Today’s Trading Playbook
KEY THEMES
Global markets took a breather yesterday, with solid gains witnessed in equity markets in the U.S. and Europe. Moreover, Asian shares bounced back on less obvious Omicron fears, as well as monetary stimulus announcement by China's monetary authority.
Here at home, Elsewedy Electric [SWDY] announced yesterday the opening of a brand new industrial complex in Tanzania over c.120,000 sqm, producing cables, wires, transformers, in addition to PVC. This comes in line with the company's plan to expand in Africa. In addition, this could increase SWDY’s chances in securing other opportunities within Tanzania, following its massive USD2.9bn turnkey contract back in 2018. Over the course of the last two years, SWDY started to employ features of non-organic growth as a means of fending off the maturity of its current traditional business segment. Such direction was perused by virtue of a number of acquisitions over the course of the last two years. SWDY’s acquisitions outside Egypt included Indonesia’s CG Power System, Pakistan’s Valdius Engineering, three wind energy companies as well as a hydroelectric energy company in Greece. In Egypt, SWDY acquired International Cables. We note that SWDY’s complex in Tanzania is considered SWDY’s first attempt of a greenfield investment since this strategy was elected. We note that such acquisitions have impacted SWDY’s balance sheet, turning its net cash position of EGP790mn in 2019 to a net debt of EGP5.9bn in 9M 2021. We note that SWDY is currently traded at TTM P/E and 5x. We remind you that we have an Overweight rating on the name with a 12M PT of EGP12.7/share (+46%).
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