectedly during November 2010 recording 10.2 percent compared to 11 percent during last month, and compared to 12.9 percent during November 2009. Moreover according to CBE inflation report, annual core inflation increased during November 2010 recording 8.6 percent compared to 7.8 percent during last month. F. External Sector With respect to the External Sector, the Balance of Payment statistics for the fiscal year 2010/2011 steadied at a slight surplus of US$ 14.7 million in the overall balance. This comes as a result of the capital and financial account accruing an inflow of almost US$1 billion. G. Stock Exchange As for the performance of Domestic Capital Market, the EGX-30 index increased by 508 points during the period October-December 2010, reaching 7142 in December 2010, and with an increase of 933 points when compared to December 2009. Market capitalization increased over the previous year by 2.3 percent, to LE 488 billion (35.4 percent of GDP). Egypt’s Key Economic Indicators Key Indicators Population (mn) Nominal GDP (US$ 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 81.50 159.70 7.20 18.30 -7.00 -0.80 14.80 32.60 2009a 83.10 189.20 4.70 11.80 -6.60 -1.50 -10.20 29.50 2010b 84.6 217.2 5.10 11.10 -8.00 0.40 3.90 30.20 2011c 86.2 220.9 4.10 14.60 -12.00 0.72 7.50 31.40 Volume II—Issue 1 October - December 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 31/12/2010 Local L.E GDR (USD) 8.26% 9.27% 10.1% 10.6% 8.50% 8.25% 9.75% 30/12/10 30/12/10 CIB (1:1) EFG (1:2) Palm Hills (1:5) OCI (1:1) OT (1:5) Telecom Egypt (1:5) Suez Cement (1:1) 47.40 33.92 6.34 287.11 4.32 18.08 38.00 8.35 12.01 5.30 48.99 3.65 15.99 5.85 30/12/10 30/12/10 02/08/10 30/12/10 30/12/10 P/D% -3.64 -2.58 -7.99 -4.26 -3.21 -2.66 -15.2 EGX 30 Index 7200 7000 6800 6600 6400 6200 Value Traded (L.E mn) 48,420 Close Prev. Close %Chg High Low YTD% 7,142.14 6,634.27 7.65 7,148.77 6,423.45 13.87 Yr. H 7,247.95 Yr. L 5,628.33 Volume Traded (L.E mn) 6,809 Corporate News Corporate News Citadel Capital Corp.’s Taqa Arabia unit entered into a US$1 billion partnership with a Ugandan company to build small and medium-sized power plants in the East African country. The projects will be built by Taqa Power Africa, a company that is 70% owned by Taqa Arabia and 30% by Chui Investments Ltd., it said. Palm Hills for Development has signed a Memorandum of Understanding (MoU) with Pardera Company for Commercial Centers Management to manage PHD future commercial buildings Sweden's Electrolux has agreed in principle to buy Egypt's Olympic Group, the biggest appliance maker in the Middle East and North Africa, in a push to capture growth in emerging markets. Following an announcement of the mandatory tender offer for up to 100 percent of Olympic Group, Paradise will launch a tender offer to re-acquire two Olympic non-core assets, Namaa and BTech. Orascom Construction Industries, Egypt's biggest listed builder, had formed a joint venture with state-owned Arab Contractors to bid on nuclear power projects in the Middle East. The joint venture will bid on Egypt's first nuclear power plant, planned to be located in Dabaa on the country's Mediterranean coast, in February. OCI has already formed a joint venture with U.S. bank Morgan Stanley to invest in Middle East infrastructure projects. Mr. Niazi Salam, Chairman of Paradise capital unveiled that the value of the deal between Paradise capital and the Swedish company Electrolux amounted to LE2.7 billion which is expected to contribute to the government’s plan to raise exports value to LE200 billion by FY13. Cairo Oils & Soap announced signing an agreement with Deyaar Egypt to construct residential units. The move had been approved by the former’s board on December 11, 2010. DP World has won a concession to double the size of its container terminal at Sokhna Port on Egypt's Red Sea coast. The concession, awarded by Egypt's Red Sea Ports Authority, involves investments of $700 million. The African Development Bank has lent Egypt $550 million, the biggest ever granted to Egypt in a single operation, to build a 650-megawatt gas-fired power plant, which will use gas as a feedstock. Heliopolis Housing & Development announced that it has sold out in a public auction two plots distributed over 5,480 sqm and 2,208 sqm and with a total value of LE16.3 million. Amer Group Holding won a bid for a 2.8 million sqm plot of land south of Cairo, adding a new project to the newly listed firm's expanding list. The firm was awarded the plot by Egypt's Tourism Development Authority. 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 *All figures are quoted in USD **EV & Target Price are quoted in Swiss Franc (CHF) Reuters Code Close Yr. H P/E Yr. L Market Cap (mn) ROA ROE Target Price Recommendation EV (m) 10 11 12 10 11 12 10 11 12 ORTE.CA 4.32 7.89 3.52 22,661.38 7.01 Outperform 60,229.85 5.48 3.25 2.46 40.22 21.53 31.45 191.70 63.84 71.96 EMOB.CA 164.92 242.50 125.00 16,492.00 191.59 Hold 18,537.23 9.29 8.91 8.65 8.55 8.45 9.25 37.36 35.17 33.65 ETEL.CA 18.08 20.59 14.88 30,863.86 20.90 Outperform 24,359.40 8.86 8.91 8.86 9.50 9.50 9.00 11.75 11.55 10.85 OCIC.CA 287.11 294.50 215.00 59,988.18 283.75 Hold 60,970.20 14.84 11.41 9.36 6.25 7.60 8.70 18.07 22.82 24.90 COMI.CA 47.40 47.70 27.45 27,972.82 44.30 Hold 9,673.22 11.89 9.63 8.11 2.80 2.85 2.97 24.35 25.65 25.75 CIEB.CA 15.78 16.50 10.00 4,528.86 16.90 Outperform -1,617.07 9.26 8.17 6.68 1.65 1.70 1.79 20.25 22.15 24.90 HDBK.CA 23.97 28.30 18.00 2,756.55 29.20 Buy 3,664.78 8.52 6.47 4.74 1.45 1.90 2.30 13.50 17.30 21.40 HRHO.CA 33.92 37.29 25.00 12,963.34 36.50 Outperform -13,165.20 11.74 12.58 9.64 3.45 1.80 2.15 9.80 9.16 11.42 PIOH.CA 3.20 7.20 2.36 1,600.00 11.00 Buy 983.51 NA NA NA NA NA NA NA NA NA TMGH.CA 8.63 8.69 6.00 17,374.18 10.00 Outperform 15,959.33 11.66 6.53 4.69 2.40 2.40 2.50 4.40 6.84 9.40 OCDI.CA 107.67 117.00 72.04 216,764.1 130.00 Buy 2,399.81 18.34 8.01 5.64 3.80 5.50 10.20 7.88 12.70 18.21 HELI.CA 24.93 26.61 16.06 2,774.64 27.33 Outperform 2,138.36 11.18 8.95 13.10 NA 9.40 9.70 NA 63.90 58.50 MNHD.CA 31.81 37.00 21.50 3,181.00 38.90 Hold 2,360.06 43.32 29.76 17.64 5.76 6.10 6.70 30.76 24.40 25.30 PHDC.CA 6.34 7.10 4.25 6,646.34 7.80 Outperform 2,546.50 9.74 5.66 4.72 4.45 5.35 6.60 11.75 20.67 20.20 MOIL.CA 3.56 3.99 2.48 1,093.63 3.92 Outperform 1,200.90 15.30 9.27 7.29 10.30 14.00 17.00 21.70 35.15 37.45 SKPC.CA 14.43 15.80 9.71 7,575.75 16.00 Outperform 5,797.31 7.96 8.55 8.01 32.20 NA NA 32.70 26.20 28.70 EFIC.CA 18.91 25.99 14.45 1,316.04 23.20 Outperform 2,000.78 19.65 14.20 8.44 1.90 2.20 4.10 3.80 4.50 8.60 EGTS.CA 2.00 3.13 1.41 2,100.00 2.23 Outperform 1,431.32 NA 60.80 17.78 -0.60 2.60 5.10 -1.70 2.90 6.75 ODHR.CA 16.53 20.08 12.44 466.36 75.00 Outperform 1,879.04 12.58 12.05 9.19 6.60 6.90 NA 10.69 9.53 11.01 SWDY.CA 53.88 63.80 39.28 9,259.81 63.18 Outperform 12,775.75 8.99 7.72 5.76 7.45 7.95 9.90 18.30 17.30 20.20 ESRS.CA 19.60 26.00 15.00 10,647.99 24.00 Outperform 18,446.55 25.69 13.50 6.67 3.80 4.80 6.10 6.90 13.75 21.48 SUGR.CA 22.50 25.00 14.00 2,984.64 26.90 Buy 1,954.39 6.62 6.38 7.70 28.60 28.90 22.20 33.95 33.90 28.00 AUTO.CA 43.44 55.00 24.95 5,603.76 50.00 Outperform 5,431.51 16.70 10.38 7.71 5.60 7.60 11.60 16.00 22.00 25.10 ORWE.CA 34.09 37.30 25.69 3,068.10 38.00 Outperform 5,294.27 9.13 7.84 7.31 6.30 6.70 6.45 12.00 13.00 13.60 Volume II—Issue 1 October-December 2010 EGYPT QUARTERLY MARKET REVIEW Highlight of the Quarter: Egypt’s Amer IPO oversubscribed 5.58 times Egyptian real estate firm Amer Group's initial public offering (IPO) was oversubscribed 5.8 times, one hour before closing of the third day of the offering, on November 25, 2010, showing good demand from retail investors interested in attractive stock offerings. Amer Group Shares trade as high as 2.98 Egyptian pounds per share, compared with 2.8 pounds per share in its initial public offering (IPO). The firm offered 82.14 million shares in the IPO, and 328.6 million shares in the private placement. It has also received bids for 478.9 million shares compared with 82.1 million on offer as Beltone Financial's head of investor relations Osama Rashad told Reuters. Contacts & Disclaimer 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] The firm sold 328.6 million shares in a private placement and 400mn shares have been subscribed up out of the 82mn floated shares. However, with a sale of 500 million shares in an IPO and private placement, the firm values at as much as 7.7 billion Egyptian pounds ($1.3 billion). Amer Group sells holiday homes on Egypt’s coasts and elsewhere. One of its projects is Golf Porto, covering 2.2 million square meters in the mountainous Ain Sokhna area by the Red. The IPO is Egypt’s second since 2008. Egyptian dairy and juice maker Juhayna Food Industries sold shares in an IPO in June. That offering, worth 192 million pounds, was oversubscribed 6.8 times. 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.