Today’s Top News & Analysis
New USD500mn Samurai bonds
A new council for green hydrogen
An USD400mn loan from Afreximbank for the new phosphate fertilizers complex
Egypt’s auto sales decrease 51% y/y in July 2023
ORAS Q2 2023: Below expectations, yet capital gains pushed profits higher
MFPC Q2 2023: Pricing power vs. cost control
EKHO details the rest of its 2023 investment plan
Raya Holding to inject more investments in its subsidiaries
JUFO and DOMT to raise their prices at the start of Q3
MACRO
New USD500mn Samurai bonds
The Cabinet approved to undertake a second issue of the Samurai bonds worth USD500mn for five years, following the success of the first issue. (Al-Mal)
A new council for green hydrogen
The Cabinet has approved to establish the National Council for Green Hydrogen (NCGH), in effort to support the green hydrogen initiatives. NCGH will undertake a number of specialties and tasks, including:
· Following up on the implementation of the national strategy for green hydrogen and proposing to update it in light of international and national developments.
· Approving policies, plans, and mechanisms necessary to implement and update the strategy.
· Coordinating between ministries and concerned authorities.
· Proposing the necessary solutions to overcome investment obstacles in the field of green hydrogen and its derivatives.
· Reviewing the legislations, rules, and regulations in the field of green hydrogen and its derivatives and proposing to update them. (Al-Mal)
An USD400mn loan from Afreximbank for the new phosphate fertilizers complex
The African Export-Import Bank (Afreximbank) agreed to extend a USD400mn loan to El-Wady for Phosphate Industries & Fertilizers (Waphco) to build an USD1bn phosphate fertilizers complex in El-Wadi El-Gedid governorate. Waphco is a subsidiary of the state-owned Chemical Industries Holding Co. (CIHC), and the new plant's production capacity is 1mn tons annually of phosphoric acid. (Asharq Business)
Egypt’s auto sales decrease 51% y/y in July 2023
According to Automotive Marketing Information Council (AMIC), Egypt’s auto sales volumes declined 51% y/y to 6,295 vehicles in July 2023 (-0.7% m/m), as:
· Passenger car sales fell to less than 5,000 units (-45% y/y).
· Bus sales fell to 566 units (-11% m/m).
However, truck sales increased 13% m/m to 797 units. (Enterprise)
CORPORATE
ORAS Q2 2023: Below expectations, yet capital gains pushed profits higher
Orascom Construction’s [ORAS] H1 2023 net income came in at an unexpected USD98.7mn compared to USD33.9mn a year before (+191% y/y). The huge increase is attributable to the divestiture of two investments worth EGP2.2bn, with capital gains of USD108.6mn. This is despite revenues missing our expectations by 17%, recording USD1,564mn in H1 2023 (-18% y/y) on a weaker EGP. Meanwhile, ORAS’s backlog recorded USD5.5bn, with USD1.6bn of new awards during H1 2023. Besix, on the other hand, recorded an investment income of USD6.4mn in H1 2023 vs. a net loss of USD6.5mn a year before. ORAS has a net cash position of USD163.1mn, which is equivalent to EGP46/ORAS share.
Below are our key takeaways from the company’s Q2 2023 conference call:
· ORAS's management attributed the lower-than-expected results to the impact of increasing costs in Egypt, which they expect to be compensated for as per their contracts. However, this process usually takes around five months for indices to be issued.
· Management also said that Sidra Medical Center's arbitration case could be concluded by mid-2024, falling short to quantify the provisions already booked by ORAS for the case or the expected compensation to be paid.
· ORAS is not currently looking to take any 100% EGP-denominated projects due to the related currency risks.
· Management plans to pay dividends in the coming period, especially after the divestiture of its recent investments, with more possible divestiture plans in the near future.
· As of 30 June 2023, ORAS’s cash position was 78% denominated in foreign currency, while debt is only 8.5%. (Company disclosure)
MFPC Q2 2023: Pricing power vs. cost control
Misr Fertilizers Production Co. (MOPCO) [MFPC] announced its full results for Q2 2023, where:
· Net income declined by 8% y/y to EGP1.5bn on the back of:
1. Lower revenues of EGP4.3bn (-3.6% y/y) on lower global urea prices, with a 5pp y/y lower GPM of 44%.
2. Higher general and administrative expenses of EGP125mn (+107% y/y).
3. Higher other expenses of EGP18.6mn (+194% y/y).
· Such results came in despite net financing income of EGP240mn.
· On a sequential basis, revenues were 15% weaker q/q on the back of a 20% q/q drop in export revenues, although GPM was better due to better cost control (gas cost fell 32% q/q). However, having no FX gains in Q2 2023 led net income to drop 38% q/q.
· For H1 2023, net income increased slightly to EGP3.9bn (+6% y/y) as revenues increased to EGP9.4bn (+8% y/y). GPM dropped to 41% vs. 55% a year before due to the substantial increase in USD-based cost. However, the huge FX gains partially made up for the lower GPM.
MFPC’s annualized ROE is now 19%, and the stock is currently traded at an annualized P/E of 6.8x. (Company disclosure)
EKHO details the rest of its 2023 investment plan
Egypt Kuwait Holding Co. [EKHO] outlined its investment areas for the rest of 2023, which include:
· The drilling of two natural gas wells in the North Sinai offshore concession.
· Nile Wood's medium density fiberboard (MDF) factory.
· All works to increase the operational capacity of Kahraba's power station.
· The purchase of minority stakes in EKHO’s subsidiaries. (Company disclosure)
Raya Holding to inject more investments in its subsidiaries
Raya Holding for Financial Investments [RAYA] plans to raise its stake in its subsidiary Ostool, a leading provider of supply chain management services, from a current 62% to 90%. We note that RAYA is currently considering offers from investors to increase the paid-in capital of its subsidiary Raya Foods byUSD15-20mn to fund its expansion plans. (Al-Mal)
JUFO and DOMT to raise their prices at the start of Q3
Reportedly, Juhayna Food Industries [JUFO] will increase the prices of its dairy products by up to EGP11/unit. Meanwhile, Arabian Food Industries [DOMT] will increase the price of its dairy products by up to 7.5%. Both companies are raising prices to overcome the high costs induced by the high FX rate. (Enterprise)
Key Dates
31-Aug-23
ZMID: Cash dividend / Payment date for a dividend of EGP0.05/share (1st installment).
PHAR: Cash dividend / Payment date for a dividend of EGP1.00/share (2nd installment).
1-Sep-23
MSCI / MSCI's August 2023 Quarterly Index Review Effective Date.
5-Sep-23
Egypt PMI / August 2023 reading.
6-Sep-23
ELSH: OGM / Approving the decisions of the company’s board of directors in its meeting held on 15/6/2023.
ELSH: EGM / Amending some articles of the Company's bylaws.
15-Sep-23
IMF Review / Second IMF review with Egypt (end-June 2023 quantitative targets).
19-Sep-23
EXPA: EGM / Amending Article No. 5 of the bank's bylaws.
21-Sep-23
MPC Meeting / Determining the CBE's policy rate.
26-Sep-23
MICH OGM / Approving financial statements ending 30 June 2023 and the proposed dividends.