Today’s Trading Playbook
It’s as if the market came back to life yesterday with speculation over yet another M&A deal. This time it involved Obour Land Food Industries [OLFI]. The potential suitor? Rumor has it, the suitor might be no one other than Agthia [ADX: AGTHIA] which seems to have found its match in Egypt’s thriving food sector. We contacted OLFI’s management who denied the rumors of any pending deal. We note that OLFI’s stock price is now almost exactly what it was at the time of its IPO back in December 2016! We also note that in 2021, Agthia bought Atyab, a deal that at the time we thought would trigger a sector-wide re-rating.
And just a couple of days ago, Agthia also agreed to acquire a 60% stake in Abu Auf Holding, the parent company of the Abu Auf food chain. Thus, another deal in the same consumer sector could be possible, which led OLFI’s stock price higher yesterday as much as 20%. Notwithstanding the rumored acquisition, OLFI’s 12-month price target (12MPT) is almost 75% higher than its current market price. OLFI, one of the 15 stocks we recommended in our STANDPoint annual strategy note published on 30 January 2022, is also a good regular dividend payer with a double-digit yield. Our 12MPT is EGP8.6/share.
Elsewhere, U.S. equity markets started this week on a negative note after stocks gave up earlier gains on Monday with Q2 2022 earnings reports coming in. Also, investors were soothed by a Fed official’s alluding that a 75bps hike is more likely, which means a less aggressive Fed, than previously thought, when it meets next week.
Now, on to the top news and analysis for the day.