1. Today’s Trading Playbook
Amr Hussein Elalfy CFA, Head of Research
KEY THEMES
After a couple of interesting movements in market, spurred by government-type catalysts (e.g. potential cut to natural gas prices provided to industrials), it looks like we’re back again to the oldest type of catalysts (i.e. company specific).
It looks like the Fawry [FWRY] surge of late has incentivized other peers. This comes as Ebtikar, a joint venture between MM Group [MTIE] and B Investments [BINV], is considering putting part of its electronic payment companies for sale in EGX during 2021. Let’s not forget that the state-owners E-Finance was scheduled to be listed on EGX as well, which was delayed due to market conditions. It’ll be very interesting to see how far the valuation for such upcoming IPOs will go.
Meanwhile, as the earnings season continues underway, we are still in the tube of “mixed” results with sectorial divergence very apparent in Q2 2020. Although the ceramics industry may enjoy a cut in its natural gas bill, demand is still weak. This is evidenced by ECAP’s top line in H1 2020 came in at EGP251mn, barely meeting our worst-case scenario for the quarter. On the other hand, HRHO’s Q2 2020 showed a tenacious performance, given lower credit provisions, which underpins HRHO’s good indicators in the near future under a recovery scenario from the COVID-19 hit.
Finally, news circulating about imminent liquidation of Egyptian Iron & Steel [IRON] continues to support the stock performance. While industrials were cheering potential natural gas price cut, IRON was dancing to a different melody. We believe that liquidation is fairly the best option possible for IRON shareholders, as valuation will move from cash flow to net asset value, opening the door for the company to monetize on its unutilized assets, mostly land bank.
POSITIVE
MTIE, RAYA, BINV: Given their exposure to the E payment party.
HRHO: Good set of results in Q2 2020.
IRON: A play on liquidation hopes.
NEGATIVE
ECAP: As weak demand outplays costs savings.