Today is the last trading day before an abnormally-long Eid vacation lasting for five days; kudos to COVID-19. This often makes some traders a bit uncomfortable owning certain stocks over such long weekends, especially at times of regional geopolitical tensions. So, we won’t be surprised if the market was generally quiet today. On the other hand, some investors prefer to own stocks of well-established companies that trade below their fair values. One such standout stock is Telecom Egypt [ETEL] which just reported its Q1 2021 results last night, posting a net income of EGP2.1bn (+62% y/y), the highest quarterly profits in its history, while revenues jumped 20% y/y. The question is whether investors will be patient enough to wait for the stock to connect to its fundamentals. We note that ETEL has long been part of our key long ideas and more recently we mentioned it again as one of the key beneficiaries of an extended partial lockdown. Also, Edita Food Industries [EFID] is another company that reported a strong set of Q1 2021 results with double-digit growth in top and bottom lines (both in excess of 20% y/y).
Meanwhile, our POSITIVE calls highlighted here before continue to make strong returns for those who were patient enough to own the stocks for only two weeks. The list is led by Egypt Aluminum [EGAL] which saw its stock advance 16% (19% based on last price) since our call on 27 April, including yesterday’s 6.6% return (+10% based on last price). As for yesterday’s POSITIVE calls, Elsewedy Electric [SWDY] ended the day marginally higher, whereas Ibnsina Pharma [ISPH] was up 2%.
POSITIVE
ETEL: The stock is now trading at a TTM P/E of just 3.2x, an absurdly cheap valuation multiple for a clean business model with double-digit growth.
EFID: Trading close to an all-time low at EGP7.10/share, EFID’s P/E is now only 14x, a low multiple for a consumer stock with such a growth profile.