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STOCK ANALYSIS
Who let the bulls out?
At a time when global investors are babbling about the aftershocks of the global economic crisis in Greece, other European countries have also been cited as potential victims. It is feared that Spain and Portugal will fuel a wider panic in the eurozone. On the other hand, economic growth seems to be picking up in Egypt. The real growth rate in Q2 FY 2009-10 GDP was revised to 5.1 percent from 4.5 percent, versus 4.9 percent the previous quarter.
Meanwhile, the period from January 15 to February 15 was fairly positive. Both the EGX 30 and EGX 70 indices continued their positive performance from the previous period. The EGX 30 was up 13 percent to 7,019.5 and the EGX 70 up 24.5 percent to 800.3. While not all fourth-quarter earnings had been published, there seemed to be positive sentiment in the market. Average daily volume and turnover increased 32 percent and 10 percent to 105 million and LE 1.16 billion, respectively.
In the food sector, Cairo Poultry and Egypt Poultry stood out. The former shot up 68 percent to LE 35.7 after reporting a 26 percent increase in earnings in 2009, while the latter advanced almost 20 percent to LE 5.32 on renewed interest by retail investors. Meanwhile, Delta Sugar grew by 14 percent to reach LE 23.86. Local and global sugar prices surged as Delta Sugar began to sell its 2010 production. With local sugar prices 50 percent higher year-on-year at about LE 4,000 per ton, Delta Sugar is set to benefit with wider margins and higher earnings.
As construction activities recover, cement and steel producers are benefiting accordingly. Sinai Cement, Misr Beni Suef Cement and Misr Cement (Qena) all ended the period higher – by 24.5 percent, 18.6 percent and 13.6 percent, respectively. Ezz Steel, Egypt’s leading steel producer, was up 4.7 percent at LE 19.32.
In the telecom sector, Orascom Telecom (OT) topped the performance list after going ex-rights on January 31. OT’s stock ended the period up 21.9 percent at LE 6.89 (equivalent to LE 35.75 in pre-rights terms). Investors bid its stock higher as its new single-digit price level began to attract more retail investors. Meanwhile, Telecom Egypt (TE), the country’s fixed-line state-owned monopoly, saw its stock advance 8 percent to LE 20.32, passing the 20 level for the first time in 21 months. TE attracted investors’ attention given an expected high dividend yield.
Shares of Egyptian Media Production City (EMPC), a state-owned company, advanced 11 percent to LE 7.71 after hitting a high of LE 9.69 on January 26. Still trading below its LE 10 par value, the company’s stock was perhaps positively affected by recent news of land sales that will unlock hidden asset value.
Pioneers Holding ended the period in the red for the third period in a row. Its stock slipped 13.6 percent to LE 5.64, just a notch above its LE 5 par value, despite growing after acquiring Beltone Financial. Investigation by capital market regulators into trading manipulation may have led investors to avoid the stock.
Additional fourth-quarter results will likely give a better picture of Egypt’s economic growth. Meanwhile, the health of corporate earnings is not necessarily promising. Improved stock performance is not necessarily reflected by corporate earnings vis-à-vis retail investors, either. At end of the day, the objective of traders has become more about “absolute return” than relatively outperforming a benchmark index.
In The Spotlight
El-Sewedy Cables
El-Sewedy Cables grew “greener” this period. The company added Wind as a new line of business back in October 2008 and more recently submitted a suggestion to the Hungarian government concerning power generation through renewable sources. It has not yet conducted any studies for this new project. These developments signal El-Sewedy Cable’s interest in renewable energy and have been reflected in its stock, which grew 3.8 percent to LE 79.29 and 16.7 percent year-to-date this period. Trading a total of 3.4 million shares worth LE 265 million, the stock ranged between a low of LE 73.02 on January 24 and a high of LE 80 on February 15. The last time the stock traded at these levels was on September 30 of last year. |
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