Eurobond round two in May?

Nasr wraps IMF / World Bank spring meetings with talks on World Bank loan disbursement: Investment and International Cooperation Minister Sahar Nasr discussed the release of the third, USD 1 bn tranche of a World Bank loan with bank vice president Hartwig Schafer, according to a ministry statement. The two also discussed adding investment zones to a USD 500 mn World Bank program to fund development in Upper Egypt and a potential USD 150 mn loan to support labor-intensive industries. Also in Washington, met with Egyptian American Enterprise Fund chairman Jim Harmon, according to a ministry statement.

Nasr will be in New York today for meetings with institutional investors and officials from the United Nations Development Program, Al Mal reports.

Renaissance Capital’s second Egypt Investor Conference gets underway in Cape Townthis morning. The event will see senior management from leading Egyptian companies meet South Africa-based investors, who have mandates to invest in non-South African opportunities across the continent. Issuers due to attend are in industries including consumer, manufacturing, banking, real estate, energy, cement and transportation.

Our friend Ahmed Badr, the CEO for MENA at Renaissance Capital will kick things off this morning, while RenCap’s global chief economist, Charles Robertson, will talk macro trends. The EM specialist has made Egypt one of its top markets. Government policy, consumer sentiment, and both credit quality and demand in the banking system will be in the spotlight, RenCap notes.

RenCap analysts were busy in the run-up to the conference:

They initiated coverage of SODIC with an “Outperform” rating and a target price of EGP18.5 per share, writing that the developer “is well positioned to navigate a possible slowdown in Egyptian real estate demand, supported by a diverse product offering, its strong brand — built on the back of consistent delivery and established communities — and its robust balance sheet. On our estimates, the current share price discounts SODIC’s West Cairo projects … which we view as unjustified.”

The also initiated coverage of GB Auto, with an “Outperform” rating and a target price of EGP 3.30 per share, calling it the “most comprehensive automotive player in MENA.” RenCap says, “We like its vertical integration in an underpenetrated market, and believe upcoming legal changes” — read: the automotive directive — “will benefit local assemblers such as GB Auto. Its strong product offering targets the largest consumer segment and in our view provides strong potential for revenue growth; its higher-margin and fast-growing finance, tyres and after-sales businesses also imply a diversified and solid revenue stream.” The company is trading at a substantial 27% discount to its global peers, RenCap suggests.

Also now covered: Pharmaceutical player EIPICO, the nation’s largest pharmaco by volume, with an “Underperform” rating and a target price of EGP 86 per share.

Finally, they see share buybacks as a likely near-term option for Elsewedy Electric, where they increased their target price 25% to EGP125 per share, saying the company has three options to grow in the longer term: through M&A, sector diversification or sale to a global player.

Renaissance Capital, already the second-largest foreign broker in Egypt by turnover and a top-two trader on the Nairobi Stock Exchange, recently launched electronic access to the Johannesburg Stock Exchange, which it says has “volumes which make it a strategically attractive factor for both long-only funds and high-frequency trading customers.”

We’re off tomorrow: Tuesday, 25 April is a national holiday in observance of Sinai Liberation Day. Next Monday, 1 May, will also be off as the country observes Labor Day.

The House Planning and Budget Committee is scheduled to begin its discussion of the FY2017-18 state budget later this week. The government’s efforts to hype up social welfare allocations in the budget seem to have hit the right notes with MPs, with Planning and Budget Committee member Yasser Omar saying the budget caters to the needs of low-income citizens, Al Shorouk reports. As we previously noted, subsidies and social benefits will cost state coffers EGP 331 bn, marking a 19% increase from last fiscal year’s allocations. Omar says social welfare spending accounts for some 16% of expenditures in the draft budget.

Parliament is also set to vote on the 10% social welfare raise for bureaucrats who don’t fall under the Civil Service Act, Al Ahram reports. The vote is scheduled for a plenary session on Wednesday. The House is also expected to put controversial amendments to the judicial code up for a final vote on Wednesday.

The House Economics Committee could finalize the draft investment act this week after kicking the ball forward from last week.

President Abdel Fattah El Sisi is expected to attend part of a 25-27 April youthconference in Ismailia. Organizers have set up a website through which questions can be submitted to the president during his Q&A.

Pope Francis is set to arrive in Cairo on Friday, 28 April for a two-day visit.

Talking heads last night were mostly preoccupied with President Abdel Fattah El Sisi’s meeting with Saudi King Salman, with almost all pundits touting the move as the opening of a new chapter and downplaying last year’s rift.

Case in point: Salman El Dosary, a Saudi writer at Asharq Al-Awsat newspaper, told Yahduth fi Masr’s Sherif Amer that the political ties between both countries might have been adversely impacted, but it never got to the point of a break. Former foreign relations minister and current MP Mohamed El Oraby told Amer that both countries decided to forgo their differences for the sake of regional stability.

El Oraby’s message was echoed by Kol Youm’s Amr Adib, who described the trip as El Sisi’s most important visit to Riyadh, runtime: 12:35). Lebanese political analyst Gehad El Khazen told Adib that he expects an increase Saudi investment in Egypt after the visit (watch, runtime: 6:00).

Over on Al Hayah Al Youm, Lobna Assal interviewed head of the Central Authority for Organization and Administration Mohamed Gamil who denied that the government intends to dismiss 2 mn employees (watch, runtime: 40:16).

Hona Al Asema’s Lamees Al Hadidi was off last night.

Eurobond round two in May? The Finance Ministry could go to market with a second eurobond worth USD 2 bn as early as the first half of May, government sources tell Al Borsa. The government is reportedly in talks with investment banks on the timing the transaction and the current state of debt markets. It is hard to gauge the level of investor appetite for another eurobond issue, the source said, but all options are on the table, including boosting the offer size to USD 3 bn if appetite is there.

Let’s not get ahead of ourselves: Al Borsa is breaking the news as an exclusive, and parts of the statement from the source could imply that this may simply be the distribution of additional amount of an already-issued bond.

If this is a new issue, the ministry is looking to replicate the success of its USD 4 bn multi-tier eurobond sale back in January. BNP Paribas, Citi, JP Morgan and Natixis had been tapped as joint lead managers on the January issue. The government announced last week that it intends to go to market with as much as USD 3 bn in additional international bonds this year to take advantage of lower interest rates on foreign-currency borrowing, with sources suggesting that this could take place in the second half of the year.

Euler Hermes upgrades Egypt’s risk rating, forecasts zero growth this year: Euler Hermes has upgraded Egypt’s risk rating (pdf) to D3 from D4 in its 1Q2017, but expects the economy to record zero growth this year (pdf). Inflation will skyrocket to 26% in 2017, and social discontent will prove to be the biggest obstacle to implementing reform. The credit insurance company lauds the country’s “forceful” reform measures, including the EGP float, as necessary to ensure positive developments for the economy down the road. “Business environment switched suddenly from heavy rigidities (fixed exchange rate, high subsidies) and low liquidity to more market-based ones, but with heavy short-term costs. These reforms were necessary to rebalance the growth model. They also help the country make the most [of] its business regulation, which is among the most favourable in the region.” Egypt’s large domestic markets, diversified economy, “relatively comfortable” external debt repayments, and continued financial assistance from the US and the region are listed among the country’s strengths in its risk rating. On the flipside, the report notes internal and external instability, and persistently high poverty rates among our weaknesses.

The central bank provided USD 28 bn for foreign trade financing from 3 November through 10 April, CBE Assistant Sub Governor Tarek Fayed said. Al Masry Al Youm adds the trade finance included collecting USD 19 bn worth of letters of credit and the opening USD 9 bn in new LCs.

The Egyptian Competition Authority (ECA) has reportedly filed a complaint against Uber with the Prosecutor General for allegedly failing to cooperate with an investigation into an antitrust complaint filed by rival ride-hailing apps, Al Borsa reports. The ECA has not yet found that Uber violated anti-trust regulations. Instead, the ECA’s complaint to prosecutors was that Uber allegedly failed to documents necessary to the investigation, ECA head Mona El Garf is reported to have said. Uber Egypt representatives have not commented on the development. A complaint to the competition authority by Uber rivals Ousta and Careem, filed last December, alleges that Uber engaged in monopolistic practices when it did not raise fares and temporarily stopped charging its drivers a 20% service fee through the end of January 2017.

The development comes only a week after a visit to Egypt by Uber’s Chief Business Officer, Emil Michael, during which he called Egypt the “new Silicon Valley.” “The Egyptian entrepreneurship ecosystem is the perfect test market for many types of new products and services at the forefront of technology. And the unique combination of history, resources, and people in Egypt makes us keen to keep investing in the Egyptian market.” said Michael during a fireside chat at RiseUp. He had also met with Investment and International Cooperation Minister Sahar Nasr and Transportation Minister Hisham Arafat, according to a statement from the company. The company says it “creates over 50,000 work opportunities for drivers each month in Egypt.”

SODIC booked net contracted sales of EGP 1.2 bn in 1Q2017, a 64% leap over the same period last year, according to an EGX filing (pdf). “Net contracted sales grew on the back of three launches with EGP 1.7 bn worth of inventory introduced in February and March of 2017. The first quarter of 2017 saw the launch of two new projects: One16, a premium apartment offering in SODIC West; and October Plaza, launched on the 30 acre plot in 6th of October. In addition a new phase of Eastown Residences in New Cairo was launched in March,” the company added in a statement (pdf). Said SODIC CEO Magued Sherif: “This has been a good start to the year with a very fluid economic situation in the backdrop, once again reflecting the resilience of the Egyptian real estate market and the depth of genuine demand.” SODIC also delivered 399 units in 1Q2017, up from 102 units in 1Q2016.

Talaat Mostafa Group (TMG) bought 500 feddans in the new administrative capital, Housing Ministry sources told Reuters. “Talaat Mostafa received the land two weeks ago after it came to an agreement with the administrative capital company on all the conditions,” a ministry source said without providing further details. Al Mal says TMG will pay the administrative capital EGP 1,500 per sqm instead of its original bid of EGP 1,250 per sqm for more favourable options that include extending the payment schedule by one year and fixing the interest rate charged at 10% instead of having it float in accordance to the CBE corridor rates. TMG did not confirm Al Mal’s scoop to the EGX, but said it paid EGP 4.4 bn for the land plot. About 15 companies submitted bids in March for land for the administrative capital’s first phase of construction.

Our friends at Shahid Law Firm are expanding into Ethiopia, signing an affiliation agreement with the country’s Meseret and Associates Law Office to better serve Egyptian and international clients doing business there and in other East African countries, the firm announced in an exclusive statement to Enterprise (pdf) last night. It’s the first move into East Africa by a leading Egyptian firm of which we’re aware. The partnership is a stepping stone to a wider expansion into East Africa and the Great Lakes region, the firm says. Shahid Law Firm’s newly established Africa Group will be jointly headed by managing partner Girgis Abd El-Shahid and partner Tarek Badawy.

MOVES- Nissan has reportedly appointed Mansour Group COO Ankush Arora as its new India president, Business Standard reports. Arora joined Mansour Group in 2014 after a one-year stint at Tata Motors and more than 17 years at General Motors.

President Abdel Fattah El Sisi met with Saudi Arabia’s King Salman in Riyadhon Sunday amid much fanfare and celebration. El Sisi was also received by Deputy Crown Prince Mohammed bin Salman along with a number of princes, ministers and senior officials, Saudi Press Agency reports. Beyond talk of strengthening bilateral ties and coordinating on regional policy, the King and the president appeared to have primarily delved into two main issues: the need for better cooperation on counterterrorism and standing together against interference in the internal affairs of regional countries, according to a statement from Ittihadiya.

Salman has accepted El Sisi’s offer for a return visit. Yesterday’s meeting is receiving widespread coverage from both the local and international press, with most of the foreign press, including the AFP, noting how far the two countries have come since relations hit a rough spot last year. Both sides made a point to stress that relations were never on the rocks. Saudi’s Foreign Minister Adel bin Ahmed Al Jubeir denied a rift had taken place, according to AMAY. He added at a presser with Foreign Minister Sameh Shoukry that relations between the two countries are impeccable and will be always stronger in the future, the Saudi Gazette reports.

The Egyptian-Saudi Business Council discussed turning pledges of USD 25 bn worth of investment into reality, Faisal Islamic Bank of Egypt chief Abdel Hameed Abou Moussa, who heads the Egyptian side of the council, told Al Mal. Salman made the pledges during his visit to Egypt in April 2016. He added that Egypt is looking to expand its exports to Saudi Arabia, with plans to increase exports of ceramics, porcelain and electrical appliances, Al Borsa reports. He spoke reassuringly that that the King Salman bridge which would link both countries will be constructed in three years and will pass through the disputed island of Tiran. This was the only public mention of the island sovereignty handover agreement last April, a case which remains in dispute in Egyptian courts.

Also coming out of the trip: A renewed commitment on the linking of the Egyptian and Saudi electricity grids. The two sides will look to tender bids for the project on 3 May and a contract could be awarded as early as September, the head of the Egyptian Electricity Transmission Company, Gamal Abdel Rahim, tells Al Borsa.

A handful of international stories worth your time this morning:

If we did this… Saudi Arabia’s King Salman rolled back unpopular austerity measures on Saturday at the same time as he appointed two of his children to key positions; one, Abdulaziz bin Salman, will head the ministry of energy affairs, while Khalid bin Salman will be the next Saudi ambassador to Washington. The reversal of austerity measures will see the kingdom restore bonuses and allowances for state employees and members of the armed forces. Bloomberg has more.

Elsewhere in the Gulf, the Qatar investment Authority is the “latest convert to passiveinvesting,” the Financial Times writes, saying the world’s ninth-largest sovereign wealth fund and “owner of London landmarks the Shard and Harrods, is moving cash into exchange traded funds and index funds as part of a more ‘prudent’ investment strategy.”

Former banker and pro-EU party leader Emmanuel Macron will face far-right candidateMarine Le Pen when France heads to runoff vote on 7 May to elect a new president. Macron is forecast to win (then again, so was Hillary Clinton): “A Harris survey taken on Sunday saw Macron winning the runoff by 64 percent to 36, and an Ipsos/Sopra Steria poll gave a similar result,” Reuters writes. Macron had 23.9% of votes cast yesterday in the first round of balloting to 21.4% for Le Pen with 96% of ballots counted. The catch, the newswire writes elsewhere, is that “to have a real chance of implementing the reform of France’s economy and politics that he wants, he needs a victory big enough to enlist popular figures from established parties in the parliamentary election that follows in June.”

Today’s Egypt Holiday Photo of the Day is of Port Ghalib. Marsa Alam’s Port Ghalib is the only South Red Sea marina from which safari boats can make direct trips to some of the world’s most famous marine sites like Daedalus Reef and Brothers Island.The image was shot for CIB’s 2016 Annual Report (microsite and print edition) by Zeina Abaza at Inktank Communications, which has produced the bank’s annual report for the past eight years.

A marathon a day for 40 days along the world’s rivers: Australian businesswoman and environmental activist Mina Guli was in Egypt as part of her goal of running a marathon a day for 40 days along 6 rivers around the world. Guli’s Run4Water is to raise awareness for the United Nations’ “Global Goal” number six: Clean water for all. In the picture above, Guli is running along the railway line near Aswan, on 21 April. Photo credit Kelvin Trautman. You can see pictures from Guli’s Run4Water here. Her Egyptian leg was supported by Qalaa Holdings.

President El Sisi’s meeting with Saudi Arabia’s king Salman leads coverage of Egypt in the international press this morning. And while reporting on the event from both Saudi and Egyptian media have been full of platitudes on the brotherly ties between the two countries, most international coverage has been focused on the differences that led to the rift in the first place. The Associated Press and Anadolu highlight disagreements over the Assad regime in Syria.

Florida Republican Senator Marco Rubio (and presidential nomination loser) had harsh words to say about Egypt on CBS’s Face the Nation on Sunday, saying: “If you continue to abuse your population, there will be government instability and that breeds radicals. … My big concern in Egypt is that the way they govern that country now under President El-Sisi is going to lead to some sort of violent clash,” Rubio said in response to a question on Aya Hijazy and her release. He admitted that President Donald Trump’s back-channel talks have Hijazy released were “successful” (watch; runtime: 45:21). Rubio’s propensity for grandstanding would make him a natural candidate the next time there’s a by-election here in Egypt’s House of Representatives.

Pledges for sustained US military aid for Arab countries could face pushback from lawmakers, Ellen Mitchell writes in The Hill. The news came after US Secretary of Defense James Mattis’ pledges of continued support to Egypt and Saudi Arabia. “There’s always elements within the Congress that have different views on different countries, but there isn’t a bipartisan consensus on any of these guys — Saudi Arabia, Bahrain, Egypt,” James Carafano, a foreign and defense policy expert at the conservative Heritage Foundation, said.

There are about 13 players fighting for a piece of Egypt’s tech-enabled transport market, Rachel Williamson surveys in Wamda. “All of these companies are targeting the same population: broadly, the 23 [mn] or so Egyptians who have a smartphone, or about a quarter of the country’s population.” 12 are up against Uber and the sector has already killed off at least four. Williamson gives special props to Wadeeny, which was launched in 2011 as a carpooling app, but is now an aggregator that searches all the different apps for the best price and books your ride through its interface.

Other news on Egypt worth noting in brief:

• President Abdel Fattah El Sisi’s economic reforms are starting to prove fruitful. For them to success El Sisi must wait out popular discontent over inflation and a decrease in his popularity, writes Neville Teller for the Eurasia Review.
• Israel had reportedly been warning Egyptian authorities about salafist groups in Sinai since the days of Hosni Mubarak, says Yaakov Lappin for Jewish News service.
• US Rep. Chuck Fleischmann recounts the moment President El Sisi was informed of the Palm Sunday bombings, as he was apparently in the room with the president at the time, according to the Tennessean.

Fifteen countries for which we don’t need visas: We may have to fill out tedious applications and keep our fingers crossed every time we want to visit the US or a European country, but Egyptians can still visit some 15 countries without obtaining a visa beforehand, HuffPost Arabic reminds us. Among the destinations that make vacation planning a breeze: Malaysia, the Dominican Republic, Cape Verde, and Vietnam (watch, runtime 4:01).

Pakistan is planning to import petroleum products from Egypt “in the coming period,” the head of a 33-company Pakistani business delegation that was in Cairo yesterday said, Al Borsa reports. Unnamed businessmen from the delegation are reportedly planning to establish two factories to manufacture electric fans and auto spare parts, CEO of the Egyptian Businessmen’s Association Mohamed Youssef said, according to Al Mal. No details were provided on the expected investment value or timeline of the projects.

The Trade and Industry Ministry is mulling whether to open a logistics center in Ivory Coast or Ghana this year to facilitate exports, a source tells Al Mal. The Ministry has already established a logistical center in Kenya the last two months.

The tripartite committee on the Grand Ethiopian Renaissance Dam began its four-day meetings in Cairo yesterday to discuss the draft report on the effects of the dam on Egypt, Al Masry Al Youm reports.

Export fees were increased on aluminum scrap to EGP 6,000 from EGP 5,000 per tonne by the Trade and Industry Ministry, in a bid to ensure adequate supply in the local market, Al Borsa reports. Separately, the Supreme Council for Customs Tariffs has completed a study on imposing an import levy on imported iron, Customs Authority head Magdy Abdel Aziz tells Al Ahram. The council will present its findings along with demands of local iron manufacturers to the Trade and Industry, and Finance Ministries to reach a final decision.

The Agriculture Ministry signed two agreements with the UN Food and Agriculture Organization worth a combined total of EUR 1.6 mn for projects to improve agricultural and irrigation practices in rural areas, Al Borsa reports. The ministry is also organizing an international agricultural investment conference within three months, minister Abdel Moneim El Banna said on the sidelines of the signing ceremony, according to Al Mal.

The New Urban Communities Authority (NUCA) is finalizing the contracts for its joint project with Palm Hills Developments, October Oasis, according to Al Borsa. The project involves the development of 6k feddans in Sixth of October and was agreed to at the EEDC in 2015. NUCA completed reviewing the financial and technical studies, which Palm Hills presented last November.

Hassan Allam Construction is targeting projects worth EGP 3.6 bn during the next year, a EGP 200 mn projected increase over this year, Al Borsa reports.

The National Bank of Egypt has received loan requests worth a total of EGP 1.5 bn as part of the CBE’s initiative to provide affordable financing for the tourism industry, NBE Vice President Yehia Aboul Fotouh said, Al Borsa reports. The bank will review the loans and decide which ones will be approved within the next few months, according to Aboul Fotouh. Under the CBE’s initiative, banks will offer combined funding of EGP 5 bn in loans at rates of no more than 10% for up to 10 years. The initiative aims to make funds available for hotel renovations and the overhaul of the tourism industry’s fleet of cars, buses, and other vehicles.

The Red Sea Ports Authority is planning to reissue the tenders for the USD 40 mn Dahab yacht marina project after President Abdel Fattah El Sisi’s visit to Riyadh, Al Borsa reports. The marina is aimed to increase tourism flow from Maqna in Saudi Arabia. The authority had first announced the project last year.

The CIT Ministry will give Orange, Vodafone, Etisalat, and Telecom Egypt (TE) their allocated 4G frequencies before the end of June, a source tells Al Shorouk. As it reached a domestic roaming agreement with Orange Egypt, TE is now conducting tests to provide mobile services nationwide, according to Al Shorouk. TE CEO Ahmed El Beheiry expects the agreement with Orange to be finalized and signed into a binding contract within two months. El Beheiry added that he hoped he could reach an agreement with the other MNOs as well.

Banque Misr signed a USD 100 mn financing agreement with China’s Industrial and Commercial Bank (ICBC) for a project led by Huawei, Amwal Al Ghad reports. Banque Misr had previously signed an agreement with ICBC and the China Export and Credit Insurance Corporation to provide up to USD 500 mn in funding for Egypt-based projects implemented by Chinese companies. The Egyptian bank is also expected to sign a USD 500 mn loan agreement with the Chinese Development Bank, Daily News Egypt reports.

To date, Egypt has signed agreements for 30 projects worth a combined total of USD 20 bn to be established in the Suez Canal Economic Zone, chairman Ahmed Darwish tells Al Masry Al Youm.

The political arm of the ultra-conservative Al Jama’a Al Islamiya, the Building and Development Party, launched an initiative on Saturday calling for an end to state violence in Sinai, Daily News Egypt reports. The party’s plan would see a ceasefire and the suspension of military raids coming into effect to allow for a period of dialogue between the state and the residents of the peninsula, followed by launching a development plan for the region and dropping all charges against Sinai locals. The party has called on Al Azhar and other state institutions to discuss the initiative in hopes of ending the ongoing conflict in the peninsula.

Former corruption watchdog Hisham Genena filed a case yesterday with the Supreme Administrative Court to overturn a previous ruling upholding his removal as the head of the Central Auditing Organization, Al Shorouk reports.

The Egyptian and US navies began their joint exercises Eagle Salute 2017 in the Red Sea, the military announced yesterday, according to a statement from the Defense Ministry. The paper says the exercises include “planning and organising joint combat operations, both at day and night, in cooperation of air-force elements. The combat scenarios involve the securing of maritime areas against various threats.” Saudi Arabia, the United Arab Emirates, Bahrain, Kuwait, Pakistan and Italy are participating as monitors.

Tanta church bombing death toll up to 29: Tanta’s St George Coptic Church bombing victim Victor Mina succumbed to his injuries yesterday, raising the death toll in the terror attack to 29, Al Masry Al Youm reports.

A US federal judge stripped Egyptian native and convicted jihadist Khaled Abu Al-Dahab of his American citizenship for lying to immigration officials while applying for the citizenship, the Associated Press reports. Abu Al-Dahab served a 15-year prison sentence in Egypt for belonging to a terrorist organization and was released in 2011. This comes as a lawsuit was filed in the Egyptian Administrative Court to strip Egyptian-American activist Aya Hijazy of her Egyptian citizenship, Al Masry Al Youm reports.

The Administrative Court rejected yesterday a request to re-issue broadcast licenses for Al Jazeera Mubasher Misr, which the General Authority for Free Zones and Investment had revoked, Al Borsa reports. The channel had announced in 2014 it would cease operations.

Rania Medhat, the country’s first female to become a certified instructor of tahteeb, “hopes tahteeb will be included as a sport in Egypt’s physical education curricula like other martial arts,” Salwa Samir writes for Al Monitor.