KEY THEMES
Today’s trading session will probably be key as to how the rest of the year will fare, in our opinion. The market’s heavy-weight CIB [COMI], which was suspended from trading last Thursday, saw its GDR [CBKD] sink 17% on that same day before paring its losses on Friday (+14%). Despite the one-day recovery, the local share will need to adjust lower to be aligned with the equivalent of its GDR price. But if we take into account that the GDR has historically been trading at a 6% discount to the local share, we should not see much change. But until the CBE releases its final report concerning its findings at CIB, we could continue to see some fluctuation in the share price on an intraday basis. We calculate that a 5-6% drop by COMI, all other stocks constant, would translate into a c.2% drop in the market’s main index EGX 30. We hope—and think as well—that the local share will find support around EGP60, driven by institutional buyers opting to get in at a 10% discount to Wednesday’s price (EGP66.60). With much of the uncertainty surrounding the bank’s leadership—at least in the short term—dissipating, investors’ eyes would be fixated on the Central Bank of Egypt’s final findings report which would reveal, once and for all, how severe the issues are at CIB, if at all. Elsewhere, we could see some profit taking activity across small caps which have had a home run on a year-to-date basis and even better since mid-March 2020. Generally speaking, we advise our clients not to push the panic button indiscriminately, but to rather consider each stock for its own merits.
POSITIVE
We reiterate the few names we prefer for the time being as we listed in last Thursday's issue, including COMI which we reiterated as an Overweight this morning, albeit with a 2% lower 12M PT of EGP83/share (still offering a 25% upside). Four of those names we mentioned last Thursday ended the day unscathed, namely Juhayna Food Industries [JUFO] (+3.4%, Ibnsina Pharma [ISPH] (+1.9%), Obour Land Food Industries [OLFI] (+0.5%), and Nile Pharma [NIPH] (+0.4%). For the full list, please read “Déjàvu”.
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