EGX 30 Sinks Again 2.25% In Week Driven By Political Instability

In a week, the Egyptian Exchange has incurred losses of EGP 6.9 billion driven by the country’s unstable political situation besides the negative repercussions of the proposed stamp tax on the bourse’s transactions, and the postponement of the parliamentary elections.

The capital market has hit EGP 367.216 billion at the end of last week, compared to EGP 374.200 billion at the end of a week earlier.

Benchmark EGX 30 index sank by 2.25%, representing a decline of 123.84 pts, ending Thursday’s transactions at 5365.621 pts, compared to EGP 5489.46 pts at the end of a week earlier.

EGX30 hit its highest point on Sunday closing at 5501.43 pts, where its lowest point recorded on Tuesday at 5241.20 pts.

Meanwhile, the mid- and small-cap index, the EGX70 dived by 3.03% closing at 456.9 pts during Thursday’s session, compared to 471.22 pts at the end of a week earlier.  Price index EGX100 also pushed down by 4.4% concluding Thursday’s session at 771.29 pts, compared to 807.37 pts during a week earlier.

Also in a week, the EGX has recorded a volume of trades hit  595.2 million securities, compared to 429.8 million a week earlier; while the traded value reached EGP 1.747 billion, compared to EGP 1.273 billion a week earlier.

Companies’ Weekly Performance:

Orascom Construction Industries (OCIC.CA) closed last week at EGP 258.89, while closed on Thursday at EGP 249.58, dipping by EGP 9.31 (4%).

Stock highest close during the week came on Sunday at EGP 259.2, while the lowest close came on Tuesday at EGP 246.81.

Investment Minister Osama Saleh told the state news agency MENA last Thursday that, the Egyptian government is holding talks with the country’s biggest listed company, OCI, to dissuade it from delisting from the local stock exchange, Reuters reported.

The minister declined to elaborate and the company was not immediately available for comment.

Egyptian authorities have barred the chief executive of OCI from leaving the country as part of an investigation into tax evasion, state media said on Sunday.

The public prosecutor ordered that OCI CEO Nassef Sawiris and his father Onsi Sawiris be barred from travel, the state news agency MENA said.

The order from the public prosecutor is part of an investigation into accusations they evaded about 14 billion Egyptian pounds ($2.1 billion) of taxes during the sale of Orascom Building, an OCI subsidiary, to French firm Lafarge (LAFP.PA), MENA said.

A banker and friend of the family told Reuters the men were out of the country. Under the order, they would be detained on arrival if they returned.

A lawyer for OCI, Hani Sarie el-Din, told state-owned newspaper Al-Ahram he was “surprised” by the decision.

Negotiations about the taxes from the deal were continuing, the paper’s website quoted him as saying. “There was nothing suggesting a dead end in the negotiations.”

On Monday, OCI said it didn’t get any additional tax claim after Egypt reportedly banned its chief executive officer from travel, Business Week reported.

“The Egyptian Tax Authority has submitted a tax claim to the company to pay 4.7 billion pounds related to the sale of Orascom Building Materials Holding to Lafarge SA (LG) in 2007,” the company said in a statement on its website. “To date, the company has received no additional claim with any different tax liability related to the sale.”

Orascom Construction said it filed an appeal against the claim, which is under review by the Egyptian Tax Authority’s appeal committee. The company said it’s “confident that it did not violate any laws pertaining to the sale.”

Orascom Construction, Egypt’s biggest publicly traded company, said in the statement it “received no formal notification about a travel ban” on Nassef and Onsi Sawiris related to the sale of Orascom Building Materials. The company, which has construction and fertilizer units, represents about a quarter of the EGX 30 Stock Index.

Also on Monday, Palm Hills confirmed that it signed a signed a EGP 400 million contract with OCI to complete one phase of Palm Hills’ Golf View project in 6th of October City.

On Wednesday morning, workers at Orascom Construction Industries (OCI.CA) have staged a sit-in on Wednesday morning outside the company’s head office in Corniche El Nil to express their opposition to the government’s arbitrary actions against OCI.

The workers said their sit-in is neither against the state nor the government but it is to represent their rejection to the arbitrary actions taken against the OCI.

The government is forcing OCI to pay tax dues worth EGP 14 billion for the Lavarge deal which was concluded many years ago, the workers added. The arbitrary actions continued against the OCI by issuing a travel ban decree against OCI chief executive Nassef Sawiris and his father Onsi, the founder and former chairman.

The workers pointed out that the sit-in could result in shutting down the OCI’s operations.

Eng. Ashraf Khairy, Deputy Project Manager at OCI, stated that he supports the state’s demands to obtain its rights. However, there are multiple legal procedures and methods that must be followed.

Khairy further stressed the importance of resuming talks between the Egyptian government and OCI management in order to settle the disputes in peaceful ways. Therefore, the state would obtain its financial rights alongside the OCI and its employees’ interests would be preserved.

Moreover, Khairy urged the Egyptian president Mohamed Morsi to hold an urgent meeting with Naguib Sawiris and his brother OCI chief executive Nassef in order to settle all the existing disputes.

“Such a meeting would give a message to the whole world that Egypt is for everyone opening its arms to all the national and foreign investments.” Khairy noted

Also on Wednesday, OCI said it will meet government authorities next week to discuss charges it evaded taxes.

The firm said it had received notice from tax authorities about a claim and had made an appointment for Sunday March 10th “to discuss the tax issue raised by the authority.”

The statement did not specify the figure the authorities were claiming. On Monday the firm said it had received a demand for 4.7 billion pounds, which it was appealing, but had not received notification of further claims.

GB Auto – (AUTO.CA) closed last week at EGP 26.99, while closed on Thursday at EGP 27.9 (highest close), upping by EGP 0.91 (3 %).

Stock lowest close during the week came on Tuesday at EGP 26.77.

GB Auto said on Wednesday its net income grew 74.2 percent year-on-year in the fourth quarter, but forecast the local car market would shrink in the coming year, Reuters reported.

Fourth-quarter net income rose to 75.90 million Egyptian pounds ($11.3 million), despite what Chief Executive Raouf Ghabbour said was a “truly volatile environment”, while revenue was up 25.4 percent to 2.35 billion.

Earnings before interest and tax (EBIT) reached 205.2 million pounds, a 55.5 percent increase. GB Auto ended the year with 28.9 percent of the Egyptian passenger car market, down slightly from a year earlier.

Egypt is beset by a political and economic crisis, with foreign exchange in increasingly short supply.

“Egypt’s foreign exchange environment and the expected deterioration of the macro (economic) climate in a high-inflation environment will see the Egyptian passenger car market shrinking in the coming year,” Ghabbour said in a statement.

However, he added that new North African business should make an immediate positive contribution.

“We are confident that our strategy for this year will see us post bottom-line growth and improve our margins in Egypt, while seeing both Algeria and Libya making positive contributions to profitability from year one, essentially providing buffers to challenges in our home market.”

On Thursday, EFG-Hermes maintained GB Auto Buy rating, as it believes regional expansions (Algeria and Libya), Iraq’s strong performance and the focus on higher-margin segments should help mitigate Egypt’s FX risk.

4Q2012 net income came in at EGP76 million, a rise of 74% Y-o-Y (+16% Q-o-Q) and 25% ahead of our estimate.

Gross margin came in at 15% (+2pp Y-o-Y and versus estimate) due to a greater contribution from higher margin segments and impressive margins at Iraq. Accordingly, operating profit grew 51% Y-o-Y to EGP214 million (+40% versus forecast)..

Iraq posted sales of EGP826 million (+79% Y-o-Y; +14% versus estimate) as supply constraints eased and pricing power/sales mix improved (average price +29% Y-o-Y).

Gross margin was at an all-time high of 14.8% with gross profit nearly tripling Y-o-Y. However, management indicated that these levels are unsustainable as they were bolstered by pent-up demand, in our view.

We expect margins to stabilise at c10%. We believe the Iraqi business growth momentum should continue in 2013 (given a 30% rise in PC allocation), which is important in light of Egypt currency risks.

Orascom Telecom – (ORTE.CA) closed last week at EGP 4.19, while closed on Thursday at EGP 4.3, upping by EGP 0.11 (3 %).

Stock highest close during the week came on Sunday at EGP 4.34, while the lowest close came on Wednesday at EGP 4.09.

On Wednesday, Orascom Telecom reported a bigger net loss of $468.9 million before minority interests in the fourth quarter, compared with a loss of $123.5 million a year earlier, Reuters reported.

The company reported a full-year loss of $205.76 million, compared with a profit of $660.35 million in 2011.

Orascom Telecom said the deterioration was driven by tax charges, foreign exchange losses and other financial problems.

The company, controlled by Russia’s Vimpelcom since April 2011, said its fourth-quarter revenue stood at $908.34 million, up from $895.71 million a year earlier.

Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 23 percent to $425.50 million. Subscriber numbers reached 84.92 million, up 8.7 from the fourth quarter of 2011.

The company also has operations in Algeria, Pakistan, Bangladesh and Canada. It said its revenues in Algeria and Pakistan were affected by the local currency devaluations against the dollar.

It reported a 1 percent drop in its 2012 revenues from its Djezzy unit in Algeria and 0.1 percent fall in its Pakistan unit, Mobilink. Its revenues from Bangladesh rose 8.4 percent in 2012.

On Thursday, EFG-Hermes reiterated Orascom Telecom neutral rating after reporting $ 474 million loss in the fourth quarter of 2012.

Hermes stated that, OT reported 4Q2012 net loss of USD474 million versus our expected net profit of USD43 million, and consensus estimate of USD41 million.

Hermes added that, it does not expect results to have a material impact on OTH share price performance, as investors’ main focus remain on resolving Djezzy’s issue with the Algerian government.

On Thursday, Algerian newspaper Al-Shrouk reported that an agreement is about to be signed within the upcoming week between VimpelCom and the Algerian government in order to end the prolonged dispute over Orascom Telecom Holding’s Djezzy.

The Russian telecommunications company VimpelCom Ltd. (VIP) said it has managed to devise a new formula for coordination with the Algerian authorities noting that OTH’s efforts have reached a deadlock to solve the disputes over Orascom Telecom Algerie (OTA) ‘Djezzy’.

All over the last few months, Orascom Telecom Holding went on confirming its plans 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 Djezzy.

Later on Thursday, Orascom Telecom announced that it is not part in the ongoing talks between Russia’s VimpelCom Ltd. (VIP) and the Algerian government over Djezzy dispute.

The company sent a release to the Egyptian Exchange (EGX) responding to reports about an expected meeting next week between VimpelCom and the Algerian government over a potential bid by Algeria to acquire Djezzy.

On the other hand, the company reaffirmed bid to gain 3G mobile license in Algeria, Pakistan and Bangladesh.

Regarding Investors’ Activity:

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

Arab investors were the most active buyers this week earning the value of L.E 84,923,574.

Local investors chose also to buy by value of L.E 16,443,619.

Foreign investors were most active sellers this week by the value of L.E 101,367,193.

Retail & Institutions’ Activity:

Retail activity led the market all through the week as it ranged between 15.54 – 58.99 %.

While Institutions activity ranged during this week between 41.00 – 84.45 %.