KEY THEMES
Exactly three months ago, we alluded to an often neglected sector in Egypt: pharma. The reason the sector is often neglected has nothing to do with its dynamics. To the contrary, the pharmaceutical sector has been under investors’ focus since the onset of the global COVID-19 crisis. Ironically, the reason has rather to do with the fact that Egypt’s pharma sector (with nine names listed on EGX) represent a tad less than 2% of total market cap, let alone its scarce trading liquidity. This means most pharma stocks are off the radar screens of many institutional investors. Nonetheless, some pharma names have outperformed the market’s main index EGX 30 by huge percentage points. More specifically, Cairo Pharma [CPCI] (+32%), Alex Pharma [AXPH] (+23%), and Glaxo Smith Kline [BIOC] (+22%) all rang up positive returns in the three-month period ending yesterday, compared to a paltry +8.7% for EGX 30. Please see below a run of the nine stocks. Yesterday alone, EIPICO [PHAR] (+4.7%), BIOC (+3.0%), and CPCI (+1.2%) ended the day higher. With news of potential M&A activity in the industry, we could be in for a re-rating.
Egypt pharma stocks
Source: Investing.com, Mubasher.
POSITIVE
Pharma: The health care sector in general and the pharma industry in specific are among our top preferred sectors/industries in Egypt. Trading at low to mid-single digit P/E ratios with high single-digit yields, the sector should re-rate based on fundamentals on one hand and on potential M&A action on the other hand.
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