Sunday, 8 August 2021

EnterprisePM — EFG Hermes Corps-Solutions’ securitized bond sale could reach EGP 700 mn

TL;DR

WHAT WE’RE TRACKING TONIGHT

Good afternoon, ladies and gentlemen. After an uncharacteristically busy first week of August, it seems we’re right back down to the summer slowdown with a dearth of news today. That said, capital markets topped headlines in the local press.

But before we dive in, here’s the good news- Central bank, stock market confirm Thursday holiday: The CBE and the EGX this morning followed the cabinet by announcing that staff will take Thursday, 12 August as holiday in observance of the Islamic New Year. Check out their statements (pdfs — here and here).

THE BIG STORY TODAY- Our hot securitization market just keeps getting hotter, with EFG Hermes Corp-Solutions could raise up to EGP 700 mn from a securitized bond issuance in 4Q2021, upping its 2H2021 target from a previous EGP 500 mn. EFG Hermes Corp-Solution now joins SODIC, Contact Financial Holding, Edge Holding, Raya’s Aman, Tamweel Holdings and NUCA’s Al Taamir for Securitization in big ticket securitization transactions this year. We break it down further in today’s Speed Round.

HAPPENING NOW- Shoukry is in Manama for talks with Bahraini Foreign Minister Abdullatif bin Rashid Alzayani. Egypt’s Foreign Ministry sent out a tweet this morning of the two ministers meeting in the Bahraini capital. Shoukry arrived in Bahrain last night carrying a letter to King Hamad bin Isa Al Khalifa from President Abdel Fattah El Sisi.

FOR TOMORROW-

Tomorrow is Islamic New Year. The nation will take Thursday, 12 August as holiday to mark the occasion.

Russian flights return to the Red Sea tomorrow: Hurghada International Airport is due to receive tomorrow its first flight from Moscow in six years as Russia’s flight ban finally comes to an end.


DRIVING THE INT’L BUSINESS NEWS AGENDA THIS MORNING-

Strong corporate earnings keeping stock market volatility at bay: A stellar season for corporate earnings is shoring up the stock market in a month which some analysts warned would be marked by volatility. The spread of the delta variant, combined with the seasonal drop-off in trading volumes that usually makes August a turbulent time in the financial markets, have had some worried about what is over the horizon, but a blockbuster US earnings season that is on course to break records has investors optimistic that the more pessimistic projections won’t come to pass. Analysts are now projecting that S&P 500 earnings will rise 90% y-o-y in 2Q2021, smashing previous estimates for 53% growth, according to the Wall Street Journal.

The spike in earnings isn’t just because last year was terrible: 2Q earnings are also so far outpacing those in 2019’s second quarter, before the world came to a grinding halt. One analyst told the WSJ that big US companies currently hold strong pricing power, as pent-up demand, savings made during the pandemic, and stimulus checks combined to make consumers more likely to accept price rises.

It was also a good quarter for Saudi Aramco, which posted its biggest quarterly profit since the end of 2018, according to Bloomberg. The oil giant reported 2Q net income of USD 25.5 bn, propelled by a surge in oil prices which are up by around 40% year-to-date.

The near four-fold hike in earnings will ease the pressure on Aramco, which may now be able to keep up with competitors including Shell and BP in raising its annual dividend, already the highest in the world at USD 75 bn. That would mark a rebound from the covid-induced slump that in June forced Aramco to raise USD 6 bn on the debt markets in order to pay its annual dividend.

TikTok owner ByteDance is tiptoeing toward a Hong Kong IPO despite Beijing’s escalating crackdown on its tech industry, the Financial Times reports, citing three people familiar with the company’s plans. The company shelved its plans for a US listing back in March under government pressure, but after addressing regulatory concerns it is now planning to go public on the Hang Seng either in the final quarter of this year or in early 2022.

Also making international headlines:

  • Thousands have fled their homes on the island of Evia, to the east of Athens, as Greece enters a sixth day of wildfires that have erupted across the country amid its worst heatwave in 30 years. Two Egyptian helicopters joined French, Swiss and Spanish firefighting aircraft to aid the Greek emergency services and army in battling the blazes.
  • The US Senate voted yesterday to advance the Biden administration’s USD 1 tn infrastructure bill, clearing an important procedural hurdle towards passing the key legislation after months of negotiations, the Associated Press reports. In a 67-27 vote demonstrating strong bipartisan support, senators agreed to hold votes on a final set of amendments to the bill, which represents the biggest investment in decades in America’s roads, bridges, airports and waterways.

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

  • Interest rates on hold for another six weeks: The Central Bank of Egypt left interest rates unchanged for a sixth consecutive meeting on Thursday as policymakers look to preempt rising inflation and maintain Egypt’s high real interest rate.
  • J&J coming today: Egypt’s first shipment of Johnson & Johnson vaccines is arriving today, though we don’t yet know how many doses we’re getting.
  • SFE to push into education: The Sovereign Fund of Egypt will soon launch a new sub-fund to invest in the education industry.

YOUR COVID NEWS BULLETIN- China will try to distribute 2 bn doses of covid vaccines by the end of this year, Chinese Premier Xi Jinping said Thursday, according to Reuters reports. The government will also provide the global vaccine distribution scheme Covax with USD 100 mn to help it expand capacity. Chinese vaccine maker Sinovac has signed agreements with 20 other countries that will see it dispatch almost 900 mn shots. This comes in addition to the 770 mn doses China has already exported to other countries.

This makes Western pledges look pretty feeble: The US has said it would provide only a quarter of this amount while the G7 has collectively committed to distributing 1 bn doses.

Senegal on its way to becoming covid vaccine maker: Backed by the EU, Senegal signed an agreement with US company MedInstill to bottle covid vaccines, and plans to start manufacturing vaccines by 2Q2022 and produce 300 mn shots per year by the end of 2022, according to Reuters.

🏅 TODAY IN THE TOKYO OLYMPICS-

Tokyo 2020 has come to an end: The closing ceremony wrapped up in Tokyo just minutes before dispatch, bringing to an end an Olympic Games held under unprecedented circumstances. Giana Farouk was Egypt’s flag bearer at the event, joining athletes from across the world who marched into the Olympic Stadium before the symbolic flame was doused.

Has Japan warmed to the Games? The first ever Olympics to be held in the wrong year, Tokyo 2020 has been dominated by shots of empty stadiums and masked athletes, while as covid cases have risen, concerns have grown about the event gaining superspreader status. Despite the widespread domestic opposition to the Games in the lead-up to the competition, public opinion seems to have softened, perhaps as a result of Japan’s record medal tally.

Egypt had its most successful Olympics ever, bagging six medals including Feryal Ashraf’s historic victory in the karate on Saturday, which made her the first Egyptian woman ever to claim an Olympic gold.

📺 ON THE TUBE TONIGHT-

Pimp My Ride with a bit of Mad Max: This week we’re looking at reality TV shows you should tune into on your streaming platform of choice. We know many of you cringe when you read the words ‘reality’ and ‘TV’ put together, and those of you who don’t consider it a guilty pleasure. However, not all reality TV is the Kardashians pulling each other’s hair out… Car Masters: Rust to Riches has three seasons out on Netflix, and for the car enthusiasts of you, it’ll be sure to provide a kick. It’s a surprisingly well-thought-out series that shows the process of converting old cars and trucks into something special for trade, focusing on both the mechanics and aesthetics at the same time. It also provides a glimpse into the business of it all as you follow along the eclectic team at Gotham Garage and their tireless pursuit of a big pay day. The garage’s high-end clientele add an extra layer of enjoyment as you witness some of the weirdest car requests we’ve ever seen (hot tub car anyone?).

🥤 DRINK THIS TONIGHT-

Milkshakes galore: This heat needs something refreshing, and that’s exactly what’s on the menu at Shakes n’ Bakes. They have an impressive variety of anything that comes in a plastic cup, from smoothies to milkshakes and iced coffee, ensuring that even the pickiest drinker will find something to indulge in. Their milkshakes include Lotus, Twinkies, Maltesers, Oreo, Nutella, bubblegum, and coconut, while their smoothie offerings range from all kinds of lemon mint to mango and watermelon. If that doesn’t sound tempting and you’d rather have something to eat, they also offer smoothie bowls and cake cups that are moist and flavorful. You can find Shakes n’ Bakes at Walk of Cairo and Sheikh Zayed’s Americana Plaza.

🎤 OUT AND ABOUT-

The Color Run comes to Marassi this weekend, featuring “the happiest 5k” running event with live music and other events throughout the day. Tickets are being sold now.

💡 UNDER THE LAMPLIGHT-

Stephen King’s newest novel Billy Summers is “his best book in years,” according to the Guardian. The book follows a ‘hitman with a heart’ who only accepts assassination jobs if he feels the target is a bad person. While the irony is not lost on us, it’s hard not to fall in love with the morally-confused Billy Summers. When he decides to take one final job, he gets the help of college student Alice whom he rescues from her own violent ordeal. King’s latest is a surprising action-filled love novel full of heartbreak redemption, and retribution. The New York Times and Rolling Stone also can’t give enough praise to the book.

☀️ TOMORROW’S WEATHER- Us Cairo dwellers look like we’re getting some reprieve from the heat this week. According to our favorite weather app, temperatures aren’t likely to top the 40°C mark (so it’s just going to be really hot, not really, really hot). The Egyptian Meteorological Authority (EMA) is forecasting daytime highs in Cairo of 37-39°C.

SPEED ROUND: DEBT WATCH

Corps-Solutions plans EGP 500-700 mn securitized bond sale in 4Q2021

Corps-Solutions securitized bond sale could reach EGP 700 mn: EFG Hermes Corp-Solutions plans to raise EGP 500-700 mn from a securitized bond issuance in 4Q2021, CEO Talal Elayat told Hapi Journal. The non-banking financial services player is currently in negotiations with several banks to manage the issuance, he said, without disclosing further information.

This could be slightly above what we were expecting: Elayat told us earlier this year that the company was looking at a EGP 500 mn issuance for the second half of 2021, and that this would be a part of a larger round of securitization.

Corps-Solutions is just one of a number of companies that look to be preparing to offer asset-backed securities: Upmarket developer SODIC, Contact Financial Holding, Edge Holding, Raya’s Aman, Tamweel Holdings and NUCA’s Al Taamir for Securitization are all reportedly planning to securitize parts of their portfolios in the coming months.

The market has been lukewarm so far this year: SODIC, Palm Hills Development, Premium International and Arabia Investments Holding subsidiary Rawaj have been the only companies to sell asset-backed securities to investors, worth around EGP 2 bn.

SPEED ROUND: M&A WATCH

Following its IPO success, Taaleem is in market for an acquisition

Higher education outfit Taaleem could potentially acquire an unnamed local education provider, Managing Director Mohamed El Rashidi reportedly told Al Mal. While Taaleem is currently exploring a local acquisition, a decision on whether to move forward with any transaction has yet to be made, he added. Taaleem was looking to invest EGP 1 bn in new and ongoing projects over the next three years, El Rashidi had told the press on the eve of the company’s blockbuster IPO back in April.

Separately, Taaleem will be signing education partnership agreements with two foreign universities to help develop the curriculum for its subsidiaries Badya and Nahda universities, El Rashidi says. Taaleem will sign this month an MoU with Northern Kentucky University that would see the latter help develop a curriculum for new academic programs the university plans to offer. An MoU with an unnamed European university is in the works for Badya University, which is expected to begin offering classes during the 2022-2023 academic year.

Background: Since last year, the government began enforcing a policy that new universities seeking licenses in Egypt must form academic partnerships with foreign universities. The Egyptian university must offer at least some of the degrees and curricula of the partner university, provisions must be made for a study-abroad program for Egyptian students, and partnerships can only be formed with universities ranked higher in global indices than the highest-ranked Egyptian university. Existing institutions wanting to launch new faculties and departments are also bound by the regulations.

CATCH UP QUICK-

  • A subsidiary of Elsewedy Electric has signed an engineering, procurement, and construction (EPC) contract worth EGP 190 mn to build an electrical network in New Valley governorate.
  • Banque du Caire is considering taking part in the establishment of a new SME-focused investment company, with a target market cap of EGP 500 bn, Mohamed Ragaei, head of investment at BdC, said.

SPEED ROUND: OFFICE LIFE

How the pandemic continued to wreak havoc on businesses this year

Even in 2021, the covid-19 pandemic is continuing to hurt the productivity and payroll of white collar staff here in Egypt, according to a survey by fintech startup NowPay that highlights the extent of the disruption the pandemic is having on our working lives. The poll of 243 Egyptian firms in more than 10 industries also showed that despite more leeway being given to employees as far as working from home is concerned, HR engagement, training, productivity are all down, while business conditions have seen layoffs and cuts go up.

The top major challenge facing businesses was sales, followed closely by managing daily operations and employee stress. Firms cited building corporate culture and engaging employees as two of their biggest challenges this year. Half of HR departments surveyed said they would invest in employee engagement this year.

Surprise, surprise: 79% either introduced full-time WFH policies or asked staff to only work from the office part time.

Not helping matters: Around 45% of HR managers said that the pandemic impacted workers’ pay while 20% of firms downsized their workforce. Compensation was the main driver of employee turnover this year, with 31% of respondents citing it as the main reason for workers to leave the firm. Meanwhile, 20% said that dissatisfaction with managers was the main cause for turnover.

Some businesses are struggling to find talent: Some 25% of HR departments are having trouble sourcing talent. The most used channels for recruitment used this year were LinkedIn (84%) followed by Wuzzuf (48%).

Nearly 60% of HR departments are planning to invest in employee training and development this year. While there are no preset training plans for employees, 66% of firms said they offer training based on the employee requirements and 72% offer that training in-house.

Looking ahead: The HR trends firms expect to see in the coming year include the emergence of hybrid workforces (59%), an increased focus on employee well-being and inclusion (47%), and the rise of people analytics using data rather than human evaluation (46%).

Other findings from the report: farid

  • Medical ins. is the most popular benefit in Egypt, 87% of companies said, followed by phone allowance at 65% and life ins. at 56%.
  • Some 51% of HR departments assess their employees annually.
  • The major challenge firms faced was a drop in sales, followed by managing daily operations and employee stress.

GO WITH THE FLOW

New closing price mechanism to come on 2 September + Farid gets new four-year term as EGX boss

MARKET NEWS- The new mechanism for calculating closing share prices will come into effect on 2 September, the bourse said in a statement (pdf) today. Approved by the EGX last week, a “pre-close auction” system will be introduced in a move designed to improve accuracy, increase trading volumes and boost foreign inflows into Egyptian shares. EGX shares will also be allowed to rise and fall by 20% during a single session, up from a current 10%, while the limit on intraday share price movements on Nilex shares are set at 10% compared to the current 5% limit.

Want to get technical? Farid explained to us how the “pre-close auction” and “MVWAP” will work last month.

IN OTHER EGX NEWS- The EGX chairman is getting another four-year term. EGX Chairman Mohamed Farid has been re-appointed for a second four-year term by Prime Minister Moustafa Madbouly, according to a statement (pdf) from the prime minister’s office. Farid was tapped as chairman of the bourse in August 2017, six years after serving as its vice-chairman (official bio). His return to government service was preceded by a five-year stint as CEO and chairman of private-sector economic think tank Dcode, as well as an adjunct at AUC and the Arab Academy for Science, Technology and Maritime Transport. We grabbed coffee with him back in 2019.

EARNINGS WATCH- Talaat Moustafa Group (TMG) Holding saw its bottomline after taxes and minority shareholders grow 23% y-o-y in 1H2021 to EGP 969.4 mn, according to the company’s consolidated financial statements (pdf). Revenues for the first six months of the year reached EGP 5.5 bn, up 27% y-o-y.

MARKET ROUNDUP-

The EGX30 rose 0.14% at today’s close on turnover of EGP 1.76 bn (26.7% above the 90-day average). Local investors were net sellers. The index is down 0.98% YTD.

In the green: Qalaa Holdings (3.4%), Rameda Pharma (+3%), and MM Group (+2.7%).

In the red: Pioneers Holding (-2.3%), Cleopatra Hospitals Group (-1.9%) and Egyptian Resorts Company (-1.4%).

IMAGE OF THE DAY

Khufu solar boat gets a new home

Khufu solar boat moves to its new home at the GEM: Pharaoh Khufu’s solar boat has been transferred from the Giza plateau to the Grand Egyptian Museum (GEM) as authorities gear up to open the flagship tourist attraction, the cabinet announced in a statement Saturday. The 4.6k year-old vessel was discovered in 1954 at the Great Pyramid, and has since been displayed in a museum adjacent to the pyramids. The boat arrived at the GEM early Saturday morning, having taken 48 hours to make the 7.5-km trip across the the Giza Plateau. Solar boats were believed to transport people to the afterlife and were placed alongside pharaohs in their burial chambers.

The story made headlines internationally: Reuters, AFP, TRT, ABC News and The Daily Mail, to name a few, ran stories on the move. Egypt is hoping to gain media attention ahead of the GEM’s opening as it looks to revitalize its tourism industry that has been hard hit by the pandemic.

CALENDAR

23 July-8 August (Friday-Sunday): Tokyo 2020 Olympics.

9 August (Monday): Islamic New Year.

9 August (Monday): Russian flights to Sharm El Sheikh, Hurghada resume.

12 August (Thursday): National holiday in observance of the Islamic New Year.

26-28 August (Thursday-Saturday): Jackson Hole Economic Symposium.

September: Delegation of Russian companies to visit Russian Industrial Zone.

2 September: The new EGX mechanism for calculating closing share prices will come into effect.

3-5 September (Friday-Sunday): The World Karate Federation will hold the third competition of the 2021 Karate 1-Premier League in Cairo.

7-8 September (Tuesday-Wednesday): Euromoney Conferences will host the GlobalCapital Sustainable and Responsible Capital Markets Forum 2021, featuring Vice Minister of Finance Minister Ahmed Kouchouk.

12-15 September (Sunday-Wednesday): Sahara Expo: the 33rd International Agricultural Exhibition for Africa and the Middle East.

15 September (Wednesday): The CFO Leadership & Strategy Summit is taking place in Egypt.

16 September (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

21-22 September (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

30 September-2 October (Thursday-Saturday): Egypt Projects 2021 expo, Egypt International Exhibition Center, Cairo, Egypt.

30 September-8 October (Thursday-Friday): The Cairo International Fair, Cairo International Conference Center, Cairo, Egypt.

30 September: Closing of 2021’s first oil and gas tender in the Gulf of Suez, Western Desert, and the Mediterranean.

October: New legislative session begins.

1 October (Friday): Businesses importing goods at seaports will need to file shipping documents and cargo data digitally to the Advance Cargo Information (ACI) system.

1 October (Friday): Expo 2020 Dubai opens.

1 October (Friday): State-owned companies and government service bodies selling goods and services to customers that have not yet signed on to the e-invoicing platform will suffer a host of penalties, including removal from large taxpayer classification, losing access to government services and business, and losing subsidies.

6 October (Wednesday): Armed Forces Day.

7 October (Thursday): National holiday in observance of Armed Forces Day.

11-17 October (Monday-Sunday): IMF + World Bank Annual Meetings.

12-14 October (Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

18 October (Monday): Prophet’s Birthday.

21 October (Thursday): National holiday in observance of the Prophet’s Birthday.

24-28 October (Sunday-Thursday) Cairo Water Week, Cairo, Egypt.

27-28 October (Wednesday-Thursday) Intelligent Cities Exhibition & Conference, Royal Maxim Palace Kempinski, Cairo, Egypt.

28 October (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

30 October – 4 November (Saturday-Thursday): The first edition of Race The Legends, Egypt.

31 October – 12 November (Sunday-Friday): The 26th UN Climate Change Conference, Glasgow, UK.

November: The French-Egyptian Business Forum is set to take place in the Suez Canal Economic Zone.

November: Egypt will host another round of talks to reach a potential Egyptian-Eurasian trade agreement, which can significantly contribute to increasing the volume of Egyptian exports to the Russia-led bloc that includes Armenia, Belarus, Kazakhstan and Kyrgyzstan.

1-3 November (Monday-Wednesday): Egypt Energy exhibition on power and renewable energy, Egypt International Exhibition Center, Cairo, Egypt.

2-3 November (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

1-12 November (Monday-Friday): 2021 United Nations Climate Change Conference (COP26), Glasgow, United Kingdom.

29 November-2 December (Monday-Thursday): Egypt Defense Expo.

12-14 December (Sunday-Tuesday): Food Africa Cairo trade exhibition, Egypt International Exhibition Center, Cairo, Egypt.

13-17 December: United Nations Convention against Corruption, Sharm El Sheikh, Egypt.

14-19 December (Tuesday-Sunday): The Cairo International Festival for Experimental Theater.

14-15 December (Tuesday-Wednesday): The Federal Reserve meets to review interest rates.

16 December (Thursday): The CBE’s Monetary Policy Committee will meet to review interest rates.

14-16 February 2022 (Monday-Wednesday): Egypt Petroleum Show, Egypt International Exhibition Center, New Cairo, Egypt.

1H2022: The World Economic Forum annual meeting, location TBD.

May 2022: Investment in Logistics Conference, Cairo, Egypt.

27 June-3 July 2022 (Monday-Sunday): World University Squash Championships, New Giza.

**Note to readers: Some national holidays may appear twice above. Since 2020, Egypt has observed most mid-week holidays on Thursdays regardless of the day on which they fall and may also move those days to Sundays. We distinguish below between the actual holiday and its observance.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

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