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HOPING FOR GROWTH
Following the sharp correction of March 14, both the HFI and CIBC
indices rebounded, to 58434.03 and 239.80, up 5.6 percent and 9.1
percent, respectively, for the period March 15 to April 15. While
the former recouped its year-to-date losses ending 5.6 percent up
for the year, the latter was still down 1.2 percent. Incidentally,
advances led declines with a ratio of almost 2 to 1.
In Egypt, the first quarterly results (ending in March) are being
released, confirming expectations for growth. So far, Mobinil and
Al-Watany Bank of Egypt have released their first-quarter results,
showing 21-percent and 17-percent growth in their bottom lines,
respectively. Mobinil’s results, however, show only a 1-percent
pre-tax growth compared to first-quarter results last year, which
were subject to higher tax rates. The market is awaiting more indicators
of sustainable growth to justify current valuations. Last month
also witnessed several companies releasing their 2005 full-year
results, the most prominent of which were Orascom Telecom (OT),
Orascom Construction International (OCI), Al Ezz Steel Rebars and
EFG-Hermes.
OT posted outstanding results, doubling its subscribers to more
than 30 million. The bottom line jumped 93 percent to £E 3.9
billion. The regional mobile operator plans to add its 50 millionth
subscriber by the end of 2006. Its sister company OCI posted a 54
percent jump in net profit to £E 1.7 billion, dampened only
by Egyptian pound appreciation against the dollar. While OT’s
stock slipped 3.6 percent to £E 310.12, OCI added 11.6 percent
to £E 240.13.
Meanwhile, Al Ezz Steel Rebars posted a net profit of £E 450
million, more than double last year’s £E 200 million,
with its stock closing 14 percent higher at £E 83.88. EFG-Hermes
also closed the period up 50 percent at £E 72.08, a 102-percent
growth since its closing price on 14 March at £E 35.61.
SODIC, the high-flying stock of the second half of 2005, returned
to profits with as much as £E 41 million versus a loss of
£E 38 million a year ago. Nevertheless, the stock ended the
period down 17 percent at £E 103.65 as sellers outnumbered
buyers since the stock hit its lifetime high of £E 284.37
in mid-February.
Of the few listed cement companies with adequate free float, Misr
Beni Suef Cement also reported good year 2005 results with profits
jumping to £E 133 million versus £E 52 million a year
ago. The company’s stock closed up 5 percent for the period
at £E 104.83.
It has clearly become a growth game. Egypt has been on a three-year
rally, which is coming under heavy scrutiny. Investors are tidying
up their papers, calculating gains, and wondering if there is more
steam in the market to grow. For those wondering if we are in for
a fourth year of growth, the answer will come as soon as the first-quarter
results of 2006 are out.
Market participants are also questioning the correlation between
Egypt and other regional markets, especially Saudi Arabia. With
pressure mounting on crude oil prices, Gulf economies should see
benefits from increased oil revenues. How well that will translate
into the Egyptian stock market, however, remains to be seen.
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ANALYZE THIS
Controlling 73 percent of the company, the Holding Company
for Construction & Development announced in December 2005
its plan to offer additional stakes in Heliopolis Housing
& Development (HELI), among three other subsidiaries.
Early March 2006, HELI reported 25 percent higher profits
of £E 35 million in its first-half results ending December
2005 with 37 percent higher revenues. Mid-April 2006, Orascom
Hotels & Development (OHD) made a very unexpected offer
to acquire 17.55 percent of HELI at £E 150 per share,
in cash and stock. The stock price had bottomed at £E
110.59 on March 14, after which it closed higher in 14 of
the following 21 trading sessions to close at £E 162.69
on April 13. The stock later continued its rally to close
at £E 177.56 on April 20, just before the five-day long
weekend. The market was betting on OHD upping its offer price
or other suitors popping up for this veteran stock.
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