Pre-Trading Thoughts

Egypt’s PMI recorded 49.2 in August, equivalent to July's figure, as output and new orders fell at modest rates while employment and inventories moved into expansion. A faster increase in input costs reduced overall activity.  

Egypt's government plans to use the International Finance Corporation (IFC) to contract with a global consulting firm to develop a clear investment strategy for Egypt and improve Egypt’s ranking in the ease of doing business index in the coming years, with the aim of raising investment rates by 25% to 30%. The IFC is also developing an integrated plan for the government’s IPO program.

Egyptians living abroad can now purchase land in new cities from abroad. 

GASC bought 480k metric tons of wheat from Russian commodity trader Solaris for USD 270 per metric ton on a cost and freight basis (C&F). 

Israel, Greece, and Cyprus agreed yesterday to form a deeper trilateral energy partnership to export Israeli gas to Europe and connect their energy grids. Israel currently sells around 4.6 bcm of natural gas a year to Egypt, which then exports a portion to Europe via its LNG facilities and uses the rest for local consumption.  

Moscow and Ankara are close to agreeing to set up a gas trading hub in Turkey, a move that will provide Russia with another avenue to export gas and strengthen Turkey’s position as a major energy player in the region.  

The Central Bank intends to issue instructions for preparing banks for better settlement setup, improve banks' governance, strengthen the board of directors' roles, and prevent conflicts of interest. 

The CBE is working on a project to digitize remittances, through incentives, such as the points system, cash back, and discounts for merchants, the issuance of products in foreign currency to encourage beneficiaries to save, where agreements have been made with banks and exchange bureaus in the Gulf to target and educate dispatchers. 

The announced transaction implies an EV/ton of USD466 (EGP14,396) for Hadeed. If we apply the same multiple to ESRS, and take into account a discount for Egypt's macro challenges then ESRS’s value will reach EGP68.63/ share implying an upside potential of 33% based on ESRS's last price, and 26% higher than our DCF valuation of EGP54.60/share, as per the table below.

The Housing Ministry is putting together a list of local construction companies recommended for taking on infrastructure projects in Iraq. ORAS and SWDY are key beneficiaries. 

Egyptian contracting companies have obtained cabinet approval to extend the contract execution period for an additional 6 months, in light of macro challenges. 

Banque Misr is looking forward to selling a 20-30% stake in Banque du Caire to a strategic investor during 2024. 

Beltone Financial Holding has inked a share purchase agreement to acquire 100% of Minya-based microfinance provider Cash after completing due diligence on the company.

Egypt Education Platform, owned partially by HRHO, intends to invest EGP1 billion for expansion until 2025. 

EGTS’s appeal against the court’s ruling in December 2021 requiring EGTS to pay USD5.7 million (EGP0.17/share) to Trans Mediterranean for Tourism Investments in relation with a canceled land sale contract was denied.

EgyptAir launched flights between Cairo and São Paulo, running two flights a month.