1. Today’s Trading Playbook
KEY THEMES
After high-level talks yesterday between Ukraine and Russia, peace was not reached, yet the talks did not result in any sort of escalations either in the form of military conflict or fresh waves of economic sanctions. As a result, global equities took a breather, with Asian shares taking a break from a jittery trading. On the other hand, failure to achieve concrete progress continued to fuel the rally in oil prices, as worries over supply are still a thing amidst tight sanctions placed on Russia. We note that yesterday the Russian central bank raised its key interest rate to 20% from 9.5% in an emergency move to protect against dollarization. The U.S. dollar has been strengthening since the conflict kicked off, with the U.S. dollar index (DXY) very close to the 100 mark. Historically, a stronger U.S. dollar is associated with softer commodity prices; however, markets today are pricing in unusual supply factors that are ruining long-established correlations.
2. Top News & Analysis
MACRO NEWS
Egypt’s fiscal deficit increased during 7M FY22 to 4.7% of GDP, compared to 4.4% for the same period of the last fiscal year, under pressure from increased expenditures, especially interests payments and social subsidy. (Asharq business)
State grain buyer GASC cancelled its wheat tender yesterday on the back of high prices.(Bloomberg)
The Ministry of Finance (MoF) confirmed that the plan to offer 10 state-owned companies on the Egyptian Exchange during 2022 is still valid, adding "there is no tendency to postpone the government offering program due to the fluctuation of financial markets globally after the events of Ukraine."(Asharq business)
CORPORATE NEWS
EK Holding’s [EKHO] 2021 attributable net income came at USD171mn (+47% y/y) on the back of 38% y/y growth in top line of USD833.4mn, coupled with a 7pp expansion in GPM to 44%. EKHO saw strong growth coming from its fertilizer & petrochemicals segment, as the segment’s net income grew by 73% y/y, driven from robust urea prices as well as higher volumes for Sprea’s products. On the other hand, the energy and energy-related segment registered a 17% growth in bottom line, driven by increasing household connections at NatEnergy and growing contributions from Kahraba. We note that the BoD has suggested a cash dividend of USD0.07/share, implying a 5% yield. (Company disclosure)
Madinet Nasr Housing & Development [MNHD] has posted its unaudited results for 2021 with a consolidated net profit of EGP283mn (-72%y/y). The company reported revenues of EGP2,230mn (-28% y/y) and a gross profit margin of 34% compared to 55% last year. MNHD is currently traded at 2021 P/E of 13.0x. (Company disclosure)
TMG Holding [TMGH] announced its real estate new sales of EGP32.4bn during 2021 (+95%y/y), compared to EGP16.6bn a year earlier, where its newly-launched Noor project contributed EGP18.5bn. TMGH’s real estate revenues grew by 2%, achieving EGP12.1bn vs. EGP11.8bn last year. (Arab finance)
Housing & Development Bank’s [HDBK] preliminary stand-alone 2021 figures showed flat net earnings of EGP1.8bn, despite a 17% higher net interest income of EGP3.7bn. We note that HDBK’s BoD has suggested a DPS of EGP2.5/share, implying a 6% yield and pending CBE approval. (Company disclosure)
Egyptian Financial & Industrial Co. [EFIC] net earnings in 2021 surged notably to EGP304mn (+139% y/y) on higher volumes and a leap in average selling prices. Top line grew 93% y/y to EGP2.7bn, while GPM registered 30% (-6pp y/y). (Company discourse)
Kafr El-Zayat Pesticides & Chemicals’ [KZPC] BoD has suggested a cash dividend of EGP4.0/share, implying a 13% yield. We note that KZPC's net earnings in 2021 came at EGP73mn (+168% y/y) on higher top line and improvement in GPM. (Mubasher)
Ghazl El-Mahalla Football Co.’s (GMFC) public offering is targeted for the first two weeks in March, following the issuance of the approval of the Financial Regulatory Authority (FRA) on the IPO prospectus, provided that April will witness the start of trading on GMFC’s shares. (Al-Borsa)
GLOBAL NEWS
Asia's factories sustained a brisk recovery in February amid signs the coronavirus was having less of an impact of business, but the Ukraine crisis has rapidly emerged as a fresh risk that could disrupt supply chains and worsen cost pressures. (Reuters)
Investors further reduced bets for interest rate hikes from major central banks this year, as the West ramped up sanctions against Russia for invading Ukraine, creating fresh uncertainty about the world economic outlook. (Reuters)
Aluminum edged higher on Tuesday, propped up by supply jitters as an intensifying Ukraine conflict led Western countries to mount sanctions on Russia, a major metals producer. (Reuters)
3. Chart of the Day
4. Markets Performance
