Egypt shares likely to move upwards as foreign investors to inject cash-ins

Egypt shares are expected by analysts to move upwards in the few coming sessions, as foreign investors are expected to build new positions in large caps amid a strong earning season, and the resumption of the government’s IPO programme.

The main index saw a return of purchasing powers, which helped push its gains, according to analyst Sameh Gharib of the Roots Stock Brokerage House.

Gharib added that the Egyptian Exchange (EGX) recorded a meteoric rise in volume last week, driven almost entirely by record-setting foreign institutional trading.

He explained that last week was the D-Day for the MSCI Egypt Index rebalancing, with Eastern Tobacco coming in, and EFG-Hermes swapping out.

Meanwhile, a recent report issued by FX Street said that the VanEck Vectors Egypt ETF (EGPT) 0.15% could be worth revisiting.

EGPT, the only ETF trading in the US, dedicated to Egyptian stocks, is up more than 3% this year, and nearly 19% over the past 12 months.

The report added, “Still, investing in Egypt, North Africa’s largest economy, is not for the faint of heart. The country has bouts of political volatility, a chequered human rights record, and is suspected of being home to Islamic State militants.”

The report also noted that there is the 14.80% yield on Egypt’s 10-year bonds, another trait illustrating the point that EGPT is not your run-of-the-mill single-country investment. On the other hand, there are signs of improvement in the Egyptian economy.

“Egypt’s first interest rate cut since exchange rate liberalisation has been made possible by an improvement in macroeconomic stability, underpinned by more orthodox policy settings under the country’s International Monetary Fund programme,” said Fitch Ratings. “These factors were reflected in our revision of the outlook on Egypt’s ‘B’ sovereign rating to Positive last month.”

EGPT, which turned 8-years-old earlier this month, holds 28 stocks. As is the case with many emerging markets (EM) single-country ETFs, the Egypt fund is heavily allocated to financial services’ stocks.

That sector represents 23.3% of the fund’s weight. Real estate and materials stocks combine for almost 40% of EGPT’s roster.

“It is prosaic advice, but ETF investors should always know what they own. In the case of EGPT, investors, perhaps unknowingly, are embracing a small-cap fund. The weighted average market value of the fund’s holdings is just $1.6bn: small-cap territory. Over 90% of EGPT’s components are classified as mid- or small-cap stocks,” the report noted.

Additionally, EGPT’s three-year standard deviation of 27.9% is nearly double the comparable metric on the MSCI EMs Index.

The EGX ended February in green territory, boosted by the decision to reduce interest rates by 1%.

The benchmark EGX30 index levelled up 677 points, or 4.79% to 14,803 points, whereas the EGX70 index added 5.2% to 719.6 points, the EGX100 increased by 5.17% to 1,812 points and the equal-weighted EGX50 index went up 6.1% to 2,426.13 points during the second month of 2019.

Over the month, market capitalisation grew EGP 29.9bn ($1.70bn) to EGP 823.33bn ($46.92bn)

The heavyweight Commercial International Bank’s (CIB) stock added 5.01% to EGP 69.75 in February, with a turnover of EGP 2.008bn.

Most analysts noted that cutting interest rates supported the upward trend of the EGX, raising the benchmark EGX30 index near 16,000 points.

On a weekly basis, the benchmark EGX30 index tumbled 2.26% to 14,803 points, while the EGX70 index inched up 0.34% to 719.64 points.

Meanwhile, market capitalisation declined EGP 12.9bn to EGP 823.3bn over the week ended 28 February, from EGP 836.26bn a week earlier.

Earlier last week, Egypt’s Financial Regulatory Authority decided to apply the short-selling mechanism in order to attract more investments to the Egyptian market.

Analysts have different opinions about the impact of implementing short-selling mechanism on the performance of the EGX, affirming that liquidity has increased since then. Market analyst Michael Mamdouh Naguib said in a research note that the EGX was able to reach a new peak.

Support levels are now between 15,400 and 15,315 points, while resistance stands at 15,721.

Meanwhile, Madinet Nasr Housing Development stock soared 4.2% last week.

The company posted EGP 943.2 million in standalone profits for the year ended 31 December 2018, registering a 28% rise from EGP 738.7 million in 2016.

Madinet Nasr Housing Development (MNHD) is targeting sales ranging between EGP 5.5bn and EGP 6bn in 2019.

The company’s board has recommended a bonus share distribution last year of EGP 0.15 per share for 2017 along with raising issued to capital to EGP 1.15bn from its current EGP 997.1m.

The bonus share distribution will be financed through MNHD’s profits for 2017.

Meanwhile, Heliopolis Company for Housing and Development announced that its board of directors approved the sale of part of the firm’s land portfolio to finance its investment plan.

The Egyptian real estate firm decided to sell its 1,980 sqm land plot behind Sheraton as well as a 100acre land plot in Heliopark City in New Cairo and 190 acre land plot in New Heliopolis City, the company said in a statement to the EGX.

The sale proceeds will be used in implementing Heliopolis Company’s investment plan, along with conducting financial restructuring of the company and considering a capital increase.

During the six-month period ended December 2018, Heliopolis Housing’s profits reported EGP 48.6m, down from EGP 59.2m in the year-ago period.

Meanwhile, the company’s revenues rose to EGP 383.3m in the first half (H1) of fiscal year (FY) 2018/19, against EGP 309.7m in the corresponding period a year earlier.

Beltone Research slashed its fair value estimate for Heliopolis Housing by 64% to EGP 25.25, against EGP 70.10.

In earning news, MM Group for Industry and International Trade on Thursday reported an 18.8% year-over-year (y-o-y) drop in its consolidated profits during the full-year 2018.

The company’s profits totalled EGP 275.52m last year, against EGP 339.34m in 2017, including minority shareholders’ rights, according to the company’s statement to the EGX.

MM Group’s sales rose to EGP 7.6bn in 2018, from EGP 6.12bn a year earlier.

The company posted EGP 258.4m in standalone profits last year, compared to EGP 271.7m in 2017.

During the first nine months of 2018, MM Group’s profits registered EGP 233.66m, versus EGP 292.5m in the year-ago period.

Meanwhile, Hassan Allam Holding has completed the construction of a 50MW solar power plant in Benban Solar Park in the Upper Egypt governorate of Aswan, in partnership with Taqa Arabia, a subsidiary of Qalaa Holdings, at a cost of EGP 1.35bn, a source familiar with the matter said.

The plant is now connected to the Egyptian Electricity Transmission’s (EETC) substation and is subject to trial operation before linking it to the national electricity grid, within the framework of the second phase of the feed-in tariff programme.

The plant will generate 154m kW/h per year when it starts commercial operation this month, and it will produce only around 65,371 tonnes carbon emissions annually.

The solar power plant project is being backed by a loan facility from both the International Finance Corporation-the World Bank’s private sector arm-and the Asian Infrastructure Investment Bank (AIIB).

In August, Qalaa Holdings announced its first investment in generating solar power through photovoltaic (PV) cells at a cost of EGP 1.35bn in Aswan, in collaboration with Hassan Allam Holding.

Revenues of the project are expected to stand at around EGP 10.8m per annum, Qalaa Holdings said.

In another context, Emaar Misr for Development, a subsidiary of UAE-based Emaar Properties, denied negotiations with MNHD over an acquisition.

This came in response to one of the newspapers that published Emaar Misr was planning to acquire MNHD, according to a statement to the EGX.

In a separate statement, MNHD also denied any talks with Emaar Misr regarding the same matter.

In January, MNHD’s board of directors suspended the merger and acquisition negotiations with Sixth of October for Development and Investment (SODIC) as both disagreed on the terms of the swap transaction.

In October 2018, SODIC announced that its mandatory tender offer to MNHD would be implemented through a stock swap deal. One share of SODIC would be exchanged for two shares of MNHD.

MNHD unveiled last April its board was considering a possible merger or acquisition with SODIC.

Meanwhile, Abu Qir Fertilisers and Chemicals Company posted a 32.4% y-o-y increase in profits for H1of FY 2018/19.

Net profits amounted to EGP 1.65bn in the six-month period ended December, versus EGP 1.24bn in the same period of 2017, according to a filing to the EGX.

Revenues rose to EGP 4.9bn in H1of 2018/19, slightly up from EGP 4.15bn in the same period a year earlier.

The company attributed the increase in profits to its flexible marketing policy, in addition to the excellent management of its financial portfolio.

In November, Abu Qir Fertilisers reported a 61% y-o-y surge in profits for the first quarter of FY 2018/19, registering a net profit of EGP 752.8m, compared to EGP 467.11m.

Additionally, revenues jumped 54% y-o-y to EGP 2.15bn in the six-month period ended September 2018.

In other market news, Amer Group Holding Co announced last week that its board of directors has decided to voluntarily delist its shares from the EGX.

The Egyptian real estate firm’s extraordinary general meeting (EGM) will discuss the voluntary delisting and purchase the shares from shareholders opposing the move, the company said in a filing to the EGX.

Amer Group’s capital reaches EGP 1.003bn distributed over 1.003bn shares.

For the full-year 2018, Amer Group’s profits reported EGP 74.7m, against EGP 92.9m in the prior year, including minority shareholders’ rights.

Meanwhile, the company’s revenues retreated to EGP 1.9bn last year, from EGP 2.15bn a year earlier.

source: Daily News Egypt