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STOCK ANALYSIS
THE MARKET RECOVERS, BUT IS IT OVERHEATING?
What a difference a month can make. Both the EGX 30 and EGX 70 indices recovered their losses from the previous period, posting gains of 19 percent and 18 percent to 7,573.6 and 763.2, respectively, during the period from March 15 to April 15. The market was buoyed by a wave of foreign buyers, hitting a 52-week high of 7,693.4 by April 15 as concerns regarding President Hosni Mubarak’s health subsided. Average daily volume and turnover jumped 40 percent and 56 percent to 124 million and LE 1.25 billion, respectively.
A few of this period’s top gainers stood out, namely Ezz Steel, EFG-Hermes Holding, Orascom Construction Industries (OCI), GB Auto and Commercial International Bank (CIB).
Ezz Steel saw the price of its end product (steel rebar) increase due to greater demand and higher international prices of iron ore, its main raw material. In response, Ezz Steel’s shares soared 36 percent to LE 24.52 (15 times greater than 2010 expected earnings).
Shares of Egypt’s leading investment bank, EFG-Hermes Holding, saw higher bids as investors rejoiced over a special dividend in light of the firm’s sale of its stake in Lebanon’s Bank Audi. As the market rally resumed during the period, so did the firm’s stock, which rose 24 percent to LE 35.04.
OCI’s stock – a favorite of foreign investors – increased 21.5 percent to LE 283.09. OCI’s contracting company has proven fairly immune to the economic crisis and continues to bolster its fertilizer segment with new investments, which often complement its manufacturing operations. It recently acquired a global life and material sciences company based in the Netherlands, which should help open European markets to its fertilizer products.
The leading car manufacturer and Hyundai’s agent in Egypt, GB Auto saw its shares advance 21 percent to LE 36.25 as the passenger car market steadily recovers and the company continues to expand its business lines to further drive sales of other products down the value chain (i.e. tires). Higher profits for GB Auto are expected in 2010.
Finally CIB, Egypt’s largest private sector bank in terms of market capitalization, saw its stock soar 35 percent to LE 73.78 year-to-date and jump 20 percent during the March 15 to April 15 period. As foreign investors’ funds continue to flow into the stock market, CIB stands to benefit from momentum buyers given its large representation in the EGX 30.
The market hit a 52-week high during the last period and may well remain above the 7,000-level for some time. However, the market may be overheating and could be somewhat overbought. The question now is whether the stock market can maintain its strongly paced upward trend.
IN THE SPOTLIGHT
Orascom Telecom Holding
Orascom Telecom Holding’s (OTH) management usually can dodge problems and come out stronger despite investor expectations, such as when it sold its mobile network operators in Jordan and Iraq. OTH emerged victorious in both cases, securing liquidity and making capital gains along the way. Today, OTH’s mobile operator in Algeria finds itself confronting the government. Consequently, the option to sell is back on the table, while there are market rumors that some OTH subsidiaries are candidates for takeover by other regional operators. All of this fueled OTH’s stock to rally by 32 percent to end the period at LE 7.50.
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