Egypt shares resume rally bolstered by positive earnings season amid heavy liquidity

Daily News Egypt
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Egypt shares are predicted to move upwards in the short term buoyed by above-expectation earnings season and very attractive valuations of blue-chips stocks, analysts said on Saturday.

They added that the stock market is expected to continue its positive trend this week, and may aim for 14,500 points.

The Egyptian Exchange’s (EGX) indices are forecasted to move upwards in the short term, Head of the Capital Market Committee at the African Economic Council, Ayman Fouda, stated. He noted that the EGX30 index may reach resistance at 13,652, then 13,800 points, while support will be seen at 13,550, followed by 13,260 points.

Fouda further indicated that the small and medium-cap index EGX70’s short-term resistance level may reach 705 points, then 712, while its support levels will be seen at 688, then 680 points.

The main EGX30 index had traded between 13,600 and 13,700 points during last week, amid a growth in trading volume, Osama Naguib, head of Technical Analysis at Arab Finance Securities, noted.

The EGX30 currently targets 13,850 points, and may extend towards 13,950 points if volumes continue rising from their averages, Naguib concluded.

Sailing Through a Market Correction

The EGX ended the first week of November on an up note supported by positive financial results announced by several major listed companies.

EGX30 was able to break the 13,700 level in the last session of the week, as it added 4%, and settled at the level of 13,732.68 points.

EGX70 rose by 2.1% and closed at 702.82 points, while the broader EGX100 gained 2.2% and ended the week at 1,760.33 points. Equal-weighted index EGX50 went up 4.7% to 2,200.56 points.

Market capitalization increased by EGP 25.9bn to reach a total of EGP 776.8bn.

Last week, Emaar Misr for Development reported a 20.8% year-over-year (y-o-y) rise in consolidated profits for the first nine months of 2018.

Net profit totalled EGP 1.75bn in the period between January and September, up from EGP 1.45bn, including minority shareholders’ rights, the property developer said in a filing to the EGX.

Revenues rose slightly to EGP 2.8bn in the nine-month period ended September, versus EGP 2.59m in the same period of 2017.

Standalone profits grew to EGP 1.759bn at the end of September, compared to EGP 1.456bn in the first nine months of last year.

Emaar Misr previously said it achieved profits of EGP 1.1bn in the first half (H1) of 2018, up 12.6% from EGP 976.9m in the prior-year period.

The Commercial International Bank – Egypt (CIB) was among the market’s best performer last week, as it posted a 24% y-o-y increase in profits for the first nine months.

Profits amounted to EGP 7.01bn during the nine-month period ended 30 September, rising from EGP 5.67bn in the same period of the previous year, the bank said in a filing to the EGX.

Net income rose to EGP 13.3bn during the period between January and September, from EGP 9.3bn in the year-ago period.

Standalone profits went up to EGP 7bn by the end of September, versus EGP 5.68bn in the same period of 2017.

For the third quarter (Q3) of 2018, the CIB reported a growth in profits to EGP 2.5bn, compared to EGP 2.08bn in Q3 of 2017.

Trade Talks to Spur More Volatility

In other earnings news, Global Telecom Holding reported turning to losses on a yearly basis for the first nine months of 2018.

Losses amounted to $345.1m for the nine-month period ended 30 September, against profits of $56.8m in the same period of the prior year, the company said in a filing to the EGX.

Revenues narrowed to $2.12bn by the end of September, from $2.29bn in the same period the year before.  

Standalone results showed that losses had jumped to $338.7m during the nine-month period between January and September, versus $84.5m in the prior-year period, Global Telecom added.

In Q3 of 2018, the telecom firm recorded sharp losses of $357.6m, against profits of $20.5m in Q3 of 2017.

Global Telecom previously reported turning to profitability in H1 of 2018, with $413.1m, against a net loss of $59.4m in H1 of 2017.

Company-Specific Factors

The consolidated financial statements of Abu Dhabi Islamic Bank Egypt (ADIB) showed a 26% y-o-y increase in profits during the first nine months of 2018.

The ADIB logged EGP 632.19m ($35.26m) from January to September, up from EGP 500.6m ($27.92m) in the same nine months last year, according to a statement to the EGX.

The bank attributed the growth in profits to a rise in income from returns, which amounted to EGP 1.8bn, from EGP 1.48bn in the January-to-September period of 2017.

The ADIB-Egypt attributed the higher returns income to margin growth in its financing portfolio by 37% to EGP 668m, in addition to an increase in yield from treasury and deposits investments by 44% y-o-y to EGP 520m.

As for the standalone business, the ADIB-Egypt posted EGP 608.4m in the nine-month period, up from EGP 348.8m in the corresponding period a year earlier.

In other market news, Qalaa Holdings said that its subsidiary, Asec Cement, has signed a memorandum of understanding (MoU) with Groupe industriel des ciments d’Algérie (GICA) to exit from the Algeria-based Zahana Cement Factory.

Upon the MoU, the GICA will purchase Asec’s stake in Zahana, the company highlighted in a filing to the EGX.

The transaction is expected to take place prior to mid-2019 after setting the fair value of the shares, the Egyptian investment firm indicated.

Qalaa Holdings holds a 52% stake in Asec Cement which owns 35% of Zahana Cement’s shares.

In September, Qalaa Holdings announced that Asec Cement was looking to exit from the Algerian facility Zahana Cement.

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