Growing Profits
Stocks mentioned: ETEL, TMGH, ADIB, ISPH, TAQA, EFIC, FWRY, CANA, ATQA, MHOT
Today’s Top News & Analysis
CBE refuses to extend top 50 clients' concentration exemption
Agthia puts off Safi acquisition
ETEL Q2 2023: Higher net profits on higher revenues across all segments
TMGH H1 2023: Exceptional figures
ADIB Q2 2023: Higher highs
ISPH Q2 2023: Higher net profits on higher revenues driven by the retail segment
TAQA H1 2023: Finance costs suffocate bottom-line
EFIC standalone Q2 2023: Strong q/q leap
FWRY Q2 2023: All the way up
CANA's OGM approves EGP400mn capital increase
Ataqa BoD approves beneficence loan
Misr Hotels is not interested in receiving any acquisition offers
MACRO
CBE refuses to extend top 50 clients' concentration exemption
The Central Bank of Egypt (CBE) has reportedly rejected the Federation of Egyptian Banks' request to extend the exemption from applying credit concentration limits to top 50 clients on banks' credit portfolios. CBE had waived off the credit limits for two years to support banks against the repercussions of the pandemic. However, the CBE decided to resume the concentration limits in 2023 to safeguard banks' capital against the associated risks with recent economic challenges. (Asharq Business)
Agthia puts off Safi acquisition
ADQ's Agthia is reportedly no longer interested in buying a stake in National Co. for Natural Water (Safi). We note that in May, it was said that Agthia may be among some entities that are interested in Safi. (Enterprise)
CORPORATE
ETEL Q2 2023: Higher net profits on higher revenues across all segments
Telecom Egypt [ETEL] posted Q2 2023 consolidated net profits of EGP2.9bn, (+19% y/y, -24% q/q), while normalized net profits grew by 25% y/y to EGP3bn, due to:
· Higher revenues of EGP14.2bn (+29% y/y, +2% q/q), the growth of which was driven by:
o Home & Consumer revenues growing by 15% y/y to EGP6.2bn on higher data and voice revenues.
o Wholesale revenues growing by 12% y/y to EGP1.9bn on higher cable revenues due to the monetization of cable projects by USD40mn.
· EBITDA grew by 30% y/y to EGP5.8bn, implying an EBITDA margin of 41%. (Company disclosure)
TMGH H1 2023: Exceptional figures
Talaat Moustafa Group Holding [TMGH] reported H1 2023 net income of EGP1.56bn compared to EGP1.1bn a year before (+40% y/y). Revenues recorded EGP10.7bn compared to EGP7.1bn (+51% y/y). Revenues can be broken into:
· Revenues from real estate sales recorded EGP7.4bn (+46% y/y).
· Revenues from hotels recorded EGP1.8bn (+90% y/y).
· Recurring income revenues recorded EGP1.47bn (+37% y/y).
GPM recorded 31.7% compared to 32.8% in H1 2022, a decrease of 1.1pp y/y. (Company disclosure)
ADIB Q2 2023: Higher highs
Abu Dhabi Islamic Bank – Egypt [ADIB] announced remarkable results for Q2 2023. These are our main takeaways:
· Net income came at EGP1.1bn (+16% q/q, +104% y/y), marking a new record for quarterly earnings.
· This was mainly due a 17% q/q increase in net interest income (NII) to EGP2bn (+82% y/y), which reflects the cumulative effect of the several rate hikes in 2022 and 2023.
· Accordingly, ADIB’s annualized NIM expanded to 7.1%, up from 6.7% last quarter, while the bank’s annualized ROAE was maintained at 41%, same as last quarter.
· Also, other operating expenses declined by 64% q/q to EGP100mn as there were no FX losses this quarter.
· This has allowed the bank to book provisions of EGP466mn (+164% q/q), increasing the annualized CoR to -2.9% from -1.1%.
· On the balance sheet side, ADIB managed to increase its loan book by 9% ytd to EGP65bn. Despite this increase, NPL ratio was maintained at 1.8% and coverage ratio increased to 305%.
· Deposits increased significantly by 13% ytd to EGP111bn, mainly derived by retail deposits, pulling the GLDR ratio lower to 59%.
· Due from banks increased by 143% ytd to EGP34.5bn, pushing total assets to EGP138bn (+19% ytd).
ADIB is now traded on an annualized P/E of 2.8x and a P/BV of 1.1x. (Bank disclosure)
ISPH Q2 2023: Higher net profits on higher revenues driven by the retail segment
Ibnsina Pharma [ISPH] reported its consolidated Q2 2023 net profits of EGP59mn (+103% y/y) on higher revenues of EGP7.9bn (+59% y/y). Higher revenues were mainly driven by a 71% y/y growth in the retail segment to EGP3.7bn. We note that net profits still expanded despite the huge increase in net finance cost to EGP223mn vs. only EGP54mn last year. Meanwhile, the gross profit margin marginally improved by 0.5pp y/y to 8.1%. In addition, the SG&A-to-revenues ratio improved by 1pp y/y to 4%. (Company disclosure)
TAQA H1 2023: Finance costs suffocate bottom-line
TAQA Arabia [TAQA] released its consolidated financial results for H1 2023, showing a 13% y/y decline in net profits to EGP167mn despite higher revenues of EGP6.2bn (+29% y/y) with a GPM of 11% (same as last year). The bottom-line decline was driven by an 81% y/y increase in finance costs to EGP658mn. Likewise, Q2 2023 net profits declined to EGP79mn (-11% q/q) as a result of a 24% q/q increase in finance costs, with revenues of EGP3.2bn (+10% q/q) and a GPM of 10%
(-1pp q/q).
Meanwhile, finance costs affected all of TAQA’s segments in H1 2023, where:
· TAQA Gas’ net income declined 17% y/y to EGP123mn despite higher revenues of EGP1.7bn (+66% y/y).
· TAQA Power's net income declined 16% y/y to EGP50mn despite higher revenues of EGP1bn (+11% y/y).
· TAQA Petroleum’s net income rose only 4% y/y to EGP35mn with revenues of EGP3.4bn (+20% y/y).
TAQA is currently trading at an LTM P/E ratio of 24x and an LTM EV/EBITDA of 12x, based on yesterday’s closing price. (Company disclosure)
EFIC standalone Q2 2023: Strong q/q leap
Egyptian Financial & Industrial Co. [EFIC] announced Q2 2023 standalone results, where:
· Net income declined by 23% y/y to EGP115mn.
· Revenues, on the other hand, increased by 25% y/y to EGP672mn. However, due to the devaluation, raw material cost increased significantly. Accordingly, gross profit declined by 5% y/y to EGP270mn, leading to a drop in GPM to 40% from 53% last year.
· Although EFIC recorded net financing expense of EGP36mn, the strong increase in other operating income to EGP6mn (+146% y/y) helped mitigate the effect.
· On a sequential basis, this quarter is operationally better. As revenues increased 75% q/q and net income increased 32% q/q. This can be attributed to a leap in granulated SSP sales (mostly exports) that recorded EGP505mn alone. (Company disclosure)
FWRY Q2 2023: All the way up
Fawry [FWRY] announced strong Q2 2023 results, where net income grew by 562% y/y to EGP160mn. Meanwhile, the top line grew by 45% y/y to EGP768mn on the back of strong growth in FWRY’s banking services segment to EGP294mn (+74% y/y) which contributed 53% to the y/y growth. This has brought the GPM up to 62% from 58% in Q2 2022.
Besides revenues, the following items contributed to net profit growth:
1. Higher credit interest of EGP106mn (+160% y/y) on higher yield from Treasury bills in addition to an 8.7x y/y higher gains on sale of fixed assets EGP8.8mn.
2. Other revenues of EGP2mn against other expenses of EGP0.22mn in Q2 2022. (Company disclosure)
CANA's OGM approves EGP400mn capital increase
In an OGM held yesterday, Suez Canal Bank's [CANA] shareholders approved increasing the bank's paid-in capital by EGP400mn to reach the minimum capital requirement of EGP5bn specified by the CBE. This increase will be through bonus shares to be financed by the bank's legal reserve and retained earnings. (Bank disclosure)
Ataqa BoD approves beneficence loan
Misr National Steel’s (Ataqa) [ATQA] BoD approved taking out a beneficence loan from its main shareholder, El Wehda Industrial Development (a 93.2% stake), worth USD5mn and will be repaid within one month. (Company disclosure)
Misr Hotels is not interested in receiving any acquisition offers
Misr Hotels [MHOT] is not interested in selling a majority stake of its shares, stating it did not receive any acquisition offers. MHOT advises any interested parties to invest in the Egyptian government's newly-established hotel company. (Enterprise)
Key Dates
14-Aug-23
ETEL: Financial results Announcement / Q2 2023 financial results' announcement.
16-Aug-23
DOMT: EGM / Amending Articles No. 3 & 4 of the company's bylaws.
RMDA: EGM / Approving increasing the issued capital & amending Articles No. 6 & 7 of the company's bylaws.
17-Aug-23
EGTS: OGM / Approving financial statements ending 31 Dec. 2022.
20-Aug-23
BINV: Cash dividend / Deadline for eligibility for a dividend of USD0.032/Share.
21-Aug-23
BINV: Cash dividend / Ex-dividend date for USD0.032/Share.
23-Aug-23
BINV: Cash dividend / Payment date for a dividend of USD0.032/Share.
MTIE: Stock dividend / Last date for eligibility for a 0.25-for-1 stock dividend.
24-Aug-23
MTIE: Stock dividend / Date for distributing a 0.25 for-1 stock dividend.
27-Aug-23
SPMD: OGM / Approving financial statements ending 31 Dec. 2022.
28-Aug-23
ZMID: Cash dividend / Deadline for eligibility for a dividend of EGP0.150/Share.
30-Aug-23
ORAS: Financial results Announcement / Q2 2023 financial results' announcement.
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.