Today’s Top News & Analysis
Unemployment rate declines to 7.2% in Q4 2022
Egypt to offer first USD1.5bn sukuk bond next week
Turkish companies to invest USD500mn in Egypt
Egypt plans to increase LNG exports by 40% starting in 2025
India’s EKC to invest USD30-50mn in Egypt
US to sell 26mn bbl from the Strategic Petroleum Reserve
Tax break for poultry players
3 framework agreements for manufacturing cars are signed
ORHD signs an agreement granting it approval for a master plan in El-Gouna
CNFN's Q4 2022: Strong earnings on higher revenues; BoD approves cash dividend
Egypt Aluminum H1 2022/23: EGP devaluation boosts net income
EAST's Q2 2022/23: Strong earnings on higher revenues and other income
DEIN’s H1 2023: Strong y/y growth
The FRA approved Kafr El Zayat Pesticides' capital increase
Strategic GCC investors interested in acquiring a stake in Sidpec-ETHYDCO
MACRO
Unemployment rate declines to 7.2% in Q4 2022
The unemployment rate in Egypt declined by 20bps q/q to 7.2% in Q4 2022. The workforce gained 145,000 newly employed workers and lost 65,000 unemployed workers, bringing the total workforce to 30.34mn vs 30.26mn the previous quarter. (Al-Borsa)
Egypt to offer first USD1.5bn sukuk bond next week
Egypt is seeking to offer its first sukuk bond next week worth USD1.5bn. Moody’s has assigned a (P) B3 rating to the proposed USD5bn sukuk program, which will be issued through the Ministry of Finance. Egypt has chosen Citigroup, Credit Agricole, Abu Dhabi Islamic Bank, Emirates NBD Capital, HSBC, and First Abu Dhabi Bank for the potential sukuk sale. (Al-Borsa)
Turkish companies to invest USD500mn in Egypt
The Prime Minister recently sat with multiple Turkish investors to discuss investment opportunities in Egypt that could be worth USD500mn. Representatives from 14 different companies were present from multiple sectors: industrial zone development, spinning and weaving, ready-made garments, sportswear, medical preparations, and electrical appliances. Current investments of Turkish companies in Egypt exceed USD2bn. (Al-Mal)
Egypt plans to increase LNG exports by 40% starting in 2025
Egypt possesses two liquefied natural gas (LNG) plants on the Mediterranean coast, designed to ship 12mn tons/year of LNG. Currently, exports remain steady at 7.5mn tons/year. The Minister of Petroleum & Mineral Recourses expects to reach full capacity by 2025 through new exploratory activities and increased Israeli LNG inflows. The EU has signed an MoU with Egypt and Israel to help secure their supply of LNG for the future. (Asharq Business)
India’s EKC to invest USD30-50mn in Egypt
NSE-listed Everest Kanto Cylinder Ltd. (EKC) intends to invest USD30-50mn in Egypt for a new compressed natural gas (CNG) cylinder factory. EKC operates several factories around the world (India, UAE, and USA) and specializes in manufacturing CNG cylinders. Egyptian industries that use CNG cylinders in their manufacturing activities (ex. pharmaceuticals, NG-powered cars, and tourism) must import all their needs; hence, EKC’s new factory will greatly lower production costs for these industries and reduce USD expenses. A new entity will be created to oversee operations, EKC Egypt, ownership and costs will be split between EKC (80%) and the Egyptian side (20%). Initial production will consist of 185,000 CNG cylinders/year, with 75% allocated locally and the rest exported to Europe and Africa. (Al-Mal)
US to sell 26mn bbl from the Strategic Petroleum Reserve
The US announced that it would sell 26mn bbl from the Strategic Petroleum Reserve in April. The US Energy Information Administration (EIA) released their total crude oil stock for the week ending 10 February showing an increase of 16.3mn bbl w/w to 843mn bbl. We expect this to offset the price increases oil saw recently, following Russia’s announcement of cutting its oil production in March. Meanwhile, OPEC+ and the International Energy Agency (IEA) have revised their oil demand forecasts from last month, driven by China’s eagerness to revitalize its economy. OPEC+ believes demand will rise in 2023 by 2.3mn bbl/day (+100,000bbl/day from last month’s forecast), while the IEA believes demand this year will rise by 2mn bbl/day (+200,000bbl/day from last month’s forecast). (Reuters, EIA, Asharq Business: 1, 2)
Tax break for poultry players
According to a Cabinet statement, poultry producers are added to the list of 19 industries that are granted three-year real estate tax break. (Cabinet statement)
3 framework agreements for manufacturing cars are signed
According to a Cabinet statement, the Prime Minister signed 3 framework agreements with local and global automakers, namely Stellantis, Nissan, and Al Mansour automotive for plans to localize car component manufacturing and vehicle assembly. (Cabinet statement)
CORPORATE
ORHD signs an agreement granting it approval for a master plan in El-Gouna
Orascom Development Egypt [ORHD] signed a master agreement with the Egyptian government to grant ORHD the following:
· Approval of new master plan for the remaining 17.4mn sqm land bank in El-Gouna.
· Granting ORHD the right to connect its lagoon system to the sea.
· Reducing the shoreline setback for the remaining land bank from 200m to 105m, allowing for more commercial use. ORHD will pay USD39mn upon signature in consideration of the reduction of the shoreline.
· Granting environmental permits for 24 projects in El-Gouna, relieving ORHD from all charges and settlement of all disputes with the Environment Protection Agency.
· Amending the USD112mn transfer fee on real estate sales for the remaining land bank in El-Gouna, with payments of USD21mn due once the master agreement has been signed, and the remaining to be paid over 15 years. (Company disclosure)
CNFN's Q4 2022: Strong earnings on higher revenues; BoD approves cash dividend
Contact Financial Holding [CNFN] declared 2022 net profit of EGP510.7mn (+10% y/y) on net revenues of EGP1.5bn (+33% y/y). The double-digit growth in revenues was backed by:
(1) A higher finance operating income of EGP1.4bn (+33% y/y), in light of a higher outstanding portfolio of EGP14.8bn (+44% y/y) in 2022.
(2) A higher insurance income of EGP54mn (+50% y/y), due to a sharp increase in the gross written premium by 83% y/y to EGP948mn.
Meanwhile, CNFN operating expenses rose 58% y/y to EGP895.7mn in 2022 as a result of:
(1) Higher provisions of EGP107.3mn vs. EGP11.4mn the year before.
(2) Higher financing cost of EGP42.3mn (+83% y/y).
Meanwhile, CNFN BoD approved a cash dividend of EGP0.25/share, noting that Orascom Financial Holding [OFH], which owns a 29.28% stake in CNFN, will earn almost EGP88mn as a result. (Company disclosure: 1, 2)
Egypt Aluminum H1 2022/23: EGP devaluation boosts net income
Egypt Aluminum [EGAL] has announced the full results for H1 2022/23. Net income increased by 110% y/y to EGP1.7bn on the back of the following:
(1) Despite lower average global aluminum prices of USD2,347/ton against USD2,719/ton last year and lower sales volumes, EGAL managed to record a 25% y/y increase in its top line to EGP8.4bn on the EGP devaluation, which in turn pushed EGAL’s GPM to increase by 7pp y/y to 26%.
(2) Significantly lower y/y provisions of EGP14.5mn against EGP587mn the year before.
(3) 22% y/y higher other income to EGP204mn.
As for Q2 2022/23 alone, the company managed to increase its net earnings q/q by 66% to EGP1.1bn on a 46% q/q increase in revenues to EGP4.9bn. (Company disclosure)
EAST's Q2 2022/23: Strong earnings on higher revenues and other income
Eastern Co. [EAST] reported Q2 2022/23 net profits of EGP2.1bn (+58% y/y), whereas it grew by 48% q/q. The high growth came due to:
· Revenues growing to EGP5.3bn (+26% y/y), while it grew by 15% q/q.
· Higher gross profit margin of 48% (+3pp y/y), however, it declined by 3pp q/q.
· Unusual other income of EGP197mn vs. EGP21mn a year before, while growing by over 100% q/q. (Company disclosure)
DEIN’s H1 2023: Strong y/y growth
Delta Insurance Co. [DEIN] announced their consolidated financials for H1 2022/23, showing strong y/y growth. Net income reached EGP233mn (+67% y/y) on revenues of EGP298mn (+81% y/y). Furthermore, ROE increased 8pp y/y to 22%. DEIN is a 63.2%-owned subsidiary of Egypt Kuwait Holding Co. [EKHO]. (Company disclosure)
The FRA approved Kafr El Zayat Pesticides' capital increase
The Financial Regulatory Authority (FRA) approved Kafr El Zayat Pesticides' [KZPC] capital increase from EGP120mn to EGP180mn through a rights issue, offering 60mn shares at a par value of EGP1/share. (Company disclosure)
Strategic GCC investors interested in acquiring a stake in Sidpec-ETHYDCO
We had reported on 16 January that Sidi Kerir Petrochemicals (Sidpec) [SKPC] is considering a full acquisition of the Egyptian Ethylene Production Company (ETHYDCO) through a share swap deal. Sources have alleged that GCC strategic investors are interested in acquiring a 16-20% stake in the newly merged entity once SKPC fully absorbs ETHYDCO. SKPC recently announced that their financial consultant is conducting their final revisions for the acquisition report. (Al-Mal, Company disclosure)
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