Today’s Trading Playbook
KEY THEMES
Egypt real estate stocks have notably cheered FRA’s approval of the bid by UAE-based Aldar Properties [ADX: ALDAR] and the UAE sovereign wealth fund ADQ to acquire at least 51% of SODIC [OCDI] at EGP20/share. The FRA approval sent OCDI flying 7.2%, trading at its best levels since October 2018 and only 3.6% below the mandatory tender offer (MTO) price. On the other hand, other big real estate names felt the momentum, with Talaat Moustafa Group Holding [TMGH], Palm Hills Developments [PHDC], Orascom Development Egypt [ORHD], and Emaar Misr for Development [EMFD] — all gaining between 1.6% and 5.2% yesterday.
We note that ALDAR has expressed back in February 2021 its interest to enter the Egyptian real estate market by investing AED2bn, which brings us to OCDI’s MTO. A stake of as much as 90% (the maximum the bidders want to acquire) would cost approximately AED1.5bn. Hence, if ALDAR was really planning on investing AED2bn, this implies they could go for other investment opportunities down the road. New regulatory frameworks related to the real estate sector, coupled with fears of overwhelming inflationary pressures, have clouded the outlook for real estate names. For this, we think it’s up to M&A activities (like OCDI’s bid) to help direct investors’ attention to a deeply-undervalued sector. To put it into perspective, the average upside potential for EGX-listed real estate stocks according to market consensus is a whopping 74%.
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