Monday, 31 May 2021

EnterprisePM — EgyTrans, HA Utilities agreement back on after FRA slams Paradigm Logistics partnership.

TL;DR

WHAT WE’RE TRACKING TONIGHT

Good afternoon, ladies and gents. With this unbearable heat, we’re almost thankful that it’s one of the slowest news days of the year we’ve seen so far (Ramadan notwithstanding).

THE BIG STORY TODAY- The Financial Regulatory Authority has apparently come down hard on the EgyTrans, Paradigm Logistics partnership announced last week. The authority says PAradigm Logistics doesn’t yet own the shares it is proposing to swap with EgyTrans. This prompted EgyTrans to declare that Hassan Allam Utilities is its only suiter, so far. We cover the story in detail in the Speed Round below.

HAPPENING NOW- Yet another bid coming in for Alex Medical: TAT for Medical Services — a subsidiary of Alexandria Healthcare Investments — has made an offer for Abu Dhabi Commercial Bank’s (ADCB) 51.4% stake in Alexandria Medical, according to an FRA statement (pdf) out just before dispatch. TAT, which is applying for an MTO, is looking to EGP 45.53 per share, valuing Alex Medical at EGP 650 mn. This is the latest in a string of bids to acquire ADCB’s shares in Alex Medical, which include Cleopatra Hospital Group’s MTO offer to acquire 100% of the company at EGP 38.53 a piece, valuing the company at EGP 550 mn. Speed Medical announced yesterday that it is no longer part of a consortium bidding for 100% of Alexandria Medical.

In diplomacy news, Egyptian intelligence chief Abbas Kamel met with Hamas leaders today, as part of Egypt’s efforts to broker a lasting truce between Israel and Hamas, Reuters reports. Discussions centered around terms of extending the truce, with Hamas officials maintaining that any truce negotiations must be separate from a prisoner swap proposition raised by PM Netanyahu. Kamel was expected to announce plans by Egypt to build a housing development in Gaza as part of reconstruction efforts, the newswire said, but no such announcement had been made as of dispatch time. The meeting followed back-to-back meetings with Sunday with Israeli Prime Minister Benjamin Netenyahu in Jerusalem and Palestinian Authority President Mahmoud Abbas in Ramallah. A 52 container shipment of humanitarian aid from Egypt arrived in Gaza today, Youm7 reported.

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

  • Lockdown-lite ends tomorrow: Retail shops can stay open till 11 pm, while cafes and restaurants can stay open until 1 am as of tomorrow, after the government’s covid-19 committee agreed to lift semi-lockdown measures imposed earlier this month.
  • We’re getting our very own digital covid passport: The digital certificates will be authenticated by the foreign and immigration ministries and will meet the requirements of countries that require proof of vaccination status as a condition of entry.
  • Net FDI could near pre-covid levels in FY2021-2022: Egypt is expected to land some USD 7 bn worth of foreign direct investments next fiscal year, just under the USD 7.5 bn recorded in FY2019-2020.

THE BIG STORY ABROAD- An international accord on the corporate taxation of multinationals may not materialize before October, Bloomberg reports, quoting Secretary General of the Organisation of Economic Co-operation and Development (OECD) Angel Gurria. Under the new tax agreement, global tech giants including Google, Netflix, Amazon and Facebook with cross-border business would pay more tax in countries where they operate. The announcement comes against expectations that agreements could be sealed at a meeting by the G7 this week and another by the G-20 in July, following the US’ shift in favour of the tax overhaul. But, the US may need more time to legislate, and “the final package could be taken to October when there is another meeting of G-20 finance ministers and central bank governors.

Egypt is working on its own plan to tax FAANGs, under proposed amendments to the VAT act to be phased in over two years that would see Multinational tech firms obliged to charge 14% VAT on e-commerce sales in Egypt.

FOR TOMORROW- OPEC+ will likely decide to continue to increase oil output when it holds its monthly meeting tomorrow, especially as other producers have been increasing supply at a slower pace than the coalition had penciled in, Bloomberg reports. The coalition of oil producing countries had announced in April that it would gradually increase supply through July, bringing back online some 1.1 mn bbl per day it had cut during covid-19 to temper the effect of falling demand on oil prices.

🗓 CIRCLE YOUR CALENDAR-

The FIG World Challenge Cup in Artistic Gymnastics for men and women will kick off in Egypt on Thursday and run until Sunday.

🚙 FOR YOUR COMMUTE-

It didn’t take long for China’s two-child policy to become three: Chinese married couples can now have up to three children in a major policy shift from the previous two-child limit, reports Xinhua. The change comes after Beijing released census data last month that showed the population could be declining. The policy will be accompanied by “relevant supporting measures that will help improve China's population structure,” the Chinese press added, without elaborating. But many say the policy will not change their family planning, with 29k of 31k Chinese citizens polled by Xinhua saying they could barely afford two children, let alone three, writes Reuters.

And should their population get out of control again, China is also paving the way for individuals to start living on its Tianhe space station, reports CNBC. The Tianzhou-2 cargo spacecraft docked on the self-developed space station yesterday, carrying astronaut supplies including space suits and food. The Tianhe Space Station will rival the International Space Station and is expected to go into operation in 2022. China has been expanding its efforts in space exploration, but came under fire last month after losing control of a rocket that eventually (and thankfully) landed in the Indian ocean.

📺 ON THE TUBE TONIGHT-

A new Apple TV+ docuseries explores the music scene of 1971, arguably the biggest year for rock and soul: 1971 saw some of the biggest music icons rise to fame including The Rolling Stones, Bob Marley, The Who, Joni Mitchell, and Aretha Franklin. The docuseries 1971: The Year That Music Changed Everything looks at the impact of these tunes on culture and politics. The eight-part series uses archival footage and interviews to paint a picture of the interconnected nature of music and the pivotal historic events of the time, as musicians tried to inspire hope and change through their work. Vulture is out with a review.

Aswan is playing against Al Masry today at 7pm for a quarterfinal match for the Egypt Cup.

🏀 KUDOS- El Zamalek took home the trophy for the inaugural Basketball Africa League after defeating Tunis’s US Monastir yesterday with a score of 76-63, according to Africa News.

💡 UNDER THE LAMPLIGHT-

How to take the ‘noise’ out of judgement calls: Noise: A Flaw in Human Judgement is the newest book by the authors Daniel Kahneman, Olivier Sibony, and Cass R. Sunstein. The trio argue that a variety of environmental and subjective factors — which they characterise as noise — cause variability in judgements which should be identical, affecting everything from medicine, to law, to economic forecasting. Individuals and organizations often ignore this “noise” and the consequences can have great costs. The book aims to introduce simple remedies to bypassing bias and making better decisions and judgements at all levels.

🌤 TOMORROW’S WEATHER- We’re in for *slightly* better weather tomorrow, with daytime highs of 38°C in the capital city and nighttime lows of 20°C. The North Coast, on the other hand, boasts a lovely 29°C weather… just saying.

SPEED ROUND: M&A WATCH

FRA pulls the brakes on Egytrans, Paradigm Logistics partnership

EgyTrans is once again happy with an acquisition offer from HA Utilities BV, after a separate, higher bid that had prompted it to rethink the sale was challenged by the Financial Regulatory Authority. The authority slammed the offer by Paradigm Logistics in a regulatory filing (pdf) today, saying the company has no grounds to propose to swap its 72% stake in shipping company Ostool, in exchange for new shares in EgyTrans. Paradigm apparently never completed its purchase of 72% stake, as it has yet to buy the 62.3% of Ostoul from Raya Holding. Paradigm and Raya still need to meet conditions outlined in a sale contract by no later than 31 March 2022.

Following the FRA’s statement, EgyTrans said it’s no longer considering Paradigm’s offer, and will instead turn to ongoing talks with HA Utilities BV, a Netherlands-based subsidiary of HA Utilities, to acquire a 65% stake in EgyTrans via a reverse merger, according to a separate filing (pdf).

Why did Paradigm’s offer prompt EgyTrans to pay less attention to HA Utilities anyway? Paradigm valued EgyTrans’ shares at EGP 460 mn, which was higher than the EGP 414 mn proposed in a fair value report attached to HA Utilities’ bid.

Background: Egytrans had accepted in March an offer from HAUH to acquire a controlling stake in the company. The transaction took a step closer this week, when the final fair value reports for both companies were finalized by Grant Thornton.

CORRECTION: This story was amended on Tuesday, 1 June 2021 to reflect that Ostool is a shipping company, not a shopping company. Autocorrect is never there for you when you most ducking need it.

SPEED ROUND: STARTUP WATCH

Almentor raises USD 6.5 mn financing round led by Partech

Online self-learning platform Almentor has raised a third round of financing worth USD 6.5 mn, bringing their total investments to USD 14.5 mn, according to a press release. San Francisco-based VC firm Partech led the financing round with participation from Sawari Ventures, Egypt Ventures, and Sango Capital. Almentor has offices in Cairo, Dubai, and Saudi Arabia, offering English and Arabic-language virtual education courses from mentors including Khaled El Sawy, Mahmoud Elaraby, and Hazem Emam.

GO WITH THE FLOW

Sodic, Ibnsina report higher net incomes, OIH narrows net losses

EARNINGS WATCH- Sodic’s bottom line surged over three-fold in 1Q2021, reaching EGP 100 mn after tax and minority interest, from only EGP 30 mn in the same quarter last year, the upmarket developer said in its earnings release (pdf). Revenues for the quarter increased 60% y-o-y to EGP 849 bn, while gross contracted sales surged 114% to a record EGP 1.85 bn from 333 units sold. The company delivered 120 units in 1Q2021, up from 100 in 1Q2020. Nearly two-thirds of sales were in West Cairo, with newly launched development Karmell contributing to 35% of the quarter’s sales and other projects in the area contributing a further 27%. Some 38% of sales were in East Cairo, led by Sodic East and Villette.

Looking ahead: “We are pleased and excited to deliver an excellent set of results for the first quarter of the year, putting us on track to achieve our annual guidance,” Sodic Managing Director Magued Sherif said. The first quarter of 2021 was “the best … on record for gross contracted sales,” supported by “strong momentum” from the previous three months. The company will remain committed to construction and delivery timelines across its projects, and will continue to invest in a “portfolio of prime assets to deliver on our strategy to create sizable future recurring revenues, Sherif added.

Ibnsina Pharma reported a net income of EGP 50.4 mn in 1Q2021, slightly up from EGP 50.3 mn from 1Q2020, according to its earnings statement (pdf). Sales increased 7% during the quarter to reach EGP 4.75 bn, compared to EGP 4.44 bn in the same quarter in 2020.

The outlook: “Ibnsina Pharma welcomes the new year with optimism and in a position of strength … [as the] the first quarter has set Ibnsina Pharma on a path to even stronger growth,” co-CEO Omar Abdel Gawad said. The company’s priority area looking ahead is to leverage “all possible avenues” for rapid growth and work on “margin-boosting efficiencies through a variety of cost-based measures,” co-CEO Mohamed Abdel Gawad added.

Orascom Investment Holding (OIH) reported a 75.8% drop in its net losses to EGP 103 mn in FY2020, compared to EGP 425 mn a year earlier, according to the company’s earnings release (pdf). Revenues fell to EGP 730.38 mn during the year from EGP 811.4 mn in 2019. Earlier this year, OIH spun off its non-bank financial services holdings into Orascom Financial Holdings through a horizontal demerger.

MARKET ROUNDUP-

The EGX30 rose less than 0.1% at today’s close on turnover of EGP 1.77 bn (26.6% above the 90-day average). Foreign investors were net sellers. The index is down 4.9% YTD.

In the green: CI Capital (+13.3%), Export Development Bank (+3.3%) and Orascom Financial Holding (+3.1%).

In the red: Sidi Kerir Petrochem (-2.4%), Ibnsina Pharma (-2.4%) and Cleopatra Hospital (-2.0%).

ON THE HORIZON

Semiconductor shortage could take years to be resolved

Remember that semiconductor shortage? It’s likely to stay with us for a while: A global lack of semiconductors — essential to making most electronic devices — could take several years to abate, with producers saying they still need time to up factory capacity, Intel CEO Pat Gelsinger told the virtual attendees of the Computex show in Taipei today (watch, runtime: 43:50). The industry addressed short-term shortages that resulted from “explosive” demand when mns worked and studied from home during the pandemic, but it could still take at least “a couple of years for the ecosystem to address shortages of foundry capacity, substrates and components," Gelsinger said. Foxconn Chairman Young Liu, who leads an industry heavyweight supplying global tech brands including Apple, had previously said the shortage would only last until the start of 2022.

Gelsinger isn’t the first CEO warning us of a prolonged shortage: Cisco CEO Chuck Robbins had warned that It might still take another six months before production starts to pick up again. But even then, that would be a short term remedy, it’ll be about 12 to 18 months before providers are really able to build out more capacity, he added. In the meantime, companies are engaged in fierce competition over available stocks of semiconductors in what Nokia CEO Pekka Lundmark described to Bloomberg as a, “fight that could continue a year or even two.”

The impact is being felt by manufacturers and consumers alike: Companies like Apple and Samsung have been forced to scale back production of their technologies and have already announced delays in the releases of their newest smartphones because of the backlog. Sony and Microsoft have also struggled to keep pace with demand for their game consoles and are likely to raise prices in the absence of more chips. Even home appliance manufacturers like US-based Whirlpool, which produces microwaves and fridges, are struggling to meet demand for their goods because of a 10% shortfall in chip deliveries this past March.

US auto manufacturers are expected to take the biggest hit and lose out on some USD 60 bn in sales this year due to the tight market conditions. Ford Motors has already downsized production by 1.1 mn units this year due to the shortage, which will see it lose out on some USD 2.5 bn in sales, according to the company’s most recent earnings release (pdf). Semiconductor stocks are on the rise however, with Taiwan Semiconductor Manufacturing Company (TSMC), the largest industry player, up 11% this year.

Here at home, Egypt’s auto industry also said it’s taken a slap, with major car manufacturers including GB Auto forced to slash production. Car makers weren’t able to get their hands on enough key components used to control electrical systems in vehicles during the first few months of 2021, Khaled Saad, who heads the Egyptian Association of Automobile Manufacturers said earlier this month.

It isn’t just tech-heavy industries that are in a bind: Low-tech products like light-bulbs, toaster ovens, washing machines and car parts, which have been increasingly relying on chips in recent years to provide consumers with smart control systems, are also beginning to suffer from semiconductor scarcity. The problem is particularly exacerbated for low-tech players because most manufacturers have oriented their production towards the more sophisticated, and expensive, variety of semiconductors — meaning that it might take even more time before we see supply rebound for these companies.

So, what are companies doing about it? TSMC expects to spend USD 28 bn in capital expenditure this year, up from USD 18 bn it had earmarked a year earlier, while Samsung is putting in some USD 116 bn over the next decade to bolster operations. Former chip manufacturing leader, Intel, is also working to get in on the gold rush and has announced a USD 20 bn plan to build two new factories in Arizona and open its existing plants to outside customers.

In the US, tax incentives are separately in the works for a proposed USD 12 bn TSMC plant in Arizona and a USD 17 bn Samsung facility that could potentially land in Texas. This will help encourage the development of a local US supply chain and semiconductor independence. The EU could also be moving in the same direction, with the European Commission setting its sights on boosting chip production to constitute 20% of the global market by 2030, with the help of Samsung and TSMC.

BACKGROUND- So what exactly is causing it? Demand for electronic appliances like cell phones and laptops, which soared during the pandemic, snapped up a large chunk of the global supply of chips this past year. Meanwhile, car manufacturers — who also heavily rely on semiconductors — reduced new orders of chips, in anticipation of a longer recovery from the pandemic. Chipmakers were then blindsided when a resumption in automobile demand picked up earlier this year, with manufacturers rushing to place new orders for chips, causing a supply crunch. The bottle-necked supply chain was also hit by a slew of fires at Japanese facilities, a major drought in Taiwan and an arctic blast in Texas that forced major manufacturing facilities offline and significantly disrupted production.

Wait, there’s more: Some computer and cell phone manufacturers like Huwawei had started hoarding semiconductors early on in anticipation of a shortage, which further undercut their availability in the market. Major stockpiling efforts in China, which saw companies collectively spend some USD 380 bn on chips in 2020, were also invigorated by the country’s trade war with the US which threatened to cut off access to manufacturers, depleting available stocks of the silicon chips even further.

We broke down the bits and pieces of the shortage when it first started making frequent headlines earlier this year in our in-house explainer.

PARTING SHOT

Think of work-life balance as an evolving cycle of awareness rather than a finish line: What most people get wrong about the idea of finding a healthy balance between work and just about everything else is thinking of it as a fixed goal, writes Bryan Lufkin for the BBC. Rather than slotting in fixed hours for work time and “me time,” finding real balance requires a degree of flexibility and awareness that will allow you to adjust priorities depending on the moment.

More about emotion than time management: In a survey of 80 London-based professionals conducted by researchers at ESSEC Business School in France and the University of Roehampton in the UK, respondents who reported the highest levels of satisfaction with their work-life balance, said it was less about resolving scheduling conflicts and efficiency hacks, and more about emotional responses and introspection. “What we call ‘work-life balance’ is actually just a proxy to having a sense of fulfilment and contentment,” says NYU clinical associate professor of management Anat Lechner. The survey came up with five key recommendations to achieve this.

A five step process to fulfillment: First, the framework suggests people question the assumption that work is the only path to fulfillment, and take some time to unpack why they may believe that. Next, people should take stock of their values and identify pressing frustrations in their lives. Feelings associated with these stressors should be taken into account before eventually reprioritizing what matters. Considering the tradeoff if they were to work fewer hours is the next step, followed by identifying what can actually be changed in their lives to accommodate new priorities. The final step involved implementing an action or decision to address concerns in some way.

All this to say: expect your employees to push for more flexible hours: All the soul-searching in the world can prove meaningless if a work environment fails to prioritize employees’ well-being. Incorporating flexible management schemes that take people’s uniquely individual situations into account is crucial to helping employees reach a place of personal satisfaction.

CALENDAR

31 May (Monday): Egypt is hosting Trescon Global’s World AI Show with the support of ITIDA.

7 June (Monday): British Egyptian Business Association hosts an event featuring Oil Minister Tarek El Molla.

3-6 June (Thursday-Monday): Egypt is hosting the FIG World Challenge Cup in Artistic Gymnastics.

14 June (Monday): Egypt's Green Economy Forum.

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

17-20 June (Thursday-Sunday): The International Exhibition of Materials and Technologies for Finishing and Construction (Turnkey Expo), Cairo International Conference Center.

20 June (Sunday): Ismailia Economic Court to hold hearing on Ever Given compensation case.

22-27 June (Tuesday-Sunday): The CIB PSA World Tour Finals for 2020-2021 will take place in Cairo.

24 June (Thursday): End of the 2020-2021 academic year (public schools).

26-29 June (Saturday-Tuesday): The Big 5 Construct Egypt, Cairo International Convention Center, Cairo, Egypt.

30 June (Wednesday): The IMF will complete a second review of targets set under the USD 5.2 bn standby loan approved in June 2020 (proposed date).

30 June (Wednesday): 30 June Revolution Day.

30 June- 15 July: National Book Fair.

July + August: Thanaweya Amma exams take place.

1 July: (Thursday): National holiday in observance of 30 June Revolution.

1 July (Thursday): Large taxpayers 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.

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

15 June (Saturday): EGX-listed will have to complete filing their financial disclosures for the period ended 31 March.

19 July (Monday): Arafat Day (national holiday).

20-23 July (Tuesday-Friday): Eid Al Adha (national holiday).

23 July (Friday): Revolution Day (national holiday).

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

9 August (Monday): Islamic New Year.

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

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

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

1 October (Friday): Expo 2020 Dubai opens.

6 October (Wednesday): Armed Forces Day.

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

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.

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

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

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

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

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

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. © 2021 Enterprise Ventures LLC.