Egypt shares to keep rally alive in mid-term as earning season goes on in full swing

Daily News Egypt
11 Min Read

The Egypt Exchange (EGX) is seen by analysts to move upwards in the mid-term, benefiting from a strong earning season and government initial public offering (IPO) programme, which kicked of last week with the secondary sale of Eastern Company.

The EGX benchmark EGX30 index gained 100.06 points, or 0.67%, to close at 14,904.03 points last week.

The benchmark index has suffered sales pressure, dragged it to go down to 14,640 points, targeting resistance at 15,000 points, Sameh Gharib, head of technical research at Roots Stock Brokerage House said.

Over the week, the EGX70 index went down 1.5% to 708.73 points, while EGX100 lost 1.26% to 1,789 points.

Market capitalisation gained EGP 1.9bn to EGP 825.27bn.

The EGX has outperformed the region’s stock markets in February, Zawya MENA reported.

The benchmark EGX30 index jumped 4.8% last month, the highest rate among the bourses in the Middle East and North Africa (MENA) region.

“The strong momentum in stocks was driven by Central Bank of Egypt’s (CBE) 100 basis point cut in the overnight lending rate to 15.75%, which was again due to the sharp fall in consumer price inflation,” investment research analyst at Century Financial, Yogesh Khairajani said.

Noteworthy, the EGX30 index has gained 677 points in February, closing the month at 14,803 points.

“With a US-China deal in sight and a strong recovery in the Egyptian pound, the Egyptian market is expected to continue to accelerate,” Iyad Hweij, managing director of Allied Investment Partners explained.

Hweij noted that government IPOs set to be announced this year, is projected to attract investments.

He expected any further cut in the CBE’s interest rate would be “unfavourable macroeconomic trends that may thwart a complete recovery of the Egyptian market in 2019.”

Last Friday, Minister of Public Enterprise Sector, Hisham Tawfik, stated that Eastern Company’s private placement had been oversubscribed 1.8 times at EGP 17 per share, which is a 3% premium to the stock’s closing price in Thursday’s trading session.

The Egyptian petroleum minister expected the Engineering for the Petroleum and Process Industries (Enppi) to float a stake on the EGX in the first half of 2019 or prior to the end of the holy Islamic month of Ramadan.

The EGX30 index has fallen by 13.21% in 2018 at 13,035.77 points, losing 1,983.38 points, with a turnover of EGP 188bn exchanged through 43bn shares.

In earning news, the Egyptian International Pharmaceutical Industries (EIPICO) reported an increase of 1.8% in consolidated profits during fiscal year (FY) 2018 compared to the previous year.

Net earnings grew to EGP 701.31m in FY 2018 from EGP 688.87min FY 2017, according to the EGX disclosure on Thursday.

EIPICO recorded a growth of 11.41% in sales to EGP 2.815bn in FY 2018 from EGP 2.527bn in FY 2017.

During 2018, the pharmaceutical manufacturer reported standalone profits worth EGP 651.7m compared to EGP 651.4m in 2017.

The standalone sales went up to EGP 2.7bn in FY 2018 from EGP 2.4bn in the previous year.

Meanwhile, the Egyptian pharmaceutical distributor Ibnsina Pharma achieved a growth of 54% in profits during FY 2018 compared to the prior year.

Earnings soared to EGP 262.52m in FY 2018 from EGP 170.13m in FY 2017, according to the EGX disclosure on Thursday.

Ibnsina Pharma has posted a revenue of EGP 13.6bn from January to December 2018 compared to EGP 9.8bn in FY 2017.

In the same context, the board members of Sixth of October for Development and Investment (SODIC) have recommended distributing EGP 0.5 per share as a cash dividend for FY 2018.

The proposed cash dividends have a value of EGP 45m, according to the EGX disclosure on Thursday.

SODIC has announced a decline of 24.7% in profits to EGP 450.9m in FY 2018 from EGP 598.6m in FY 2017.

Revenues totalled EGP 3.7bn in 2018, higher than EGP 2.29bn in 2017.

The standalone business of SODIC registered a loss of EGP 193.4m in FY 2018 against a profit of EGP 154.25m in the prior year.

In company news, Alexandria Container and Cargo Handling Company said it was targeting EGP 1.8bn in profits for FY 2019/20, a slight decline from the EGP 1.9bn targeted in FY 2018/19.

However, projections indicate that the container firm was likely to achieve EGP 1.7bn this year.

As for the company’s investment strategy, Alexandria Container and Cargo Handling said it was planning to invest EGP 173.4m in its next FY as part of its efforts to renew its equipment to ensure continued high efficiency, according to a statement to the EGX.

In January, Pharos Research reiterated its fair value (FV) for Alexandria Container and Cargo Handling’s stock at EGP 14.5 per share, recommending an ‘Equalweight’.

Alexandria Container and Cargo Handling last reported a 15% fall in its profits for the six-month period ended December 2018 to EGP 962.4m from EGP 1.1bn in the same period of the previous FY.

Back to earnings, the Arab Dairy Products Company (Panda) posted it has turned profitable in 2018, as compared with 2017.

Consolidated profits reached EGP 41.29m during the 12-month period ended December 2018, against a net loss of EGP 29.32m in 2017, including minority shareholders’ rights, according to a filing to the EGX.

Sales increased to EGP 1.18bn last year from EGP 1.14bn a year earlier, the dairy producer added.

Meanwhile, standalone profits amounted to EGP 40.9m in 2018, against a net loss of EGP 29.6m in 2017.

Panda is targeting a 27% year-over-year (y-o-y) growth in sales in 2019, the company revealed in a separate statement.

The Egyptian cheese maker is looking to log EGP 1.5bn in sales this year, which is EGP 316m higher than 2018 sales, according to the statement.

Moreover, the company said its domestic sales rose by 37% y-o-y or EGP 209m in 2018, while its exports jumped by 17% or EGP 107m.

The EGX-listed firm’s management has set an investment scheme of EGP 74m for this year for all the company’s departments.

Panda previously reported EGP 26.4m in profits during the nine-month period ended September, against a net loss of EGP 11.22m in the corresponding period of 2017.

Sales rose to EGP 861.6m in the January-September period of 2018, versus EGP 829.8m in the same period a year earlier.

Meanwhile, a top official from EFG Hermes said Tuesday that his company was working on a $500m merger and acquisition (M&A) deal in Saudi Arabia.

Speaking to Reuters, EFG Hermes’ head of investment banking Mohammed Fahmi projected that more M&A deals would come to light in Saudi Arabia this year, particularly the private sector.

The Egypt-based investment bank is also advising on an IPO in the kingdom, the top official noted, but declined to give additional details about this IPO.

“Saudi, I think, will be very busy,” Fahmi stated on the sidelines of EFG Hermes’ investment conference in Dubai. “I’m seeing a lot of request for proposals (RFPs) coming from Saudi for IPOs… Private sector companies looking to go public, which I think is a valuable thing,” he explained.

Saudi Arabia has been working hard to attract foreign investments to support its economy and as part of its ambitious Vision 2030, through which it has been trying to diversify its economy away from its heavy reliance on oil resources. The kingdom is close to being included on the FTSE Russell emerging markets (EMs) index in March, a move that is forecast to attract billions of dollars in foreign fund flows.

It is worth noting that EFG Hermes is taking part in the potential $1bn listing of Fawaz Alhokair Group’s Arabian Centres Company, which is projected to take place sometime in the second quarter
(Q2) of 2019, according to a previous Reuters report. EFG Hermes has declined to comment on its role this mega IPO.

In December, an EFG Hermes official told Reuters that the firm was working on an M&A deal in Saudi’s healthcare sector.

Fahmi also told the news agency that his company was conducting a number of deals in the automotive, banking, and facilities management sectors in Saudi Arabia and the UAE, whereas in its home country Egypt, EFG Hermes was working on a ‘potential’ $300m IPO slated for the Q4 of 2019.

Along with Citigroup, the investment bank is also working on an IPO for state-owned Alexandria Container and Cargo Handling, which may be carried out in Q2 of 2019, EFG Hermes Co-CEO Mohamed Ebeid told Reuters. EFG Hermes is also handling several IPOs for a number of private firms in Egypt.

Hermes’ CEO Karim Awad told Bloomberg that his company was looking to expand its footprint in EMs including South East Asia, noting that the investment would not be sizeable but would involve “building market share from the ground up.”

In July, EFG-Hermes acquired Nigeria-based Primera Africa Securities Ltd as part of its Africa expansion strategy.

Caption: The benchmark EGX30 index jumped 4.8% last month

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