1. Today’s Trading Playbook
TABLE OF CONTENTS
KEY THEMES
The world still has to deal with a more hawkish U.S. Fed, further pushing the U.S. dollar and yields higher. Now, we learn that the Fed plans to curtail its balance sheet by some USD95bn a month to combat inflation. Also, it has not been going well for the BRIC group lately. First, Brazil has been suffering from drought then frost and now floods, which impacts its crops. Second, Russia has induced its own wounds after invading Ukraine. Third, India just had last week a 2-day nationwide strike protesting the Indian government’s recent economic measures. Also, China is fighting the spread of new COVID-19 cases, further rattling already shaky global economic expectations.
Here at home, we continue to see M&A playing out as the main outstanding theme of the five themes we had mentioned in our STANDPoint strategy note published on 30 January 2022. Trading in the market has become transaction based. For instance, a potential bid for EFG-Hermes Holding [HRHO] drove the stock price higher. Another example is Domty [DOMT] which saw its price rise as a result of another bid. A third example is B Investments’ [BINV] exit from Giza Systems, cashing out on one of its private equity investments. Thus, we think Egypt stocks’ performance will continue to be event-driven for the rest of H1 2022, be it M&A or share buybacks.
Now, on to the top news and analysis for the day.
2. Top News & Analysis
TABLE OF CONTENTS
MACRO NEWS
The Egyptian government could look into rescheduling debt payments for developers.The prices of local building materials, including steel and cement, have soared since the start of the Russia-Ukraine conflict, eating into contractors’ margins and leading them to lobby for government support to help absorb the shock. (Enterprise)
The Prime Minister green-lit a number of decisions at yesterday’s Cabinet meeting, including amendments to the Income Tax Law and the date at which the new hotel price floor will be applied across the country. (Enterprise)
The EU is providing Egypt with EUR100mn in support to help tackle rising food prices amid the ongoing war in Ukraine. (EU Commission)
The Ministry of Supply & Internal Trade (MOSIT) released a decree to decrease by 10% the daily allocation for bakeries producing the subsidized bread during the holy month of Ramadan due the decline in bread consumption and the lack of bread sales during the month. Meanwhile, MOSIT agreed to extend the working hours for bakeries for two additional hours from 9 pm to 11 pm after filing a request to the minister. (Akhbar-Elyom)
CORPORATE NEWS
Dice Sport & Casual Wear [DSCW] reported net income after minority of EGP32mn in 2021 vs. net losses of EGP57mn the year before on higher revenues of EGP1.6bn (+29.5% y/y) and better gross profit margin of 16.9% (+315bps.y/y). Meanwhile, the Financial Regulatory Authority (FRA) said that the fair value report prepared for the purpose of DSCW’s EGP265mn capital increase is not in compliance with its financial valuation standards. (Company disclosure, FRA)
Heliopolis Housing & Development’s [HELI] BoD approved a planned contract to sell a vacant land plot of 243 feddans. The total contract value is EGP1.735bn (EGP1,700/sqm), with a 20% down payment and the remaining 80% spread out over 16 equal installments over four years without interest. (Company disclosure)
Remco for Touristic Village’s [RTVC] 2021 results showed net losses of EGP455mn vs. net losses of EGP443mn a year earlier, despite higher revenue of EGP 922mn (+51% y/y). (Mubasher)
ValU, the consumer finance subsidiary of EFG Hermes Holding [HRHO], partnered with OPPO to provide product purchase financing programs across its branches. (Arab Finance)
The Egyptian government approved the establishment of a free zone in Alexandria port for the state-owned Egyptian Group for Multi-Purpose Terminals (EGMPT) with a USD500mn investment from Alexandria container and cargo handling co. [ALCN] and other EGMPT shareholder's. (Hapi Journal)
Cleopatra Hospitals Group [CLHO] bought 275,000 treasury shares. (Company disclosures)
Amer Group Holding [AMER] executed a deal of 50mn shares through block trading valued at EGP45mn. (Arab finance)
United Housing & Developments [UNIT] has bought 45,000 shares, amounting to treasury shares to 2.35% of the total share capital. (Mubasher)
GLOBAL NEWS
Federal Reserve officials in March "generally agreed" to cut up to USD95bn a month from the central bank's asset holdings as another tool in the fight against surging inflation,even as the war in Ukraine tempered the first U.S. interest rate increase. (Reuters)
Inflation in the eurozone is high and the European Central Bank may soon need to raise interest rates as a result. (Reuters)
3. Chart of the Day
Yousef Ghazy | Equity Analyst
Source: Company reports.
In 2021, the microfinance arm of EFG Hermes Holding [HRHO], Tanmeyah, generated revenues of EGP1.4bn (23% of total revenues), 132% higher than CI Capital Holding's [CICH] Reefy which generated EGP614mn (17% of total revenues).
4. Markets Performance
