Today’s Trading Playbook
KEY THEMES
The second quarter earnings season of such an eventful year is starting to kick in. We should now brace for tons of information concerning corporate performance from the quarter that suffered the most from the pandemic so far. As we speak, QNBA just posted its Q2 2020 results yesterday, again exhibiting strong growth in core banking income but combined with higher provisioning and a higher effective tax rate due to higher Treasury exposure. It appears that the 300bps surprise rate cut by the CBE managed to contain strong credit deterioration outbursts. That said, we could expect banks to continue building up high provisions during H1 2020, but it would not very farfetched to see a considerable portion of them reversed before year end, decorating banks’ profitability and annual bottom line growth for 2020. As a reminder, we prefer small-cap over large cap bank stocks. We had mentioned last Thursday that CANA and EXPA are our two favorites. If you missed it, please read it here.
Meanwhile, Q2 numbers for NBFS should be in focus as—unlike banks—the NBFS segment’s credit quality remained fairly unchecked, noting that Q1 2020 is not a fair reflection of what went down so far post the pandemic.
Neutral
Yesterday’s agreement between STC and Vodafone Group to extend their MOU over Vodafone Egypt sale to the former is neutral for ETEL in the short term. We now could have two months before we know for sure what the final outcome is. This is positive for ETEL on one hand as it means the deal is not off the table. This could also be negative in the short term as it plays down one of the catalysts that supported ETEL’s stock performance so far into the year. Either way, ETEL is worth adding/maintaining, pending Q2 2020 results which—in our opinion—should reflect the positive impact of COVID-19 on internet and data usage in general.
Now, on to the top news and analysis for the day.