EGX 30 Falls 1.5% Below 5630 Pts In Turbulent Week

In a week, the Egyptian Exchange has incurred losses of EGP 5.5 billion driven by political turbulence and calls for civil disobedience. The capital market has hit EGP 380.949 billion at the end of last week, compared to EGP 386.441 billion at the end of a week earlier.

Benchmark EGX 30 index fell by 1.55%, representing a decline of 88.95 pts, ending Thursday’s transactions at 5626.92 pts, compared to EGP 5715.87 pts at the end of a week earlier.

EGX30 hit its highest point on Sunday closing at 5695.62 points, where its lowest point recorded on Wednesday at 5609.32 points.

Meanwhile, the mid- and small-cap index, the EGX70 dropped by 2.65% closing at 476.48 pts during Thursday’s session, compared to 489.39 pts at the end of a week earlier.  Price index EGX100 pushed down by 1.94% concluding Thursday’s session at 807.37 pts, compared to 823.79 pts during a week earlier.

The EGX has recorded volume of trades hit  453 million securities, compared to 594 million a week earlier; while the traded value reached EGP 1.727 billion, compared to EGP 1.458 billion a week earlier.

Mohsen Adel, Vice Chairman of EG-Finance, said there was highly volatility of the indices movements in the market. The EGX indices have faced local individual selling pressures; while foreign buying transactions remarkably boomed during the second half of last week which in turn have contributed to curbing the indices’ losses, Adel added.

The EG-Finance Vice Chairman further noted that the political and economic instability have dragged the market down, notably the attempts to stage civil disobedience in Port Said alongside witnessing a great deal of uncertainty about obtaining the long-awaited US$ 4.8 billion IMF loan.

Companies’ Weekly Performance Highlights:

Orascom Construction Industries (OCIC.CA) closed last week at EGP 266.51, while closed on Thursday at EGP 266.9 (highest close), upping by EGP 0.39.

Stock lowest close during the week came on Sunday at EGP 264.44.

On Sunday, OCI N.V. announced that the GDR holders holding a total of 156,542,609 GDRs (being 98.8% of OCI’s GDRs and representing 75.7% of total shares outstanding including the Sawiris Family and the Abraaj Group have accepted the offer to exchange their GDRs for OCI N.V. shares.

Also on Sunday, EFG-Hermes maintained OCI fair value at EGP 275 per share with Neutral rating.

Hermes stated that, now that OCI N.V. share exchange offer has been approved by shareholders, OCI will formally submit the Mandatory Tender Offer (MTO) to EFSA for approval  Thursday 14 February 2013.

According to OCI management, EFSA should respond within 48 hours. Once approval is granted, the offer will be valid for 21 business days.

Strategically, we expect OCI NV to further invest in the US market, where the impressive shale-gas-driven cost advantage offers several attractive opportunities, Hermes added.

On Monday, Egyptian Financial Supervisory Authority (FSA) sent a release to EGX, stating that an obligatory tender offer was submitted by OCI N.V., a Dutch company listed on NYSE Euronext. Amsterdam, according to Article no. 12 of the Executive Regulations of Law no. 95 for the year 1992, to buy 47,169,862 shares representing 22.57 % of OCI shares.

On Wednesday, OCI N.V. announced that its subsidiary, OCI, will comply with the Egyptian Financial Supervisory Authority’s (EFSA) request for additional documentation, disclosures and clarification pertaining to the announced Mandatory Tender Offer (MTO) by OCI N.V. on its ordinary shares.

As per the request of EFSA, OCI S.A.E. will host another Extraordinary General Meeting (EGM) to discuss additional disclosures related to the transaction and to subsequently obtain approval on the EGM’s resolutions from minority shareholders.

Once minority shareholders approve these resolutions, the EGM result will be ratified and an updated MTO application will be formally filed with EFSA.

Also on Wednesday, Reuters reported that a deal that would see Bill Gates and other U.S. investors inject $1 billion in fertilizer and construction firm OCI NV has been hampered by Egyptian regulators’ request for clarification of the deal.

EFSA wanted more information on an offer by Dutch-listed OCI NV to acquire ordinary shares of its Egyptian-listed subsidiary OCI, OCI NV said.

This move will delay completion of a deal under which U.S. investors will pay shareholders who choose to sell their ordinary, Egypt-listed shares, said Mohsen Adel, vice chairman and managing director of Pioneer Funds, a financial institution.

“The new disclosures will not affect the course of the deal but will extend the time,” he said.

The transaction may see one of Egypt’s biggest firms disappearing from the local stock exchange.

EFSA head Ashraf El Sharkawy told Reuters the clarifications had been requested “to guarantee the stability of the non-banking financial markets”. He added that the aim was not to obstruct or delay the deal but to protect shareholders.

Commercial International Bank Egypt – (COMI.CA) closed last week at EGP 34.97, while closed on Thursday at EGP 34.38, dipping by EGP 0.59 (2 %).

Stock highest close during the week came on Monday at EGP 34.92, while the lowest close came on Tuesday at EGP 34.08.

On Sunday, Moody’s Investors Service has downgraded the standalone credit assessment of five Egyptian banks: National Bank of Egypt to Caa2 from B3, Banque Misr to Caa2 from B3, Banque du Caire to Caa2 from B3, CIB to B3 from B2 and Bank of Alexandria to B3 from B2.

The foreign-currency [FC] deposit ratings of all these banks were also downgraded to Caa1 from B3, capped by Egypt’s FC bank deposit ceiling.

Moody’s expects further downgrading if the banks loss absorption capacity weakens. Improvements in the macroeconomic environment could upgrade Egypt’s bank ratings according to Moody’s report.

CIB said on Tuesday fourth-quarter net income rose 7 percent year-on-year to 588 million Egyptian pounds ($87.4 million), Reuters reported.

CIB said in a statement it made “record” revenue of 5.34 billion pounds for full-year 2012, and net income of 2.23 billion pounds for the full year.

Egyptian banks such as CIB have been able to keep their bottom lines growing thanks partly to high interest rates paid by the state last year for its short-term borrowing.

State borrowing costs soared as foreign investors exited the local treasury market, tax receipts suffered from a weak economy and the government boosted spending to meet popular demands for better living standards after an uprising against President Hosni Mubarak in 2011.

But Egypt’s business sector has been struggling to recover from the disruption that followed Mubarak’s overthrow.

On Wednesday, CIB administration suggested to distribute cash dividends of EGP 746.535 million, representing EGP 1.25 per share which awaits AGM approval.

Also on Wednesday, EFG-Hermes reiterated Commercial International Bank Egypt Buy rating with fair value of EGP 44.9 implying 32% upside potential.

Hermes stated that, CIB has reported FY2012 net profit of EGP2,226 million, up by 38% Y-o-Y and broadly in line with our forecast.

It added that, the strong earnings increase was driven by very strong net interest income growth thanks to higher yields on government securities, as well as a Y-o-Y increase in trading and investment income, and despite provisioning more than doubling during the year.

Earnings in 4Q2012 of EGP588 million increased 7% Y-o-Y (-4% Q-o-Q), and were broadly in line with our forecast of EGP595 million.

Higher-than-expected revenues offset a much higher-than-expected cost of risk during 4Q2012.

Juhayna Food Industries – (JUFO.CA) closed last week at EGP 8.72, while closed on Thursday at EGP 8.55, dipping by EGP 0.17 (2 %).

Stock highest close during the week came on Sunday at EGP 8.67, while the lowest close came on Wednesday at EGP 8.55.

On Sunday, Juhayna announced that it started establishing a new yoghurt plant (Egyfood) in Assiut with investment cost of EGP 200 million expecting production to start in April 2013.

The company added, in a release sent to EGX that, it completed Egyfood 6th of October yogurt plant to start production before the Holy month of Ramadan season.

The company pointed out that, it plans pumping EGP 1.2 billion investments in 2013, 40 % of it are will be directed to Upper Egypt.

On Tuesday, Audi Bank maintained Juhayna fair value at EGP 6.21 per share and kept Reduce recommendation after reporting 2012 results.

Audi stated that, Juhayna Q4 12 normalized NI more than doubled to EGP 85 million, supported by higher sales and better margins.

Audi added that, while results came 12% above our expectations, we expect profitability margins to drop during 2013 because of higher raw material costs and the start up cost related to the establishment of new plants.

On Thursday, EFG-Hermes cut Juhayna rating to Neutral from Buy following the stock’s c37% rally since mid-December 2012.

Hermes stated that, Juhayna posted 4Q2012 recurring net income of EGP86 million, growing c130% Y-o-Y. Earnings came in 10% below our forecast on weaker performance from the typically volatile concentrates and agriculture divisions.

We believe the share price is likely to remain supported in the short-term as: i) 1Q2013 is likely to be strong (partly on a low comparable base); and ii) Juhayna should continue to attract long-term buyers given its defensive nature, exceptional medium-term growth prospects within an EM context.

Regarding 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 this week earning the value of EGP 22,169,419.

Foreign investors chose also to buy by value of EGP 3,746,396.

Arab investors were most active sellers this week by the value of EGP 25,915,815.

Retail & Institutions’ Activity:

Retail activity led the market all through the week as it ranged between 10.79 – 69.25 %.

While Institutions activity ranged during this week between 30.74 – 89.20 %.

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