QNB Al Ahli to move upwards in short-term on any adjustments to raise free float

Daily News Egypt
7 Min Read

A recent report issued by Pharos said that the Qatar National Bank Al Ahli (QNB Al Ahli) stock is expected to see an upside potential in the short-term if the bank performs any adjustments to raise the free float to 10%.

The research firm has reiterated their ‘overweight’ recommendation on QNB Al Ahli at a fair value (FV) of EGP 70 per share.

QNB Al Ahli reported a 27% year-over-year increase in consolidated profits for the first half (H1) of 2018, recording EGP 3.4bn, up from EGP 2.7bn.

The bank previously posted EGP 1.6bn in consolidated profits during Q1 2018, versus EGP 1.26bn in the three months ending March 2017, including minority shareholders’ rights.

In February, QNB had cut its stake in the Egyptian unit, QNB Al Ahli, to 95.6% from 97.12%, to comply with the Egyptian Exchange’s (EGX) listing rules.

Meanwhile, EFG Hermes has topped investment banks in the Middle East and North Africa (MENA), in terms of equity capital market (ECM) underwriting fees, with a 24.4% market share during the second quarter of 2018.

JP Morgan and Goldman Sachs Group were ranked the second and third on the list, respectively.

ECM underwriting fees in the region rose by 21% to register $56.4m, according to a report by Thompson Reuters.

Orange Egypt’s capital increase deal was the largest in the region in Q2 2018, through allocating $866m in capital, the report indicated.

Total equity and equity-related issuance in the region rose by 68% y-o-y in Q2 2018 to $3bn, data showed.

The value of announced merger and acquisition transactions in the MENA region climbed 74% y-o-y to $33.9bn in Q2 2018, the highest record in eight years.

MENA-targeted deals hit an all-time high, rising by 110% y-o-y to $21.3bn in Q2 2018, the report noted.

Middle Eastern and North African investment banking fees totalled an estimated $472.3m, during the second quarter of the year, decreasing by 7% compared to Q2 2017.

Debt capital markets reached $59.4bn year-to-date, according to the report by Thomson Reuters on the investment banking analysis for the Middle East and North Africa (MENA) in the second quarter of 2018.

“Debt capital markets underwriting fees totalled $140.6m, down 7% y-o-y and the second highest start of the year the region since our records began in 2000. Equity capital markets fees increased 21% to $56.4m,” said Nadim Najjar, the managing director for MENA at Thomson Reuters.

Fees generated from completed merging and acquisition (M&A) transactions totalled $59.6m, a 52% decrease from last year and the lowest first half since 2012.

Syndicated loan fees reached $215.7m, up 17% from Q2 2017, the report indicated.

Debt capital markets fees accounted for 30% of the overall Middle Eastern and North African investment banking fee pool, the second highest market share since records began in 2000.

Syndicated lending fees accounted for 46%, while the share of completed M&A advisory fees fell to its lowest level, only accounting for 13% of the market.

Equity capital markets underwriting fees accounted for 12%.

Citi earned the most investment banking fees in the MENA region, during Q2 2018, with a total of $44.8m for a 9.5% share of the total fee pool.

DNB topped the completed ECM fee rankings with 14.2% of underwriting fees.

DCM underwriting was led by Standard Chartered with $24.2m in ECM fees, or a 17.2% share.

MENA inbound M&A currently stands at an all-time high thanks to the Saudi British Bank’s acquisition of the entire share of capital of Alawwal Bank for $5bn.

On the other hand, outbound M&A decreased from $6.9bn in Q2 2017 to $6.6bn so far this year.

On another note, a recent report issued by the Institute of International Finance (IIF) said that inflows to emerging markets are skewing to certain markets, as a sell-off streak took its toll on most emerging market.

“Flows have seen a sharp rise since the China devaluation scare in 2015/16 and by the end of last year had returned to a pace last seen in the run-up to the 2013 taper tantrum. That said, these flows were skewed towards a few emerging markets, including Argentina, South Africa, Colombia, Egypt, Mexico, and Indonesia,” the report noted.

The IIF said also it turned more cautious on emerging markets in February and signalled substantial overvaluation for the Argentinean peso and Turkish lira.

Both currencies have fallen sharply since then, but spill-overs to the rest of the EM complex have been limited so far.

The Washington-based firm has built on the Capital Flows Report to examine contagion risk through the lens of non-resident portfolio flows to emerging markets.

It noted that the underlying driver of the sell-off is this year’s rise in the 10-year treasury yield from 2.4% to 3%, which is half the size of the move (from 1.6% to 3%) that started the taper tantrum.

“If emerging markets are this vulnerable to what can only be described as a moderate rise in global funding costs, we worry about the underlying resilience of EM,” it added.

Non-resident portfolio flows to EM fell sharply around the China devaluation scare in 2015/16, but have rebounded sharply since then and are almost back to levels last seen ahead of the 2013 taper tantrum.

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