Al Ahly Pharos

Pre-Trading Thoughts

February 28, 2023 Al Ahly Pharos
Al Ahly Pharos
Pre-Trading Thoughts
Show Notes

We remind you that MSCI EM rebalancing for February will be executed today, during which inflows of USD 1-2 million are expected for ESRS and HELI since they were added to the MSCI Egypt small-cap index. 

The Ministry of Finance updated its targets for the budget deficit in FY22/23 to 6.8% of GDP, compared to the 6.1% budgeted originally. Key changes: Exchange rate, Brent at USD90-95/bbl, up from USD80/bbl, Wheat at USD424/ton, up from USD330/ton, and average interest rates on government bills and bonds at 18%, compared to 14.5% previously, while real GDP growth expectations were stable between 4% and 5%. The ministry expected the public debt to reach 93% of the GDP, with 21% of GDP for external debt and about 72% of GDP for domestic debt.  

Egypt and Qatar yesterday signed an agreement to eliminate double taxation and crack down on tax evasion. 

Supply Minister: Egypt's wheat reserves cover more than four months, with the country preparing to start securing domestic wheat supply season in mid-April, at around 4 million tons. In addition, strategic oil reserves are sufficient for about 1.5 months, with rice reserves covering local consumption.

CIEB 4Q22 consolidated bottom line recorded EGP816 million pre-minority interest and appropriations (+90% y/y , +39% q/q), bringing FY22 bottom line to EGP2,418 million (+50% y/y).

The Cabinet announced offering a stake in the Arab African Bank, which is jointly owned between the CBE and the Kuwait Investment Authority, with a share of 49.37% each.

Valu, EFG Hermes' consumer finance arm, has signed a partnership agreement with Sixyards Sports & Event Management and the La Liga League camp in Egypt. Under the agreement, citizens will be able to benefit from the flexible and accessible financing plans and solutions offered by ValU.

ORWE recorded attributable net profit in 4Q22 of EGP316 mn for the quarter ( 43.9% YoY, +263% QoQ). FY22 bottom-line recorded EGP843 mn compared to EGP1,085 mn in FY21 (-22.3% YoY). The BoD proposed dividends distribution of EGP0.60/share, pending AGM approval. Implementing a DPO of 47.3% and a Dividends Yield of 5.3%. ORWE is currently trading at a 2023 P/E of 6.2x and an EV/EBITDA of 5.8x.

We updated our FV for ORWE earlier to reach EGP16.45/share maintaining our Overweight recommendation. The rise is backed by: Recovery in the export market as consumers factors in the latest inflationary pressures and the EGP devaluation. Disturbance in rival exporting countries bodes well for ORWE leaving them with a larger market to serve, Price increases implemented for the local segment support margins, and Gradual normalization in polypropylene prices lifts the pressure off the cost base and supports margins. 

MPs approved a 70% discount on customs duty for expats living in countries not subject to mutual customs agreements.

EFID (FV: EGP19.00/share, OW) agreed to submit an offer to acquire 100% of an unnamed, unlisted company in the local food industry. The value of the transaction isn't disclosed yet.

Temry Chicken will build an EGP150 mn poultry factory in Sharqiya Governorate, that will produce 300 tons of chicken per month. Construction will begin by the end of this year, with plans for the factory to start operations by the beginning of 2025.

The government released 136 thousand ton of corn and soybeans with a worth of USD58 mn in the past 7 days, according to the Ministry of Agriculture.

The government lowered its plans to import 50 thousand tons of Brazilian frozen chicken to 25 thousand tons, for which they have already started approving LCs.

The Ministry of Transport intends to open the financial bids of the tender for the electrification project of Cairo-Bani Suef line signals during this week, at a cost of EUR225 million. According to local press, two consortia are qualified technically to win the tender, first consort