All is well following interest rate hike

It was an excruciatingly slow news day yesterday, but most importantly…

The sky did not fall yesterday: Egyptian stocks witnessed a 0.2% drop on Sunday, the first day of trading sincethe Central Bank announced a 200 bps increase in interest rates — a far cry from the 2.5% slip following last May’s interest rate hike which was the largest drop in the world at the time. It would appear that markets have been mostly responsive to the CBE’s message that the move is temporary. Analysts at Naeem Brokerage said in a note that the market might witness a slight temporary correction, adding that banks might benefit because they expected higher investment income to offset delinquencies and slower credit growth, according to Reuters.

Six banks reportedly raised interest rates on deposit certificates with variable interest rates on the first day back. QNB Al Ahly, Blom Bank Egypt, National Bank of Greece Egypt, the Egyptian Arab Land Bank, and AlexBank have all raised monthly interest rates on variable interest CDs to anywhere between 14.75% and 19.5%, according to a chart courtesy of Al Borsa. Meanwhile, the Arab African International Bank raised the interest rates for its EGP Golden Saving Account to 12.5% monthly, Daily News Egypt reports.

Other state-owned banks will not announce how they will move until their Alco (assets and liabilities committees) meetings this week, most of which will apparently be held on Tuesday. The National Bank of Egypt (NBE) will unlikely raise interest rates on its 20%-yield CDs, NBE Deputy Chairman Yehia Aboul Fotouh tells Al Borsa. The bank is likely to move to raise interest rates on savings and deposit accounts, he added. Banque Misr Chairman Mohamed El Etreby had announced on Saturday that his bank would hold interest rates on 20%-yielding deposit certificates. Banking sector sources tell the newspaper that it is unlikely that banks will move high-yield long-term CDs as the CBE had said the move was temporary.

Banking heads including El Etreby assured the public that lending rates to SMEs will be kept at 5%, the CBE’s mandated rate under its SME finance program, Al Ahram reports.

In his first public statement since issuing the rate hike, CBE Governor Tarek Amer said that raising interest rates would increase inflows of USD to the banking system, in a widely picked up interview with Egyptian daily Al Akhbar’s print edition. He told the newspaper that the banking system has managed to draw in USD 57 bn since the EGP was floated eight months ago.

This has not stopped naysayers from continuing to denounce the move: The CBE’s decision to hike interest rates by another 200 bps last Thursday will lead the economy to shrink and strays from the government’s financial reform and inclusion policies, Federation of Egyptian Chambers of Commerce head Ahmed El Wakil tells AMAY. In theory, an interest rate hike is meant to help curb inflation, but the situation on the ground dictates otherwise and the timing is just not right, he adds, as higher interest rates will translate to higher production costs and lower investments.

Elsewhere, Goldman Sachs Asset Management is the worst-selling fund manager globally this year, with revenues falling 7% year-on-year in 1Q17 — compounding a 7% drop in revenues and a 17% fall in profits in FY2016, according to the Financial Times. Investors pulled an estimated USD 26.7 bn from GSAM’s mutual funds so far in 2017, with more than half of the asset manager’s strategies globally suffering outflows, the salmon-colored paper said. “Investors have been dumping stockpickers for cheaper passive funds that track an index,” something which is hurting other asset managers including Fidelity, Morgan Stanley and Franklin Templeton.

We would be remiss if we didn’t mention the passing of banking sector giant and legend Mahmoud Abdel Aziz Saad who passed away late last month. Mr. Saad had served as the Chairman and Managing Director of CIB until his retirement in 2002, and headed the team responsible for setting strategic decisions that made CIB one of the leading private banks in the region. His storied career also included heading up NBE, the Federation of Egyptian Banks and the Union of Arab Banks. Our thoughts and prayers go out to his family and friends.

Egypt’s investment roadmap will be available for viewing in a few days’ time on the Investment and International Cooperation Ministry’s official website, according to Minister Sahar Nasr. She had previously said that the plan will be regularly updated but currently contains 600 investment opportunities concentrated mostly in New Valley, Fayoum, and Qena.

We’re expecting to hear this week whether private mobile network operators might be getting their letters this week to launch commercial 4G service operations. MNOs have two months to sort out distribution of 4G frequencies, but industry insiders have been saying it may come much sooner.

The executive regulations for the recently-passed Natural Gas Act will be completed by September, Oil Minister Tarek El Molla had said on Saturday.

The CBE’s decision to hike interest rates by 200 bps last Thursday was still in the limelight on the airwaves last night. Also catching our attention is the Transport Ministry backtracking again on previous statements that the metro ticket prices were rising.

CIB is yet to decide if it will change its interest rates in response to the CBE’s rate hike, Chairman Hisham Ezz El Arab told Hona Al Asema’s Lamees Al Hadidi, explaining that most banks will not respond in the same way they did after the last interest rate hike by changing their rates.

Ezz El Arab also chatted with Lamees about the CIB winning the Euromoney award for best emerging market bank, explaining that the competition was fierce as it included institutions from India, Malaysia, and Brazil, to name a few (watch, runtime 8:11).

There might be a temporary hike in the rates for short-term certificates of deposit, Banque Misr Chairman Mohamed El Etreby told Lamees. high-yielding certificates of deposit, however, are likely to remain at their current 20% given their 1.5-3-year duration. Investors know the hike is temporary, El Etreby also said, explaining that people should instead focus on the CBE’s achievements, such as the fact that banks are now freely buying USD from the interbank system, for example (watch, runtime 6:00).

Emirates NBD might follow suit, raising the rates only for short-term deposits, Deputy Managing Director and Chief Risk Officer Sahar El Damati told Lamees. The bank is still weighing its options though. As for the impact of fiscal policy on investors, Damati suggested that the government lower the fixed custom exchange rate to EGP 13 from EGP 16.5 to ease some of the pressure on the business community.

Lamees then moved on talk about the EGX with CI Capital’s Executive Chairman and CEO Mahmoud Atallah, who confirmed that 24% of CI Capital’s shares will be offered on the EGX by 4Q2017 and GDRs are also a possibility.

From there she discussed whether real estate is still a safe haven for investors with Al Ahly Real Estate’s Chairman Hussein Sabbour. The price of sold units will continue to rise as long as the government is the sole authority concerned with issuing and tendering land, Sabbour said (watch, runtime 31:08).

Meanwhile on Masaa DMC, Transport Minister Hisham Arafat appears to be playing the usual game of hinting at price increasing then denying it to the public. The minister said that the there were no plans to hike metro and railway ticket prices “at this time”(watch, runtime: 5:41). We’ve been through this song and dance geared for public consumption with the metro plenty of times, only to see the price increase.

Over on Kol Youm, Amr Adib seemed upset that Egypt is moving forward with the Dabaa nuclear power plant contracts when Russia has still not re-launched air travel between Cairo and Moscow, a highly perceptive notion from the boisterous one (watch, runtime 1:03).

He then followed up on Friday’s terror attack on Rafah, chatting with Ahram Center researcher Ahmed El-Behairi about the dynamics of terror and militancy in North Sinai (watch, runtime 11:14).

Yahduth fi Misr’s Sherif Amer was also on about the same issue, speaking to security analyst Khaled Okasha, who blamed the Rafah terror attack on the diplomatic rift between Qatar and other Arab states.

Supply Ministry raises subsidized bread production cost: Supply Minister Ali El Moselhy agreed yesterday with the Federation of Egyptian Chambers of Commerce’s bakeries division to raise the cost of subsidized bread production to EGP 180 per each 100 kg sack of flour, up from EGP 160, Al Masry Al Youm reports. Each sack of flour yields 1,250 loaves. The new figure covers the increase in diesel prices, which the Supply Ministry will cover. El Moselhy said he would coordinated with the Finance Ministry to bring the new prices into effect at the beginning of August. Separately, the subsidized commodity vendors’ union issued a statement claiming that bakeries are continuing to take advantage of loopholes in the bread point system, resulting in EGP 7 bn in losses to the state, Al Mal reports.

It looks like unemployment benefits may be coming after all: The Social Solidarity Ministry formed a committee to study the possibility of unemployment benefits, Al Borsa reported on Sunday. The committee will determine the criteria for eligibility and the number of citizens who would be paid in order to work out the feasibility of paying out unemployment benefits under the state’s social welfare program. An administrative court ruling issued last week mandated the Sherif Ismail government to pay out unemployment benefits, as stated in the constitution and 2010 Social Welfare Act. It is not clear yet whether this will be implemented in FY2017-18, as this has clearly not been factored in. We imagine this may put a dent in the government’s plan to curb the budget deficit.

Egypt is looking to double its famous long-staple cotton production and exports during FY2017-18, Agriculture Ministry spokesperson Hamed Abdel Dayem tells Reuters. Long-staple output this fiscal year — which is expected to rise to 1.4 mn qintar (160 kgs), up from 700k qintar last year — will all be exported and at a higher price of USD 168.07 per qintar (c. EGP 3,000), Abdel Dayem adds. The return of long-staple cotton to “world markets could provide a lucrative export opportunity at a time when Egypt has a huge trade deficit,” notes the newswire.

Naeem Holdings’ real estate fund’s private placement 1.5x oversubscribed: The private placement for 20% of Naeem Holding’s EGP 1 bn real estate fund is 1.5x oversubscribed, an unnamed executive tells Al Borsa. The company expects the offering to be 2x oversubscribed when the placement’s one month extension ends on Thursday, 13 July, and hopes to have raised EGP 500 mn through institutional investors. Insurance provider Allianz Egypt and chem producer Sidpec have pledged c. EGP 97 mn to Naeem, and the company is in the final stages of talks with a third institution, the executive says. Subscription levels are still lower than expected for the 80% stake of the fund offered to the public, likely due to high inflation and rising interest rates, he adds. The three-year fund aims to achieve a minimum annual return rate of 26%, Naeem Holding CEO Yousef Al Far had previously said. The company could be setting up another real estate fund before the year is up and is considering more specialized funds focused only on residential projects.

AOI to assemble Toyota Fortuner models: It appears that Arab American Vehicles Company — a joint venture between Arab Organization for Industrialization (AOI) and Chrysler Group — will begin assembling Toyota Fortuner 2017 cars in Egypt, AOI said. The company plans to officially announce the move at a conference next week, Al Borsa reports. AOI is also hoping to become Ford’s assembler in Egypt. Ford had reportedly said late last year that it is awaiting the automotive directive to decide on whether to assemble in Egypt.

Trial runs have begun at the Arab Petroleum Pipelines Company (SUMED)’s USD 415 mn LNG pier at Ain Sokhna port, Ahram Gate reports. The project — which aims to receive LNG and pump it through the national grid, in addition to receiving, storing and transporting fuel to the domestic or export — is a crucial component of the Oil Ministry’s strategy to turn Egypt into a regional energy hub. Structural work for the FSRU unit anchorage was completed in June, with the facility having begun receiving natural gas shipments, which was connected to the national grid. The port should begin receiving and connecting butane in early 2018, said Oil Minister Tarek El Molla, who added that storing and treating Mazut will begin early 2019. The facility will become especially important once the executive regulations of the Natural Gas Act pass and we can see the private sector begin making deliveries.

Impact of CIB cannot be understated, according to Euromoney: CIB — the first bank in Egypt, the Middle East and Africa to win Euromoney’s World’s Best Bank in the Emerging Markets — has made a crucial impact on managing the social impact of political upheavals in Egypt over the past decade, said Euromoney on the award. “While other banks can lay claim to having broader reach than our next winner, no bank in the emerging markets performed better than Egypt’s Commercial International Bank – and often in a difficult environment.” The prize is a testament to both the bank and Egypt, said Chairman Managing Director Hisham Ezz Al Arab, adding that Egypt is a market of vast opportunities, and the bank is proud to be part of its continued economic recovery.

INVESTMENT WATCH – TCV closes USD 2.5 mn investment in premium agri exporter Plantform: Egypt’s TCV (formerly Tanmiya Capital Ventures) announced on a Sunday that its mid-cap investment fund TCV1 has closed its first ever transaction with a USD 2.5 mn investment in agribusiness company Plantform. Plantform, which exports 100% of its premium speciality produce canned processed fruits and vegetables, also supplies a number of household names including Papa Johns, Little Caesars and Burger King. This is TCV1’s first direct investment following its March close with anchor limited partners including the Egyptian American Enterprise Fund and EFG Hermes. TCV1, which specializes in helping mid-cap Egyptian companies scale up, also plans to commence due diligence on two new potential investments before the end of July.

Private equity firm Actis is planning to acquire stakes in companies in banking, food industries, health and education, Partner Sherif El Kholy tells Al Shorouk. Investments in renewable energy and education will be financed by the firm’s USD 1.6 bn Actis 4 Fund which. The company also plans to launch a new investment fund in early 2018 for which will focus on African, Asian, and Latin American markets, according to El Kholy. He gives much of the credit for this growth in appetite to passing of the new Investment Act.

MOVES- Shake up at Orange Egypt: Orange Egypt Chairman Atef Helmy’s has resigned from his position, according to a bourse statement by the company’s board. The board appointed Bruno Mettling, who had previously served as Vice Chairman, as Helmy’s successor. No explanation was given as to the sudden departure of the former ICT Minister, which comes just as the company is on the verge of announcing it is launching 4G services. Former Investment Minister Osama Saleh also resigned from the board Orange Egypt, while Michel Monzani was appointment as Vice Chairman.

The board of directors also approved a EUR 250 mn loan from parent company MT Telecom SCRL, which the company plans towards updating and strengthening its network ahead of launching 4G services, Senior PR Manager Hala Abdel-Wadood tells Al Mal.

EARNINGS WATCH- Orascom Telecom Media and Technology Holding (OTMT) reported a 7x increase in net profit for 1Q2017, which came in at EGP 388.5 mn, up from EGP 48.7 mn in 1Q2016, according to the company’s consolidated financial statements (pdf). The growth in bottom line is likely owed to revenues growing nearly three-fold to EGP 297.3 mn in 1Q2017 from EGP 110.8 mn in the same quarter last year.

The number of online shoppers in the Middle East grew 6% between 2013-17, says Pricewaterhouse Cooper’s latest Middle East Retail Survey. With around 29% of Middle East consumers now shopping online each month, the region’s retail sector is undergoing some “game changing developments” that are giving rise to numerous opportunities. “The appetite for investing in online retail continues to grow with high profile acquisitions from heavyweight players such as Amazon and Souq.com and JadoPado.com, along with the anticipated launch of Noon which is due to have a big impact on the region,” says the report. PwC outlines five main areas that “will be top of mind for Middle Eastern retailers” when weighing out investments in the coming period. Those are mobile, social customer engagement, secure platforms, loyalty, and showroom experience. “The investment areas identified are critical for any retailers looking at their long-term retail strategy and they must quickly learn to develop omni-channels to ensure that both their online and offline strategies are not only aligned, but monetised,” says PwC Middle East Retail and Consumer Partner Norma Taki.

Is Egypt planning a political shakeup in Gaza? President Abdel Fattah El Sisi met with Palestinian President Mahmoud Abbas in Cairo yesterday, according to an Ittihadiya statement. While the official statement “stuck to generalities,” some sources close to Abbas say the two presidents talked about the power-sharing agreement between Hamas rulers and exiled Mohammed Dahlan, the Associated Press reports. Abbas’ visit comes as ties between Egypt and Hamas have also been warming up, with the two sides reaching agreements for Egypt to supply Gaza with fuel and security equipment. The Palestinian Authority, which Abbas heads, has been moving to curb these relations, reportedly freezing the bank transfers that were funding Egypt’s fuel shipments.

Who do we have to do unmentionable things to to bring our laptops on flights to the US? It appears all the countries who have been slapped with a ban on carrying laptops on flights to the US have been given at least a tentative exemption from the ban, with the exception of Egypt. Royal Jordanian and Kuwait Airways announced exemptions on Sunday, joining Etihad Airways, Qatar Airways and Turkish Airline. Royal Air Maroc, Saudi Airlines and Emirates Airlines have announced an exemption is forthcoming.

Apache sells Canadian unit to focus on Egypt, US, North Sea: Canadian oil producer Paramount Resources has made an offer to acquire the Canadian subsidiary of Apache Corporation for USD 353.7 mn. The move comes as part of Apache’s move to streamline and focus on its operations in Egypt, the United States, and the North Sea, Reuters reports.

Other International news worth noting in brief include:

• Iraqi Prime Minister Haider al-Abadi declared Mosul officially liberated of Daeshbags on Sunday, in an announcement in the city itself, according to Reuters.
• The on-gain, off-again bromance between US President Donald Trump and Russia’s Vladimir Putin is back on again, after the two were figuratively canoodling at the G20 summit. The same could not be said for his talks with other world leaders at the riot-ridden summit, where he continued to antagonize on climate change and spout more protectionist rhetoric.
• China’s COSCO Shipping has offered to acquire Orient Overseas for USD 6.3 bn, a transaction would see the formation of world’s third largest container line, Reuters reports.

Dubai’s Green Art Gallery is hosting an exhibition entitled “Modern Women of Egypt” to showcase Egypt’s “unique engagement in the early 20th century with issues of nationalism, womanhood, activism, traditions and multiculturalism,” as reflected in the works of women artists, according to Blouin Artinfo. The exhibition, which runs through 27 July, features pieces by prominent artists such as Ingi Efflatoun, Gazbia Sirry, Effat Naghi, and Marguerite Nakhla, among others.

Topping what little (or barely any) coverage of Egypt there was in the international press this morning, is the its place in the tug of war between Palestinian factions. Egypt is at the center of a three-way power struggle in Palestine between Hamas, Palestinian President Mahmoud Abbas, and exiled Fatah leader Mohammed Dahlan, Peter Beaumont writes for The Guardian. Hamas, currently the de facto ruler of the Gaza Strip, is enlisting Dahlan’s help (despite his being a longtime foe of the organization) to warm up to Cairo in hopes of alleviating the pressure of Israel’s blockade on the Strip. While Dahlan is close to Egyptian President Abdel Fattah El Sisi, he is a longtime rival of Abbas, who is also working to maintain a strong relationship with El Sisi.

Egypt and the GCC countries played their hand too soon in their rift with Qatar, and now have little (if any) room to escalate their punitive measures, Al Masry Al Youm’s Mohamed Kamal says. Resorting to a military escalation — the nuclear option — would not sit will with other regional powers or the rest of the world, making it a highly unlikely option. As such, the quartet’s only move is to ramp up economic and political sanctions, in which case they should be prepared to play the waiting game until Qatar feels the pinch enough to come around.

Japanese puffer fish takes grand romantic gestures to the ocean floor (or: another reason to love BBC Earth) : Equipped with nothing more than his two fins, the tiny Japanese puffer fish works almost continuously for an entire week to create a geometrically perfect design in the sand of the ocean floor. Complete with a few shells for that extra special touch, the artwork is his species’ version of a grand romantic gesture meant to land him a female companion (watch, runtime 2:59).

Egypt called for Qatar’s membership in the Global Coalition Against Daesh to end, calling it a “contradiction” that could undermine the coalition’s credibility, according to statements by Foreign Ministry spokesman Ahmed Abu Zeid. Abu Zeid’s statement comes ahead of a coalition conference scheduled to kick off today in DC, during which he said the Egyptian delegation will present further evidence of state-sponsored terrorism in “certain countries.” This comes as Doha said it is forming a committee to seek compensation for damages to the state resulting from its rift with Egypt and the GCC, the Associated Press reports.

Shipping companies have decided to delay service fee increases that had been set in response to the government’s decision to boost fuel prices until the recent hike in electricity prices can be factored into the costs, Unigrain Shipping’s General Manager Hani Mekky tells Al Borsa. The increases are slight, Mekky says, explaining that the price of transporting a tonne of grains, for example, will rise by EPG 5 as a result of the fuel hike.

Breakbulk carrier Bahri Logistics will begin using the Alexandria Port as its third direct call port, according to an emailed statement (pdf). The carrier currently uses the Suez and Port Said ports, but the addition will allow it “to offer breakbulk and ro-ro transportation services on its North American itinerary from key US ports to Alexandria and from Alexandria to the Middle East and India,” the statement reads.

Saudi Arabia’s temporary ban on Egyptian strawberry imports came into effect on Saturday, prompting Egypt to speed up talks with Saudi to resolve the issues surrounding the ban on exports of Egyptian agricultural products, including strawberries, AMAY reports. Saudi Arabia had banned Egyptian strawberries last month saying they contained alarming levels of pesticides. A team of Egyptian experts has been tasked with studying Saudi’s stance and observations, Agriculture Minister Abdel Moneim El Banna said yesterday. The agriculture and trade ministries had both also previously said that they plan on imposing international-quality standards on Egyptian exports to avoid similar incidents in the future. The Export Development Authority had also rolled out a five-year development strategy for exports that would put in place stricter quality control rules and procedures.

Unilever is targeting growth levels of around 15% y-o-y in 2017, Unilever Mashreq Managing Director Ashraf Bakry tells Al Shorouk. The company invested EGP 500 mn in a new detergent plant that opened last year and plans to expand its investments in Egypt, exporting at least half of its output in five years’ time.

El Gohary Group subsidiary T-Plus began producing women’s sports shoes under the European Berry Shoes trademark from its EGP 60 mn factory, Chairman Tarek El Gohary said on Sunday, according to Al Borsa. The shoes will be the first in Egypt manufactured according to European standards. Production began with 120k units a month and should double soon, El Gohary added.

The Egyptian and Lebanese health ministries are set to sign an agreement soon that will see them partner up to promote and cooperate on mutual investments in pharma, Health Minister Ahmed Rady said, according to Al Borsa. The agreement means to boost pharma trade between the two countries.

Egypt’s auto market is expected to remain in a slump as sales are seen dropping by 50% year-on-year to 110-110k units in 2017, Automotive Information Council (AMIC) spokesperson Khaled Hosni said on Sunday, according to Al Mal. This drop in passenger car, bus, and truck sales will mostly be driven by lowered demand as a result of the recent hike in fuel prices, he said. In the first five months of 2017, passenger car sales dropped 36.1% y-o-y to 15.1k units, according to AMIC statistics. Nissan was in the lead with a 42.5% market share, followed by Hyundai with 23%, and then Chevrolet with c.17%.

The Supply Minister will tender land plots next month for the establishment of retail outlets, sources tell Al Borsa. 15-30k sqm-feddan land plots will be offered in nine governorates, including Luxor, Assiut, Qena, and Suez.

Air Cairo began operating flights between Hurghada and Armenian capital Yerevan last week, Chairman Yasser El Ramly tells Al Shorouk. The company will be running two weekly flights between Yerevan and Sharm El Sheikh and Hurghada. Air Cairo operates a total 65 monthly flights between Europe and the two-Red Sea cities, as well as Marsa Alam, and recently launched flights with Belgrad, Hungary.

The Egyptian Financial Supervisory Authority (EFSA) gave Union Capital the green light to launch the venture capital fund meant to restart operations at idle factories, Al Mal reports. The fund will form its board of directors in early August and begin carrying out feasibility and technical studies on the struggling factories. The fund will allocate EGP 10-15 mn to each factory and work on three or four facilities at a time. The fund will have an initial capital of EGP 150 mn, 46.6% of which the Tahya Misr Fund will contribute. The remainder will be split between the Industrial Modernization Center, Ayadi, and the National Investment Bank.

Banque Misr is looking to secure a 20% growth average across its operational board in FY2017-18, Vice President Akef El Maghraby tells Al Shorouk. The bank’s strategy will be mainly focused on expanding its SME lending portfolio, which currently stands at EGP 4.5 bn. The National Bank of Egypt is also targeting growth levels of 15-20% in its loans and deposits for the FY, Vice President Yehia Aboul Fotouh tells the newspaper. The bank’s net profits in FY2016-17 remained unchanged from the previous year at EGP 12.5 bn.

A bill that would increase the prices of 27 different government services in FY2017-18 has been moved over to the House of Representatives’ next session, Al Borsa said on Sunday. Discussions over the bill — which would hike the fees for passport issuance, expat resident visas, and vehicle registration — have been on hold since April, as MPs have been wary of issuing any service fee increases in light of rising inflation levels.

Seven lawyers from Alexandria were referred to trial yesterday for protesting without a permit over the Tiran and Sanafir island sovereignty agreement with Saudi Arabia, according to AMAY. A Giza court had upheld a five-year prison sentence on Saturday for two defendants on the same charges.

Prime Minister Sherif Ismail imposed a curfew from 7 pm to 6 am on the western parts of Al Arish in North Sinai on Sunday, Al Shorouk reports. This comes after Friday’s twin bombings, which killed and injured 26 soldiers.

The Cairo Chamber of Commerce is calling on the government to impose a curfew on shops and restaurants as a means of curbing electricity consumption, in a ludicrous proposal that reminds us a whole lot of a similar measure from 2012. Chamber head Ibrahim El Araby suggests all venues should be forced to close shop for the night at midnight, with the exception of those that are necessary for citizens’ lives, Al Masry Al Youm reports. We can easily see the argument being made that the shisha place down the street and a favorite bar count as necessary.