KEY THEMES
CIB’s [COMI] volatile trading (be it in shares or GDRs) seem to have settled just about the equivalent to EGP60/share—in line with our initial assessment following the heated events of last weekend. Now, we think investors should start to look elsewhere around the market for opportunities, one of which we can infer from the news related to Oriental Weavers Carpet [ORWE]. ORWE’s decision to go for the discount offered by the Ministry of Finance will release immediate cash before yearend rather than having to wait for four more years. Meanwhile, investors long Egyptian Iron & Steel [IRON] are between a rock and a hard place; the status quo for the business is not profitable, and the spin-off of the company into two could weaken the overall group. It remains to be seen how it will all play out. Until then, we prefer to stay away from taking risky bets without visibility.
POSITIVE
ORWE: The stock has reacted well to the news yesterday, jumping 4%. We believe the decision will be value accretive but the magnitude of the positive impact will be limited. We calculate it will add just around 1% to ORWE’s valuation, assuming a 15% cost of capital. But if this turns out to be the norm going forward, it would be much more valuable for ORWE. Even so, at 7x LTM earnings and 0.6x P/BV, the stock offers some upside. Cash raised from the abovementioned decision may further support the company’s already-high dividend payments (a 10% yield).
NEUTRAL
AMER: The negative impact of the arbitration cases filed against Amer Group Holding [AMER] by Arabtec Egypt Construction (please read the news below) will be minimal, if AMER were to lose both cases. The total amounts in question are less than 2% of AMER’s equity.
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