KEY THEMES
Welcome back everyone! It has been a long vacation here at home. However, it wasn’t a very calm one on the global markets front. Last Wednesday, the U.S. Federal Reserve hiked interest rates by 50bps, with planned hikes in the remaining meetings of 2022. Furthermore, the Fed’s chairman mentioned that a 75bps hike is not on the cards. At first, markets welcomed the decision, since it was already priced in beforehand. However, U.S. equities slipped notably during the last two sessions of the last week, as investors doubted the promises made by the Fed, in view of the growing notion of overwhelming inflation and its implication on global growth. Analysts believe that while interest rate risk was front and center so far in 2022, the environment of higher interest rate will lead the market to perceive credit and liquidity risks. This is projected in light of the recent movements in developed markets’ Treasury yields, as well as the Fed’s balance sheet reduction as part of a Quantitative Tightening (QT) efforts.
Elsewhere, Abu Qir Fertilizers [ABUK] has reported its preliminary Q3 2021/22 figures, which resulted in a wide bottom line beat of EGP3.7bn (+97% q/q) (+10% vs. PRe). ABUK has witnessed a historical quarter thanks to a 61% q/q growth in top line of EGP5.8bn (+2% vs. PRe) and a 4.6pp sequential improvement in GPM. Reasons for such historical quarter remain ultra-high urea prices, as well as higher subsidized local urea prices. We hypothesize that the strong beat in net earnings could partially include non-operational events (e.g. FX-related gains). We note that ABUK’s performance in 9M 2021/22 resulted in net earnings of EGP6.9bn (+185% y/y). ABUK is on the road to surpass our previous 2021/22 target of EGP7.1bn. ABUK is one of the 15 stocks we had picked in our STANDPoint 2022 strategy outlook published on 30 January 2022. We will be revising our 12MPT (set previously at EGP31/share) in view of the considerably better than expected Q3 2021/22. ABUK is currently traded at 2021/22 P/E of only 4x.
Moreover, Misr Chemical Industries [MICH] reported its March 2022 earnings of EGP23.4mn, bringing 9M 2021/22 bottom line of EGP148mn (+38% y/y) due to significantly higher caustic soda prices, coupled with improved y/y utilization rate. We note that Q3 2021/22 earnings alone came at EGP52mn, where 45% of the quarter earnings taking place in March 2022. Hence, we again presume that the quarter’s earnings may have include non-operational events (e.g. FX related gains). We note that MICH has already achieved our bottom line target for the entirety of 2021/22. In light of 9M 2021/22 preliminary figures, we will be raising our EPS projection for
Top News & Analysis
MACRO NEWS
Egypt plans to offer shares in state owned companies on the EGX starting next September, according to Public Enterprise Minister Hisham Tawfik. (Enterprise)
Abu Dhabi Ports (ADP) has signed a contract to develop, operate and manage a multi-purpose terminal in Safaga Port as part of a joint venture with the Red Sea Ports Authority and the Transport Ministry’s commercial arm. (Enterprise)
The Ministry of Petroleum and Eni are implementing a pilot carbon capture project at the Italian energy firm’s Meleiha concessions in the Western Desert. The pilot project — which marks Egypt’s first carbon capture initiative — is being implemented at a cost of USD25mn and aims to store some 25,000-30,000 tons of carbon dioxide each year. (Enterprise
CORPORATE NEWS
Qalaa Holdings [CCAP] narrowed its losses to EGP2.3bn in 2021 from EGP2.6bn a year earlier, thanks to 27% y/y growth in total revenues of EGP45.8bn. (Company disclosure)
Juhayna Food Industries [JUFO] announced its 2021 consolidated results; revenues came at EGP8.8bn (+17% y/y). Meanwhile, GPM came pressured at 28.7% compared to 32.1% (-3.4pp) due to a worldwide increase in SMP prices. On the contrary, NPM came higher at 6.0% in 2021 (+0.3pp) due to a decrease in SG&A to revenues of18.3% (-0.3pp). Juhayna is currently trading at a P/E of 13.4x. (Company disclosure)
Abu Qir Fertilizers' [ABUK] scheduled maintenance for its Abu Qir III facility will take place this May 2022. (Mubasher)
Egyptian Financial and Industrial [EFIC] standalone bottom line in Q1 2022 surged to EGP96.4mn vs EGP20.3mn a year earlier thanks to 68% growth in top line of EGP308.6mn. (Mubasher)
Ibnsina Pharma [ISPH] shareholders approved dividend distribution of EGP0.10/share, a 3.8% dividend yield. (Company disclosure)