Today’s Trading Playbook
Amr Hussein Elalfy CFA | Head of Research
KEY THEMES
We believe the market will continue to be event driven as we have seen in the last couple of weeks. Bank stocks fell last week after the CBE banned Egyptian banks from paying any cash dividends, a decision that we think may be revisited for banks that already boast high capital adequacy ratio (CAR) and low non-performing loan (NPL) ratio, like large-cap banks. Yesterday’s announced acquisition of BLOM Bank Egypt by Bank ABC, while expected, should help re-rate bank stocks, especially those that trade below or near their book value. Please check our latest EGX Valuation Multiples report for a run of those bank stocks. Also, the investment banking arm of CI Capital Holding [CICH] (+8.6% since we published our core coverage report last Thursday) should benefit off the BLOM Bank Egypt’s deal as it is the advisor to the seller.
Meanwhile, Orascom Construction [ORAS] – as we expected yesterday – ended the day on a positive note (+7% on a VWAP basis and +10% on a last price basis) on the heels of its new award to take part in Egypt’s high-speed rail system project. Also, tomorrow is the last day to be eligible for ORAS’s EGP3.313/share dividend (a 3.5% yield). Incidentally, Siemens’ CEO named Elsewedy Electric [SWDY] (unchanged d/d) as one of the potential local beneficiaries from the high-speed rail system project in the future in his interview with Skynews Arabia (minute 2:30+).
Elsewhere, we believe Ibnsina Pharma [ISPH] is poised to benefit from the second wave of COVID-19 in view of the high demand for medication as Egyptians adopt a home-grown treatment protocol. We note that ISPH is not linked to certain medicine, so it is – in our opinion – the best play on growing medicine sales in Egypt.
Positive
ORAS: We think ORAS could continue its rally for the next couple of days before it goes ex-dividend on 20 January. The stock is still cheap, trading at 7.6x TTM earnings.
SWDY: If the words of Siemens’ CEO foreshadow a potential involvement of SWDY in the high-speed project down the road, we could continue SWDY join ORAS’s rally. The stock is also cheap, trading at 7.3x TTM earnings.
TMGH: TMG Holding’s [TMGH] new land acquisition in the New Capital City should add 42% to its land bank, marking a new chapter in the company’s growth story, albeit still focused East of Cairo.
ISPH: Ibnsina Pharma [ISPH] has pared some of its earlier losses, having advanced by 8% in three trading sessions from a day low of EGP4.90 on 12 January. ISPH is still trading at a 35% discount to the market consensus of EGP8.28/share.