EGX30 Retreats by 1.9% Amid Fluctuated Performance Week

Egypt’s stock exchange benchmark EGX 30 index retreated by 1.9 % this week, representing a decline of 91.87 points, ending Thursday transactions at 4,735.15 points compared to 4,827.02 points at the end of last week.

Regarding current week trading, the index hit its highest point on Thursday closing at 4,735.15 points, where its lowest point recorded on Tuesday at 4,558.61 points.

Egypt’s stock exchange benchmark extended loss for the fourth consecutive day to start week on sharp decline by 2.17 % on Sunday and close at 4,722.41 points. Market trade volume reached 89,577,436 shares amounted to LE 1,194,560,079.

Egypt’s stock exchange benchmark fell to eight-week lows on Monday after the Muslim Brotherhood challenged the government to change the terms of an emergency IMF loan, showing political powers remain far apart on how to stave off a payments crisis.

The index extended loss for the fifth consecutive day on sharp decline by 2.73 % on Monday and close at 4,593.52 points. Market trade volume reached 108,530,956 shares amounted to LE 355,707,924.

Egypt’s stock exchange main index widened red area for the sixth consecutive day and retreated by 0.76 % on Tuesday to close at 4,558.61 points after fluctuated performance. Market trade volume reached 100,106,655 shares amounted to LE 760,814,643.

The benchmark ended negative performance which lasted six consecutive days and jumped by 2.05 % on Wednesday to close at 4,651.88 points. Market trade volume reached 123,631,103 shares amounted to LE 500,219,800.

Egypt’s stock exchange benchmark extended positive performance and advanced by 1.79 % on Thursday to close at 4,735.15 points. Market trade volume reached 122,437,685 shares amounted to LE 487,409,602.

Companies’ weekly performance highlights:

Orascom Telecom Holding (ORTE.CA) stocks closed last week at L.E 3.4, while closed on Thursday at L.E 3.46 (highest close), upping 2 % (LE 0.06).

The lowest close during the week came on Monday at LE 3.19.

Last Thursday, talks between Vimpelcom and Algeria over the future of the Russian group’s Djezzy Algerian mobile phone unit have soured since the imposition last month of a $1.25 billion fine on Djezzy, Reuters reported according to sources on both sides.

Vimpelcom, 35 percent owned by Norwegian group Telenor ASA, is now considering seeking international arbitration over the fine, said the sources, an Algerian official and a person close to the Russian firm.

The two sides had been close to concluding a deal under which the Algerian state would have acquired a 51 percent stake in the Djezzy mobile phone business from Vimpelcom, ending a prolonged row that has hurt the parent company’s share price.

But the fine has jeopardised that deal, the sources said, dimming the company’s hopes that it can get a multi-billion-dollar payout from Algeria in exchange for the stake and start operating lucrative Djezzy as a viable concern.

Following the announcement of the fine, “relations … have deteriorated to the point that international arbitration is becoming a very likely option to find a solution to the fine issue,” the Algerian official, who is familiar with the discussions, told Reuters on condition of anonymity.

Vimpelcom is expected on Sunday to lodge an appeal in an Algerian court against the $1.25 billion fine. It was imposed after a judge ruled that Djezzy had made false statements to the Algerian central bank about currency transactions.

The sources said that Algeria wants the fine deducted from the amount it pays Vimpelcom for its controlling stake.

But Vimpelcom does not want the fine deducted from the deal price, said the source close to Vimpelcom, also speaking on condition of anonymity. The source confirmed to Reuters that Vimpelcom was considering international arbitration.

On Sunday, The Administrative Court (Investment Division) rejected yesterday the claim of annulling Orascom Telecom Holding split process which was filed against Egyptian Financial Supervisory Authority (EFSA).

The court stated that such decision was taken as the investor Ibrahim Ibrahim Mahmoud, who filed the law suit, didn’t submit a complaint to FSA’s Complaints Committee.

It is worth noting that, EFSA approved OT split to companies, Orascom Telecom Holding and Orascom Telecom Media and Technology Holding.

On Monday, Negotiations between the Algerian government and Vimpelcom over the firm’s Djezzy mobile phone unit have not stopped, Algeria’s telecommunications minister said, despite a row between the parties over a $1.25 billion fine, Reuters reported.

The minister, Moussa Benhamadi, said the negotiations “are still being conducted”, Algeria’s official APS news agency reported late on Sunday.

Sources in the Algerian government and close to Vimpelcom told Reuters last week relations between the two sides had deteriorated because of the fine imposed on Djezzy and that Vimpelcom was considering going to international arbitration.

Algeria’s government is nationalising a 51 percent stake in Djezzy, and negotiations are now focused on how much it will pay Vimpelcom for the share.

Egyptian Company for Mobile Services (Mobinil) – (EMOB.CA) stock closed last week at L.E 176.4, while closed on Thursday at L.E 179.97, highest close; upping 2 % (LE 3.57).

Stock lowest level came on Tuesday closing at LE 161.53.

On Tuesday, Mobinil announced that there are no steps taken considering the terms memo of the syndicated loan consists of a consortium of 4 banks to arrange its loan.

It added, in a release sent to EGX that, it is periodically conducting talks with banks considering its finance but no material steps were taken in this issue.

On Wednesday, CI Capital upgraded Mobinil recommendation from Hold to Buy, given a 25% upside potential to our target price: the suggested EGP202.5/share acquisition price.

Mohamed Hamdy and Amr Hussein Elalfy , analysts at CI Capital, stated that news published in Al-Mal newspaper about proposed amendments to the Telecom Law was the main reason behind the selling pressure witnessed today in Mobinil shares (down almost 10% intraday, 7% for the day).

According to the article, the new amendments could oblige telecom companies to keep a minimum of 20% of its capital in Egyptian hands. However, by end of today’s trading session Reuters quoted an unnamed source at the Ministry of Communications & Information Technology (MCIT) as saying that the proposed amendments will be limited to new licenses only (if any).

They stated that, in our opinion, if the Parliament approves such amendments, we do not believe they will be applied retroactively on operating companies and, if so, may be challenged as unconstitutional. If worst comes to worst, France Telecom (FT) and Orascom Telecom Media & Technology (OTMT.CA) may have to fine-tune their deal to comply with the new rules.

That said, we see two scenarios at opposite ends of the spectrum: (1) France Telecom (FT) may decide not to acquire any additional stakes in EMOB and (2) FT can comply with the new ownership limit by listing 15% on the EGX in addition to the 5% owned by OTMT.

Absent any official news, we prefer the second scenario and view today’s intraday price fluctuation as speculative in nature.

On Thursday, France Telecom has finalised a deal to buy out most of its partner’s stake in Egyptian telecom operator Mobinil for 1.5 billion euros ($1.97 billion), leaving the joint venture with 95 percent French ownership but significant Egyptian board and management presence, Reuters reported.

France Telecom was already the biggest shareholder in Mobinil, and Egypt is a key part of its effort to expand in high-growth emerging markets in Africa and the Middle East.

This accord simply recasts the terms of its relationship with Egyptian tycoon Naguib Sawiris, who had a put option to sell out completely to France Telecom starting in September 2012.

Sawiris will instead sell much of his stake, and minority shareholders of listed holding company ECMS can choose to keep their shares or accept a tender offer from France Telecom.

Under the terms of the accord, France Telecom will buy most of the stake held by Sawiris’ holding company Orascom Telecom Media and Technology Holding (OTMT) for 202.5 Egyptian pounds ($33.54) per share.

It will then make a tender offer at the same price to the minority shareholders of ECMS, the listed portion of Mobinil.

France Telecom would end up owning 95 percent of Egypt’s largest mobile operator if all the minority shareholders accept, while Sawiris would keep 5 percent.

The Egyptian side will retain six of 13 seats on the board and the same voting rights as before.

The deal is subject to regulatory approval in Egypt.

The new accord will also put into place a new system of call and put options through 2017 to set the terms under which Sawiris’ OTMT can exit in the coming years.

Also on Thursday, Egyptian Financial Supervisory Authority (EFSA) sent a release to EGX, stating that an obligatory tender offer submitted by MT Telecom SSRL (France Telecom-Orange affiliate), according to Article no. 12 of the Executive Regulations of Law no. 95 for the year 1992, to buy up to 100 million shares representing 100 % of Mobinil shares at LE 202.5/share.

Noting that, Orascom Telecom Media and Technology Holding (OTMT) will maintain 5 % of its stake in Mobinil.

The release added that, the mandatory tender offer is under study by FSA.

Telecom Egypt (ETEL.CA) stock closed last week at L.E 13.66, while closed on Thursday at L.E 12.3, sinking by 10 % (LE 1.36).

The highest close during the week came on Sunday at LE 13.74, while the lowest close came on Tuesday at LE 12.07.

On Wednesday, Saudi Telecom Co. (STC), the kingdom’s largest phone service provider, wants to partner with regional operators to strengthen development and services, al-Watan said citing Chief Executive Officer Saud al Daweesh.

Saudi Telecom discussed joint projects with Telecom Egypt Co. in the field of submarine cable services, the newspaper said.

Egyptian Financial Group-Hermes – (HRHO.CA) closed last week at LE 12.85, while closed on Thursday at LE 11.83, sinking 8 % (LE 1.02).

Stock highest level recorded on Sunday closing at LE 12.63, while the lowest close came on Tuesday at LE 11.49.

On Sunday, EFG-Hermes reported a 63 percent drop in 2011 net profit on Sunday as the economic fallout from uprisings across the Middle East pushed down brokerage, investment banking and asset management revenue, Reuters reported.

Net income before minority interests was 307.7 million Egyptian pounds ($51 million), down from 826.2 million pounds in 2010, a statement from the bourse said.

Like other Egyptian financial firms, EFG was hit last year by the turmoil that followed a popular uprising that unseated the country’s president.

Consolidated operating revenue fell 31 percent as investment bank revenue tumbled 65 percent.

The unit’s fee and commission income fell 31 percent, EFG said in a statement. It closed four major transactions during the year with a combined value of over $27 billion.

Assets under management grew 2.2 percent from the third quarter after three quarters of declines.

The company said commercial bank Credit Libanais, which EFG bought in 2010, reported a profit that offset a net loss in investment banking, “underscoring the wisdom of management’s pursuit of a universal banking strategy”.

Ezz Steel (ESRS.CA) closed last week at LE 6.7, while closed on Thursday at LE 6.64 (highest close) dipping by 1 % (LE 0.06).

Stock lowest level recorded on Tuesday closing at LE 6.13.

On Tuesday, Ezz Steel said its 2011 net profit declined 20 percent from a year earlier, Reuters reported.

Net profit after minority interests dropped to 202 million Egyptian pounds ($33.5 million) from 252 million pounds. Net sales rose 12 percent to 18.6 billion pounds.

Additionally, Ezz Steel reported consolidated financial results posting a net profit of LE 536,250 (value in thousands) for the period from 01/01/2011 till 31/12/2011.

The company announced that net sale hit 18.611 billion in 2011.
Commenting on the results, Mr Paul Chekaiban, Chairman and Managing Director of ezzsteel, said:

“2011 was a challenging year both in Egypt, because of the ongoing exceptional political circumstances, and globally because of the slowdown in the steel industry.

“However, we are pleased that ezzsteel managed to come through this period with an improved performance across production, sales, revenues and margins.

“With the completion of our long product mill in Suez, which further increases the flexibility of our production portfolio, and given the strength of our domestic market and the solidity of our balance sheet, we are confident that ezzsteel’s business model will deliver even better results as a more stable political environment returns to Egypt.”

Sectors performance:

The most active sectors all through the week were Telecommunications, Real Estate, Banks, Financial Services and Construction & Material.

Telecommunications sector achieved total traded value of L.E 831,386,065.

Real Estate came second in terms of performance, as it achieved total traded value of L.E 218,531,533.

Financial Services sector ranked third in terms of performance, as it achieved total traded value of LE 152,283,228.

Regarding Construction & Material, it achieved total traded value of L.E 111,343,419.

Finally, Banks, as it achieved total traded value of LE 70,979,755.

Regarding the investors’ activity:

-Local investors led the market activity all through the week, followed by Foreign and Arab investors respectively.

– Local investors were the most active buyers all through the week as their stock this week earning the value of L.E 223,366,899.

– Foreign investors were most active sellers this week by the value of L.E 222,879,112.

– Arab investors chose also to sell by value of L.E 487,788.

Retail and Institutions’ activity:

Retail activity led the market all through the week as it ranged between 15.23 – 61 %.

While Institutions activity ranged during this week between 38.99 – 84.76 %.