Today’s Trading Playbook
KEY THEMES
EGX 30 index is likely to react positively to COMI’s Q2 results just released over night. However, investors need to be wary of becoming too complacent as Q2 earnings continue to be released by Egyptian companies. One good set or results (albeit better than expected) should not be propagated across all EGX-listed stocks. We believe investors should consider each sector’s and each company’s earnings separately.
POSITIVE
Moving along with the Q2 earnings season, COMI’s results came as what we consider a positive surprise to market consensus. The results may come as a reassurance to the market of Egyptian banks’ ability to weather the tough economic givens without jeopardizing too much growth. By end of Q2 2020, COMI’s CAR jumped to almost 30% with growth in net loans coming sequentially at 4%. The NPL ratio hardly moved, fueling hopes that the strong provisions build-up that will have taken place in H1 2020 are likely to be reversed come end of 2020. With COMI’s results coming better than expected and the stock trading at 1.85x book equity, we see room for stock to go back to EGP70 (i.e. 2x book equity) – still low compared to its historical P/B profile.
NEGATIVE
Yesterday, EGTS revealed what it called a “material mistake” in a previous disclosure that had investors pencil in 12 July as the date for the next court hearing concerning its dispute with the Tourism Development Authority over a 20mn sqm land on the Red Sea. It turns out that the court hearing is not due until two months later, specifically 12 September. We see this as a negative for the stock performance as the market was hoping for a final resolution to the dispute which could unlock value.
Now, on to the top news and analysis for the day.