Today’s Trading Playbook
Amr Hussein Elalfy CFA | Head of Research
KEY THEMES
We are in the last week of what has been a momentous, yet infamous, year. Some investors, mostly foreign ones, are likely on vacations for Christmas and New Year’ Eve, so we might see some quiet trading in the last trading sessions of the year. However, we could still see some company-specific events standing out.
One of these events just popped up this morning, where Cleopatra Hospital [CLHO] seems to have finally came to an agreement with Alameda’s shareholders to acquire 100% of their healthcare group for as much as USD500mn, including debt. While we believe such a valuation is close to CLHO’s current enterprise value, we think resulting synergies from such a deal will help drive CLHO’s stock price a bit higher.
Another company-specific event is related to Ezz Steel [ESRS] which has raised its selling prices over the weekend effective today by EGP1,000 or 8% to EGP13,654/ton (including the 14% value-added tax “VAT”). Interestingly, ESRS has raised its selling prices by a cumulative 35% so far since mid-September when it was selling at EGP10,100/ton (including VAT). While we think the increase in selling prices reflects a somewhat improved environment in the sector (especially with the resumption of building permits), we think it also reflects higher iron ore global prices which rose by 35% over the same period.
POSITIVE
CLHO: The stock is likely to react positive to the news on hopes of a revaluation of CLHO’s equity as well as potential synergies resulting from the deal. The stock is trading below its 3-year median P/E. Please see Chart of the Day below.
ESRS: We expect ESRS to react positively to the news in the short term, but the long term picture will be determined to a large extent by other factors, including the cost of natural gas, the price of iron ore, and the company’s sales volume.