EGX 30 Hikes 3.9% In Week On Funding Hopes
Egyptian Exchange benchmark EGX 30 index advanced by 3.94 % this week, representing an increase of 210.5 points, ending Thursday transactions at 5542.75 points compared to 5332.25 points at the end of last week.
Regarding current week trading, the index hit its highest point on Thursday closing at 5542.75 points, where its lowest point recorded on Sunday at 5424.79 points.
EGX30 started week in green area and advanced by 1.74 % to close at 5424.79 points on Sunday. Market trade volume reached 204,272,560 shares amounted to EGP 681,716,230.
EGX30 ended in green area and rose by 0.65 % on Monday to close at 5459.92 points. Market trade volume reached 251,698,902 shares amounted to EGP 771,356,180.
The Index extended green performance and advanced by 1.49 % to close at 5541.46 points on Tuesday. Market trade volume reached 296,271,153 shares amounted to EGP 889,939,819.
EGX30 ended rally which lasted for 4 consecutive sessions and retreated by 0.56 % to close at 5,510.56 points on Wednesday. Market trade volume reached 156,629,861 shares amounted to EGP 701,851,349.
EGX30 returned to positive area and rose by 0.58 % to close at 5542.75 points on Thursday. Market trade volume reached 186,703,705 shares amounted to EGP 976,672,367.
Companies’ Weekly Performance:
Orascom Construction Industries (OCI) – (OCIC.CA) closed last week at EGP 277.58, while closed on Thursday at EGP 288.05 (highest close), jumping by 4 % (EGP 10.47).
Stock lowest close during the week came on Monday at EGP 277.79.
On Wednesday, OCI announced that it will build a $1.4 billion fertilizer plant in Iowa and is buying a U.S. construction firm, as it targets growth outside its main Middle East markets, Reuters reported.
The plant in the main U.S. corn-growing region will make between 1.5 and 2 million metric tons of products including ammonia, urea and urea ammonium nitrate annually, reducing U.S. reliance on imports, OCI said in a statement.
Construction is due to begin this year for completion by mid-2015 and will be funded using equity and bonds.
“It costs $100 to (import fertilizer) to Iowa on a $400 product,” OCI Chairman Nassef Sawiris told Reuters in a phone interview. “The Iowa plant will keep that $100 dollars in its operating margin.”
OCI’s construction arm took the contract worth over $1 billion to build the plant, which will use technology from Kellogg Brown and Root, Maire Tecnimont and ThyssenKrupp (TKAG.DE).
Orascom Construction Group also said it was buying The Weitz Co, an Iowa-based commercial, federal and industrial construction specialist whose revenue tumbled by more than half in recent years because of the U.S. economic downturn.
Weitz had an orders backlog of $788 million on June 30, half of it made up of federal projects. It will bolster OCI’s U.S.-based construction business Contrack International.
Sawiris said recent fertilizer investments meant a 60 percent increase in OCI’s profit-generating assets during the second half of 2012.
“As this … asset improvement comes to an end in November and December, people are going to see month after month of quite significant growth,” said Sawiris, whose family founded some of the biggest companies in Egypt, in industries ranging from telecoms to hotels.
He said OCI now had enough new projects on its plate until 2013 when it would address fresh growth opportunities.
Sawiris said markets such as Libya and Egypt had suffered from the Arab Spring uprisings that began in early 2011. But Saudi Arabia remained very strong.
Asked if OCI’s construction business would see growth in its order backlog in the coming year, he said: “Sure … We are working on other sizeable opportunities and we are always bidding for work”.
His optimism comes despite a slide in investment and tourism into Egypt in the wake of last year’s popular uprising.
“We have to get the currency obstacle behind us even with a not very significant devaluation, but some kind of adjustment has to happen. The faster it happens the faster we will get the (Egyptian) economy growing,” said Sawiris.
Sawiris said he expected a demerger of OCI’s fertilizer and construction businesses, first planned for the third quarter of this year, to be completed in October and that government approval for the split appeared imminent.
He said it was possible OCI would see a one-off impact from a move by Egypt’s government to rationalize or phase out gasoline and diesel subsidies for industry, but its customers would share some of the added costs.
“All our construction contracts have cost-adjustment formulas so … clients will participate in the implications,” he said, adding it was time Egypt got rid of subsidies that drained precious funds from education and health.
“Every time I go on vacation in Egypt, I feel disgusted that my motorboat is receiving subsidized fuel,” he said.
On Thursday, OCI, Egypt’s biggest listed company, reported a 28 percent drop in net income for the second quarter, pulled lower by start-up costs at new fertilizer factories, as it prepares to split the two businesses.
Net income fell to $119.4 million from $165.2 million a year earlier, which the company also blamed on a higher effective tax rate because of a bigger contribution to earnings from its European operations.
OCI expects to split its construction and fertilizer businesses into separate companies next month to make them more competitive, widen their investor base and improve their credit profiles.
“We expect strong demand for fertilizer products in the upcoming harvesting season and we expect prices to remain firm for the remainder part of the year,” Chairman Nassef Sawiris said in a statement on Thursday.
The company said it expected its new Sorfert Algeria business to begin exports this month and analysts said that would give a big boost to fertilizer margins.
In its other business, OCI has sought to attract construction projects across the Middle East to offset a slowdown at home since Egypt’s leader was ousted in 2011.
Profit margins slipped at both businesses, as analysts had expected.
Investment bank EFG Hermes cut its rating on the stock to “neutral” from “buy” ahead of the results, citing a strong share price performance. OCI shares are up 41 percent this year.
Bank of America Merrill Lynch analyst Abdelrali El Jattari said there seemed to be little to justify further stock gains.
“Given the level of profitability and the newsflow right now, there is not much positive to add at this (share price) level.”
Egyptian bank Beltone disagreed, saying profitability was in line with its forecasts and the results and expansion plans were a “positive indicator” for OCI as an investment.
Loic Pelichet at National Bank of Kuwait Capital, who has a 292.5 pound share price target for OCI, said the construction backlog was below his estimate.
ELSWEDY ELECTRIC – (SWDY.CA) stock closed last week at EGP 23.95, while closed on Thursday at EGP 25.13, jumping by 5 % (EGP 1.18).
Stock highest close during the week came on Tuesday at EGP 25.37, while the lowest close came on Sunday at EGP 23.97.
On Monday, El Sewedy Electric, the Arab world’s biggest listed cable maker, reported an 82-percent drop in second-quarter net profit, Reuters reported.
Net income tumbled to 30.6 million Egyptian pounds ($5.01 million) from 169.5 million in the same quarter a year earlier, the company said, without giving a reason for the decline.
Analysts say political turmoil in Sewedy’s main Middle East markets, especially Syria, has led to weaker demand that forced it to cut some production.
Also on Monday, Sewedy reported consolidated financial results posting a net profit of EGP 133,293,519 for the first half of 2012.
On Wednesday, El Sewedy, the leading Wire & Cable and Integrated Energy Solution Provider in the Middle East and Africa announces the signing of a US$ 56 Million contract in Iraq with the Ministry of Electricity/ Al Rusafa Directorate for Electricity Distribution.
This award is extremely important to El Sewedy Electric as the last time we have supplied cables to the Government of Iraq directly was ten years ago. Iraq is in need of substantial investment in power generation, transmission and distribution.
This contract will be supplied within one year from the signing of the contract.
On Thursday, EFG-Hermes stated that El Sewedy Electric reported net profit of EGP32 million in 2Q2012, well below 1Q2012’s EGP98 million and our estimate of EGP125 million despite the EBITDA beat (+26% Q-o-Q, +22% versus estimate) on higher margin.
The strong operational results did not filter through to earnings due to the reporting of an EGP102 million FX loss. Excluding this loss, earnings came in at EGP133 million, up 50% Q-o-Q, 6% and 17% above our estimate and Bloomberg consensus, respectively.
Our bottom-line forecast for the full year is at risk; but we believe our clean earnings forecast remains achievable, provided that turnkey deliveries recover in 2H2012 as per management’s previous guidance, and cables remain resilient.
National Societe Generale Bank (NSGB) – (NSGB.CA) closed last week at EGP 31.61, while closed on Thursday at EGP 39.81 (highest close), representing an increase of EGP 8.2 (26 %).
Stock lowest close during the week came on Sunday at EGP 34.77.
Last Thursday, Qatar National Bank (QNBS) is in talks to buy a majority stake in Societe Generale SA (GLE)’s Egyptian unit as it seeks to expand overseas to boost profit, Bloomberg reported.
Negotiations to buy the Paris-based company’s 77.2 percent stake in National Societe Generale Bank SAE (NSGB) are at an early stage, Cairo-based NSGB, Egypt’s second-largest publicly traded bank, said today in a statement. The holding currently has a value of about 10.8 billion Egyptian pounds ($1.77 billion), based on NSGB’s 14 billion-pound market capitalization.
“QNB has been looking at entering the Egyptian market for some time,” Sara Boutros, banking analyst at Cairo-based Beltone Financial, said by phone today. “NSGB has a cleaner book, a larger market share and better growth prospects than the local units of BNP Paribas SA (BNP) and Piraeus Bank SA. (TPEIR)”
A request to conduct due diligence was presented today to Egypt’s Central Bank, NSGB said. The bank said this month second-quarter profit climbed 18 percent to 435.6 million pounds, beating analysts’ estimates on gains from interest and fee income. NSGB operates 160 branches in Egypt, while Commercial International Bank Egypt SAE (COMI.CA), the country’s biggest publicly traded lender, has 153 branches, data on the companies’ websites show.
On Sunday, three sources told Reuters that Qatar National Bank, the state lender seeking to boost its regional presence through acquisitions, has hired J.P. Morgan Chase to advise on its planned buy of Societe Generale’s Egyptian arm.
“The talks are initial but they definitely have the firepower for an asset of that size. J.P. Morgan is assisting QNB on the deal,” one of the sources said.
SocGen, which recently sold fund management unit TCW, is being advised by U.S. bank Morgan Stanley Inc on the transaction, a second source said.
If an agreement is reached between the Qatari and French banks, QNB may be forced into a mandatory offer to minority shareholders which would see them acquire the entire bank, a note from Egypt-based investment bank EFG Hermes said.
A full takeover would likely cost QNB between 15.9 billion and 18 billion Egyptian pounds, the note added.
On Monday, Hermes raised National Societe Generale Bank (NSGB) – fair value by 60% to EGP50 to incorporate an acquisition premium and retain our Buy rating on the stock.
Hermes added “Despite QNB having been conservative in pricing acquisition targets in the past, we believe that NSGB presents a unique opportunity to enter the Egyptian market through a well established, quality franchise, and therefore, we expect QNB to be more aggressive in pricing this time.
On Wednesday, Egyptian Financial Supervisory Authority (EFSA) announced that NSGB has to inform FSA about any written notice from National Bank of Qatar of showing interest of acquiring NSGB Group in is Egyptian unit representing 77.71 % of its capital.
Telecom Egypt – (ETEL.CA) closed last week at EGP 14.1, while closed on Thursday at EGP 14.08, representing a retreat of EGP 0.02.
Stock highest close during the week came on Sunday at EGP 14.1, while the lowest close came on Wednesday at EGP 14.05.
On Tuesday, Eng. Mohamed Nawawy, CEO of Telecom Egypt, revealed that the company is intending to execute 4 marine cables projects in the coming 4 years.
Nawawy estimated marine cables’ revenues last year at EGP 800 million, compared to EGP 600 million during 2012; pointing out that the second quarter of 2012 witnessed profits decline due to delay in a marine cables project.
He asserted TE plan to of domestic presence to offer integrated services.
Orascom Telecom – (ORTE.CA) closed last week at EGP 3.64, while closed on Thursday at EGP 3.68, representing an increase of EGP 0.04 (1 %).
Stock highest close during the week came on Tuesday at EGP 3.74, while the lowest close came on Sunday at EGP 3.62.
Algeria’s finance minister denied speculation that its talks on acquiring a controlling stake in local mobile phone unit Djezzy from emerging markets telecoms operator Vimpelcom had stalled, Reuters reported on Monday.
“Talks are continuing,” Karim Djoudi told reporters at parliament, when asked whether Algeria had abandoned the acquisition plan.
Vimpelcom has appealed against the ruling by a court in Algiers and the dispute over the ruling prompted analysts and local media to speculate that the two sides might abandon talks.
Asked on Monday to give details of the talks, he said: “We cannot comment on this issue until an agreement is reached.”
On Wednesday, Orascom Telecom announced that it will go on completing the necessary procedures to go for the international arbitration against People’s Democratic Republic of Algeria in respect of the unlawful actions taken since 2008 by the Algerian government against Orascom Telecom Algerie (OTA) – Djezzy.
Russia-focused Vimplecom, which acquired Djezzy in 2011 as a part of a $ 6 billion deal to buy assets of Egyptian firm OTH, had resorted to hold talks with the Algerian government seeking to drop the $1.25 billion fine.
Khalid Al Leithy, Deputy Chief Finance Officer of Orascom Telecom – OT, said the company will continue completing the arbitration procedures so as to reach a solution with the Algerian government.
“If Vimpelcom reaches a settlement with the Algerian government, Orascom will not go for the International arbitration.” Al Leithy added
Al Leithy said talks between Vimplecom and the Algerian government on acquiring a controlling stake in Djezzy are continuing, but he noted that: “Orascom will not accept to give up the group’s right to manage its Algerian unit.”
Al Leithy also mentioned that both Orascom and Vimplecom seek to end all the pending issues with the Algerian government without giving up their legal and financial rights to manage Djezzy.
Sectors performance:
The most active sectors all through the week were Real Estate, Construction & Material, Financial Services, Telecommunications and, Banks.
Real Estate sector achieved total traded value of EGP 476,141,283.
Construction & Material came second in terms of performance, as it achieved total traded value of EGP 430,629,327.
Financial Services sector ranked third in terms of performance, as it achieved total traded value of EGP 430,329,749.
Regarding, Telecommunications it achieved total traded value of EGP 402,194,834.
Finally, Banks, as it achieved total traded value of EGP 298,216,818.
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 117,284,349.
Arab investors chose also to buy by value of EGP 38,571,026.
Foreign investors were most active sellers this week by the value of EGP 155,855,376.
Retail & Institutions’ Activity:
Retail activity led the market all through the week as it ranged between 61.73 – 75.81 %.
While Institutions activity ranged during this week between 24.18 – 38.26 %.
