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Rebound slowed by regional tension
The period from June 15 to July 15 was meant to
be an attempt for the market to rebound from its doldrums and the
third mobile license auction on July 4 seemed to be the needed stimulus.
Dubai’s Etisalat was declared the ultimate winner of the license,
for which it paid a hefty £E 16.7 billion.
At that point, the market seemed on its way to recovery from the
losses of the previous period. It closed higher on five of six trading
sessions, including July 4, and peaked on July 11. However, the
Israeli military offensive in Lebanon, which began on July 12, rippled
through the Egyptian stock market causing it to close lower for
three consecutive days before stabilizing. Nevertheless, the HFI
and CIBC indices ended the period 5.7 percent and 4.4 percent higher,
at 45470.41 and 197.10, respectively. Advancers led decliners 5
to 2, a three-month record.
Expectations for Q2 financial results were overshadowed by news
of the third mobile license. Winning or losing the bid didn’t
seem to matter much. All bidders listed on the Egyptian bourse fared
well. Indeed, EFG-Hermes Holding, Telecom Egypt (TE) and Raya Holding
paired with MTC, Telecom Italia and MTN of South Africa, respectively,
were part of three different bidding consortia. EFG-Hermes Holding
stock ended the period 20 percent higher at £E 31.20, while
Raya Holding closed up 3 percent at £E 10.24. Although TE’s
stock was down 6 percent for the period at £E 11.58, it was
surprisingly resilient to TE losing the bid.
The higher-than-expected winning bid also bore fruit for the other
two mobile operators, Mobinil and Vodafone Egypt, as investors revalued
their existing licenses higher. Mobinil showed the highest jump
on July 4 with its stock rising to £E 170, a £E 40 increase
in just one day.
Mobile news aside, the period was rather uneventful. CIB’s
general assembly approved the bank’s 50-percent stock dividend
but its stock was virtually unchanged, down only £E 0.20 at
£E 58.91. Meanwhile, Al-Watany Bank of Egypt’s stock
shrugged off the resignation of its chairman, closing 10.7 percent
higher at £E 21.16.
SODIC continued to fly high, closing the period up 46 percent at
£E 82.93. The staggering increase was fueled by news that
the company signed an agreement with Coldwell Banker to establish
a real estate marketing company. On a similar note, Arab Cotton
Ginning, another retail investor favorite, closed 27 percent higher
at £E 9.58, piggybacking on the delay in listing the capital
increase shares and the stock’s supply in the market.
The market was attempting to rebound from a lull using the mobile
license bid as a catalyst. However, it bore the brunt of the Israeli-Lebanese
conflict. Indeed, global investors have attached a higher risk premium
to Middle Eastern markets, Egypt included, which could translate
into a temporary reduction of global investments. But, the conflict
should bode well for the tourism sector as travelers redirect their
regional travel plans to Egypt. However, once the conflict is resolved,
global investors will surely come back again. So for local investors
this might be the time to buy in.
ANALYSE THIS
Telecom Egypt
Partnering up with Telecom Italia, Telecom Egypt (TE) lost
the mobile license bid in the second round with only £E
11.6 billion on the table. The following day, TE’s management
held an analyst conference call to discuss its way forward.
Management explained that TE withdrew following the second
bidding round since it did not believe that increasing its
bid would be economically feasible, given their consortium’s
own analysis and calculations. Meanwhile, their other comments
attempted to reassure investors of the company’s growth
prospects, especially outside Egypt in Algeria, Jordan and
Saudi Arabia. A few days after, the National Telecommunication
Regulatory Authority (NTRA) announced its approval for new
calling codes for Mobinil and Vodafone Egypt due to rapid
customer growth.
TE was also approved an eighth digit for
its customers in Cairo. The company’s stock was resilient
to the news of not winning the bid. It closed only 2.8 percent
lower on July 4, and ended the period only 6 percent lower
at £E 11.58. |
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