Egypt shares to move sideways awaiting fresh stimulus ahead of imminent earning season

Daily News Egypt
9 Min Read
Traders work near the exchange bell at Egypt's Stock Exchange (EGX) in Cairo July 3, 2013. Cairo's benchmark dipped 0.3 percent, slipping off a three-week high and extending 2013 losses to 9 percent. Bourse data showed that foreign investors were sellers but Egyptians remained net buyers on hopes a military intervention would put an end to the Islamist president's rule. REUTERS/Mohamed Abd El Ghany (EGYPT - Tags: BUSINESS)

Analysts expect Egypt shares to move sideways in the few coming sessions ahead of the earnings season, which is seen to serve as a catalyst to boost the market with fresh cash inflows likely to hit the market.

The Egyptian Exchange (EGX) is likely to maintain the sideways-to-declining trend, analysts said.

The benchmark EGX30 index may test resistance at 13,500 points, Osama Naguib, head of technical analysis at Arab Finance Securities said.

Sell-offs are still weak, which may accelerate purchasing power, Naguib added.

The EGX30 index may break at 13,400 points in the medium-term and move toward 13,750 and 14,100 points, he said.

For his part, Ayman Fouda, head of capital market committee at the African Economic Council, said that the EGX is expected to maintain the sideways-to-declining trend in the few coming sessions until the new market-boosting catalysts emerge.

The benchmark EGX30 index has a short-term resistance at 13,580 and 13,800 points, and has support to 13,223 and 13,035 points, Fouda highlighted.

Meanwhile, the small- and mid-cap EGX70 index has a short-term resistance at 688 and 695 points, and has support to 682 and 677 points, he added.

Last week, the EGX closed in mixed notes with the benchmark EGX30 index inching up 115.55 points, or 0.86%, to close at 13,482.99 points.

The EGX30 index has tried to break above 13,600-point level, but selling pressure dragged it down, head of technical research at Roots Stock Brokerage House, Sameh Gharib, said. However, it is expected to see support at 13,775 points, the analyst added.

The Commercial International Bank (CIB) increased 7.9% to EGP 80 during the week, recording its highest level in two months.

The EGX70 index lost 2% to 673.52 points, while the EGX100 index declined 1.5% to 1,697.43 points.

Over the week, market capitalisation levelled down EGP 3.4bn, registering EGP 761.6bn.

In company news, Orascom Investment Holding (OIH) has secured $170m in finance from the African Export-Import Bank (Afreximbank).

The facility is aimed at helping OIH expand in Africa and achieve its short-term and medium-term strategies.

The recent deal is a part of Afreximbank’s efforts to promote investments in African nations, the bank’s chairperson, Benedict Okey Oramah said.

The main focus of OIH currently is investing in Africa, the company’s chairperson Naguib Sawiris commented.

Meanwhile, Egypt’s state-run initial public offering (IPO) programme is to begin next March, a government official at the committee responsible for the IPO scheme said.

The committee, in collaboration with investment banks participating in the state-run IPOs, is considering the opportune time for the share sales.

A two-firm consortium comprising of EFG Hermes and Citibank won a deal to lead-manage the addition share offering of Alexandria Container and Cargo Handling.

In the same vein, the CI Capital- Renaissance Capital alliance would manage the offering of a further stake in Abu Qir Fertilisers.

The official said that the committee has adjusted the list of public sector firms scheduled to be floated in the second phase of the government’s IPO programme.

He noted that the share sale of a 4.5% stake in Eastern Company has been topping the state-run IPOs, which await the improvement of market conditions.

EFG Hermes manages the additional offering of Eastern Company, the official noted, adding that the Egyptian investment bank is watching the market closely until the Egyptian tobacco firm’s stock hits its target price.

In earning news, Egypt Free Shops reported a 55.7% year-over-year (y-o-y) growth in net profits during H1 of FY 2018/19.

The company’s net profits surged to EGP 72.89m in H1 FY 2018/19, against EGP 46.8m during the corresponding period in the prior FY, according to a filling to the EGX.

The revenues of Egypt Free Shops amounted to EGP 366.91m by the end of December 2018, from EGP 203.1m during the same period in FY 2017/18.

During the third quarter (Q3) of 2018, Egypt Free Shops posted EGP 35.7m in profits, compared to EGP 21.16m in the corresponding period in 2017, taking into consideration the minority shareholders’ rights.

In other company news, Eastern Company, Egypt’s monopoly cigarette producer has announced that it is considering new manufacturing contracts with international companies.

The contracts are still under discussion and any further details will be announced immediately upon taking any action, the company said in a statement to the EGX.

During Q1 of FY 2018/19, the Egyptian tobacco company posted a net profit of EGP 991.18m, 5% down from EGP 1.04bn in the prior-year period.

From June to September 2018, the company’s revenues rose to EGP 3.3bn, compared to EGP 3.17bn in the comparable quarter of 2017. Eastern Company previously announced a profit of EGP 4.2bn for FY 2017/18 due to higher revenues, compared to EGP 2.9bn in FY 2016/17.

Meanwhile, Arabian Cement Company has signed an agreement with Solaris Egypt to build a solar power plant in its plant in Suez, with EGP 100m in investments.

Funded by Qatar’s National Bank (QNB), Al Ahli, the solar plant will be the first in Egypt to power a cement plant.

The construction of the project is expected to commence in Q2 of 2019, Arabian Cement’s CEO Sergio Alcantarilla said. The projected solar plant will be located on up to 96,000 sqm.

In another vein, Qalaa Holdings signed a memorandum of understanding (MoU) with state-run Qatar Petroleum (QP) to purchase an additional stake in the Egyptian Refining Company (ERC).

The Cairo-based investment company is expected to obtain the required financing for concluding the deal in Q2 of 2019, Qalaa said in a filling to the EGX.

If the deal is consummated, the indirect ownership of Qalaa Holdings in the ERC is likely to increase to 23%.

Meanwhile, QNB Al Ahli’s board has recommended raising the bank’s issued capital by EGP 979.4m to EGP 10.77bn from its current EGP 9.79bn.

The capital hike will be carried out through a bonus share issue at a ratio of 1 to 10, that is one share for each 10 held, the lender said in a filing to the EGX, noting that the issuance will be financed from 2018’s reserves.

QNB Al Ahli has also mandated the board and the managing director to call for an ordinary and an extraordinary general meeting to approve the capital increase, changes to articles 6 and 7 of the articles of association, as well as splitting the share to EGP 5 from EGP 10.

QNB Al Ahli said it had invested EGP 39.9bn ($2.23bn) in 2018.

The bank had also reported EGP 7.2bn in profits for the full year 2018, a rise from EGP 5.5bn in 2017, while returns from offered loans increased to EGP 30.5bn in 2018 from EGP 24.5bn in the previous year.

Investments in 2018 were divided into financial investments available for sale worth EGP 2.3bn and investments held until maturity were worth EGP 36.58bn, the bank said in a statement to the EGX.

Last year’s investments also included EGP292.10m in subsidiaries and sister companies, the lender, which is a subsidiary of QNB, added.

For the full year 2018, QNB Al Ahli logged EGP 7.2bn in profits up from EGP 5.5bn, it said in a statement released earlier on Tuesday. Returns from offered loans increased to EGP 30.5bn in 2018 from EGP 24.5bn in the previous year.

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