Today’s Trading Playbook
KEY THEMES
U.S. equities closed slightly lower after hitting a record intraday high on Tuesday, as a four-day rally lost steam in thin trading and investors weighed Omicron-driven travel disruptions and store closures. Meanwhile, Asian shares are also traded lower in Wednesday’s morning. On the other hand, oil prices remained stable, well within yesterday’s trading range.
Here at home, both indices ended in the green territory, as the market reacted to a set of new fresh stories. For a starter, Heliopolis Housing [HELI] has selected Mountain View as a co-developer to develop Heliopark, with a land area close to 1,695 feddans (i.e. 7.1mn sqm). The disclosure released from HELI has mentioned that the expected revenues out of the project over the next 25 years is expected to be EGP397bn. Furthermore, HELI’s share of the total revenues proceeds represents EGP115bn. We ran a basic NPV exercise, assuming the project will last for 25 years, pre-tax margin of 50%, and a discount rate of 15%. The aforementioned inputs yielded an NPV for Heliopark project attributable to HELI of EGP11.5bn, which imply a per share value for HELI of EGP8.6/share, and imply a price per sqm of EGP1,620. The market reacted negatively to the news, either because investors didn’t trust that the project will generate such revenues, or the implied per-sqm price is not satisfying. Just this morning, HELI has mentioned that Mountain View will pay an advance payment of EGP1.4bn in order to co-develop Heliopark, with 50% of the payment to be made at the time of signing, and 50% over the course of the next 18 months. Also, HELI specified that its share of total revenues is 30%, with a minimum guarantee of EGP80bn.
Elsewhere, Abu Qir Fertilizers [ABUK] surged notably yesterday, as the market reacted to the President’s statement related to the possible complete lifting of subsidies on the price of local fertilizers, as a cash subsidy regime is suggested. The impact of a fully liberalized local fertilizers market on ABUK’s profitability is enormous, especially as ABUK commits to a local quota equal to 77,000 ton per month. We remind you that we have an overweight recommendation for ABUK with a 12MPT of EGP31/share (ETR +44%).
Now, on to the top news and analysis for the day.