Today’s Trading Playbook
Unfortunately for traders and investors alike, Egyptian equities are still deep in the red ytd, with EGX 30 losing 27% and EGX 70 EWI losing 24%. But fortunately for some of the EGX-listed companies, this should be an opportunity to undertake sizable share buybacks. We just started seeing this from Elsewedy Electric [SWDY] which announced its intention to buy back as much as 1.4% off its shares. We note that at a forward P/E of around 5 times, the post-tax earnings yield of EGX 30 is 20%, more than double the market’s post-tax cash yield (interest on cash). In other words, it makes sense for many EGX-listed companies with balance sheets flush with cash to start implementing share buybacks. And we mean here “real” share buybacks where companies write off the shares afterwards. On the positive side, this will create value for current shareholders as EPS will be boosted. But on the negative side, this will reduce market capitalization and hence free float. But at the end of the day, companies’ management teams have a fiduciary duty to maximize their shareholders’ value. We should expect more share buybacks to be announced over the coming weeks, along with more M&A news coming our way.
Now, on to the top news and analysis for the day.