Tuesday, 11 November 2014

El-Sisi’s message to US biz delegation • Parliamentary elections in March • Core inflation slows to 8.47% in October • South Valley Cement eyes EKH’s BMIC stake • GB Auto net income up 7x • PepsiCo invests $270mn • MoP sets shale gas price • Emiratis seek Citi Egypt clients

WHAT WE’RE TRACKING TODAY

We’re paying careful attention for new business announcements following the successful wrap-up of the US Chamber of Commerce / AmCham trade delegation. Our bet: The best (maybe even most) announcements will be saved for Sharm El-Sheikh in March.

In all cases: The point has been made, as Bloomberg’s headline over Ahmed Namatallah’s piece makes clear: “Biggest U.S. Trade Mission Shows Egypt Back in Favor After Rift (Read)

Article IV consultations with the IMF should begin in Cairo today, according to a statement made by Gerry Rice, the IMF’s Director of Communications at a press conference on 30 October 2014 in Washington D.C. The last consultation, which are usually performed on an annual basis, was in 2010.

Will its pledge of allegiance to Daesh split Ansar Beit El-Maqdis in two? That’s the key question David Kirkpatrick explores this morning in the New York Times. To give the devil his due, it’s an exceptionally well-reported piece that raises all the right questions, both the expected (Will the group broaden its target list, as Daesh has? How will investors see this?) and the less-obvious-but-critical (Is there really a split between the Nile Valley and Sinai factions of ABM?).

Egypt’s re-engagement with Africa continues as President El-Sisi met yesterday at Ittihadia with a COMESA Business Council delegation with reps from Ethiopia, Rwanda, Kenya, Eritrea, Sudan, Zambia and Mauritius. Ministers Salman and Abdelnour also attended the meeting, which came in the run-up to December’s COMESA / SADC / EAC trade summit in Cairo.

LAST NIGHT’S TALK SHOWS

The US Chamber of Commerce trade delegation hosted by AmChamreceived extensive coverage on last night’s talk shows.

Mohamed Sherdy spoke by phone to AmCham President Anis Aclimandoson the success of a gathering that brought together 69 American companies with President Abdelfattah El-Sisi, Prime Minister Ibrahim Mehleb, five government Ministers and a group of leading Egyptian businessmen.

“Almost all the companies that President El-Sisi met with in New York came to Egypt. The meeting was extremely positive; we didn’t discuss problems with the President, we discussed solutions,” said Aclimandos.

Lamees El Hadidy also opened her show with coverage of the delegation. According to El Hadidy, representatives from American companies includingCoca-Cola, Pepsi, Apache and GE met with the President for about two and a half hours, during which they received a briefing on the political situation in the country. El-Sisi delivered a number of clear messages to investors:

  • Egypt respects its contracts and obligations;
  • Egypt will solve all of the problems that foreign and Egyptian investors currently face;
  • The private sector will be the driver of growth in Egypt;
  • Egypt is a free market economy, the government is simply acting as regulator;
  • Parliamentary elections will take place in March, ahead of the Egypt Investment Summit

Said El-Hadidy: “Investors are optimistic, but optimism is not enough. We to remove bottlenecks ahead of the Summit, otherwise we will not see a single dollar come in to the country.”

Ali Faramawy, Corporate Vice President of Microsoft Corporation and President for Microsoft Middle East & Africa, was El Hadidy’s guest in the studio. In an extensive and engaging interview, Faramawy spoke of his experience with the El-Sisi’s Scientific Advisory Board as well as the talent and potential that he sees in Egypt’s youth.

“The advisory board is still in its very early days, so we are still at the stage of setting the agenda and deciding on the messages that we want to deliver to the President. It’s important to note that the focus for us is not just suggesting projects, but rather coming up with the plan, the project, and the proper coordination with governmental and non-governmental bodies in Egypt who will be involved in implementation,” said Faramawy.

“The government has some tough decisions to make. They need to set priorities and allocate available resources accordingly,” he continued.

“I became the Head of Microsoft Egypt at the age of 32. I was given opportunities because someone saw potential in me. I want to give others the same opportunities that were given to me. You can hire based on either experience or potential. It’s important that we look into the potential of youth. Unfortunately, in Egypt, we have come to associate youth with activism and therefore problems. There is no problem with activism. There is also a very big difference between opposing the government and opposing the country.”

El Hadidy’s second guest was Minister of Transportation Hany Dahy, who said crews are currently doing maintenance on 1,900 km of roads and building a further 3,400 km. The Minister also spoke about the restrictions that are currently being set on heavy trucks as well as plans to open up investments in the transportation sector to private investment.

SPEED ROUND

The EGX closed up 0.92% yesterday at 9,460 points, and is up YTD by 36.4%. Turnover was 5% above the 90-day average at EGP 755 mn, with retail and local investors being the day’s net buyers. KSA and ADX were up 1.1%, Kuwait lost 0.4%, Qatar added 0.7, DFM climbed 2.8%.

Global equity markets were largely up yesterday: S&P 500 by 0.3%, Nasdaq 0.4%, Dow 0.2%, Nikkei 0.6%, Kospi 0.1%, Shanghai 1.3% and Hang Seng 0.5%.

Other stuff you trade was mixed: US treasury yields rose, Brent crude fell below USD 78 / barrel, gold was down to USD 1,159 an ounce, and the greenback gained against a basket of currencies, rising 0.2%. Asian shares were in positive territory earlier this morning, while oil was continuing to lose ground.

By the end of next month, PepsiCo will have invested USD 270 mn in Egypt this year, bringing its three-year total to USD 600 mn, says Omar Farid, the company’s president for MEA. Growth priorities include Upper Egypt and the Delta, the company says.

Egypt has closed down schools associated with Libya’s Islamist 17 February movement, according to a report in Libyan media, which suggested branches had been shuttered in Nasr City, Sixth of October, Mansoura and Alexandria. The Libya Herald also reports that Libya’s minister of health was recently in Cairo for talks.

ENI and EGAS are reportedly near an agreement that would see the latter given a better price for its natural gas production. ENI is currently paid c. USD 2.65 per mn BTU, Reuters said, noting that ENI was unavailable for comment on the story.

Egypt and other MEA markets will hold substantial appeal for private equity players looking at sectors including fitness, food and healthcare, suggests a light blog post presented by Franklin Templeton Investments and quoting Freshfields MENA leader Pervez Akhtar. Akhtar, while managing to plug his firm’s work in this sponsored editorial piece, still hits on the highlights driving growth in the MEA consumer space while noting the saturation of the UAE consumer markets.

An American debate we should be having in Egypt as we ponder the new unified telecommunications law: Is the internet a public utility? Or something discretionary, like cable television? That’s a question now being debated in America (great piece here) as their president weighs in on the issue.

We’re not certain what bothers us more: Clickbait in general, or that the Daily Mail has become the world’s most-read English-language newspaper by so successfully using it. Alongside today’s features of “pert derrieres” (direct quote, honest) and starlet cleavage is this gem: Egyptian teacher becomes internet hit after hilarious footage of his chemistry experiment going horribly wrong goes viral. (“Read.” If you must.)

[Editor’s Note: Yes, it was a slow news night / morning here at Enterprise…]

OIL & GAS

BP expands in Egypt with USD 240 million investment in two new exploration blocks
BP press release | 10 Nov 2014
BP Egypt confirmed in a press release issued yesterday it has been awarded two new exploration blocks as a result of the 2013 EGAS bid round. BP and its partners have committed to invest a total of USD 240 million in the blocks over different phases. Block 3 – North El Mataria is BP’s first entry into the Onshore Nile Delta. The block is located in the northeastern part of the Nile Delta cone, approximately 57km to the west of Port Said city. BP will operate the block with 50% equity and Dana Gas of Abu Dhabi will hold the remaining 50% working interest. Block 8 – Karawan Offshore is located in the Mediterranean Sea, in the northeastern part of Egypt’s economic waters. The block lies at approximately 220km to the NE and 170km to the NW of Alexandria and Port Said cities respectively. BP will have 50% equity and the block will be operated by ENI which holds the remaining 50%. (Read)

Egypt agrees to purchase shale gas at USD 6 per MBTU
Mubasher | 09 Nov 2014
The Egyptian government has agreed to purchase shale gas from Shell and Apache at USD 6 per MBTU, announced the Shell Egypt Chairman Jeroen Regtien. The Ministry of Petroleum had finally given the green light for Shell to perform shale gas exploration in the Western Desert through using the newest technology. (Read in Arabic)

Minister of Petroleum: 20 New agreements worth investments of USD 2.1 billion
Al Masry Al Youm | 10 Nov 2014
The Ministry of Petroleum (MoP) signed 20 new E&P agreements worth USD 2.1 billion, announced the Minister of Petroleum Sherif Ismail during the symposium discussing Egypt’s Energy Future held on Sunday. Since 2013, the MoP had signed 36 E&P agreements (excluding the 20 new agreements that just entered the pipeline of projects), the minister said. The Minister also mentioned the ambitious USD 3.9 billion refinery upgrade program on which Enterprise has previously reported, as well as new investments entering Egypt’s petrochemical sector reaching USD 2.6 billion.

BASIC MATERIALS

South Valley Cement looks to acquire EKH’s stake in cement producer BMIC
Al Masry Al Youm | 10 Nov 2014
The Board of Directors of South Valley Cement (SVC) has approved opening talks to buy Egypt Kuwait Holdings’ (EKH) stake as well as that of other shareholders in cement producer BMIC. SVC is already a shareholder in BMIC and has released to the EGX its intention to acquire a minimum of 30% of the remaining shares in BMIC, while granting shareholders one week to seek approval of their respective Boards. (Read in Arabic)

AUTOMOTIVE

GB Auto 3Q14 net income up 7x to EGP 54 mn
GB Auto Earnings Release | 10 Nov 2014
GB Auto, a leading automotive assembler and distributor in the MENA region, announced yesterday its consolidated results for 3Q14, reporting revenues of EGP 3 billion, up 49.7% y-o-y. Net profits rose more than seven-fold y-o-y to EGP 54.0 million, with net margins up 1.4 percentage points to 1.8%. Growth was driven by solid sales in the company’s passenger cars units (including both Egypt and Iraq) as well as commercial vehicles and financing businesses sales. (Read Earnings Newsletter in PDF)

HEALTHCARE

Pharco Pharmaceuticals licenses clinical-stage Hepatitis C drug, takes Egypt and possibly MENA rights
Pharmiweb | 10 Nov 2014
Pharco and Presidio today announced that they have entered into an exclusive license agreement for Presidio’s HCV NS5A inhibitor PPI-668 for development and commercialization to treat HCV infection in Egypt. This exclusive license includes an opportunity for Pharco to expand its licensed territory to one or more additional countries in the MENA region. Pharco will fund clinical development and commercialization of PPI-668 in Egypt and potentially the MENA region. Presidio will receive upfront and development milestone payments as well as tiered royalties based on product net sales in Egypt and potentially the MENA region. Pharco made an equity investment in Presidio related to the license agreement. Pharco employs a staff of 8000 employees and has over 500 million in product sales units—ranking as the leader in the Egyptian pharmaceutical market with 13.2% market share in 2013. (Read)

REAL ESTATE

Heliopolis Housing reports 3Q14 net income of EGP 91 mn
EGX | 10 Nov 2014
Heliopolis Housing reported 3 month results with a net profit of EGP 91.1 million, according to a statement sent to the EGX. Net profit grew yoy by c.28% from EGP 66 million. (Read in Arabic)

BANKING

Three Emirati banks eyeing Citibank Egypt’s client base
Al Mal | 10 Nov 2014
Abu Dhabi Islamic Bank (Egypt), Mashreq Bank and the National Bank of Abu Dhabi are all competing to acquire Citibank’s customer base in Egypt, which includes about 600,000 clients with funds exceeding EGP 1.7 billion pounds, mainly concentrated in personal loans, Al-Mal reports. Citibank Vice President Lamis Negm declined to comment on any negotiations for the time being, stressing that it is the Central Bank of Egypt that will manage all phases of the process of exiting from retail activity, which may be long and drawn out, as with the group’s operations in Spain, where liquidation took almost five years to complete. (Read in Arabic)

CBE uncovers use of bank accounts in black market currency trade
Al Masry Al Youm | 10 Nov 2014
The Central Bank of Egypt (CBE) has uncovered the illegitimate use of bank accounts by some black market currency traders to execute their dealings. An unnamed CBE official was quoted on Al Masry Al Youm explaining that the modus operandi for some black market traders with their clients has seen them deposit the required currency amount in their clients’ accounts, while simultaneously presenting client checks in the corresponding EGP figure at the prevailing black market rate.  On its part the CBE has requested that all banks keep a tap on accounts that with significant currency deposits and corresponding EGP withdrawals. (Read in Arabic)

OTHER BUSINESS NEWS OF NOTE

Egypt seeks EGP 3 bn from UAE for 10th of Ramadan tech park
Al-Bayan | 09 Nov 2014
An unnamed Egyptian government official announced that the government is currently planning a pipeline of investment opportunities in the technology sector to be offered to Emarati investors during the upcoming Egypt Investment Summit in Sharm. Among these projects is an EGP 3 billion technology park to be located in 10th of Ramadan City, Egypt’s largest industrial zone. (Read in Arabic)

Min of Finance targets USD 5 bn rise in US investments in Egypt
Al Arabiya | 10 Nov 2014
Al Arabiya quotes sources at the Ministry of Finance as saying the Egyptian government hopes to see US investments in Egypt grow to USD 22 billion, against the current levels of USD 17 billion, as estimated by USAID. (Read in Arabic)

Archer Consulting hangs out its shingle as boutique mid-cap investment bank?
Al Borsa | 10 Nov 2014
Training provider Archer Consulting, which appears to claim having many of Enterprise’s readers as clients, told Al-Borsa yesterday that it has opened a “financial consulting” arm capitalized at EGP 500 mn to pursue a transactional pipeline in growth sectors including renewable energy, healthcare, sanitation and water desalination, said Mohamed Nader, Chairman of Archer Consulting. Ticket sizes seem to put the would-be entrant into a crowded field in the mid-cap crowd. (Read in Arabic)

EGYPT POLITICS + ECONOMICS

President Sisi confirms parliamentary polls to be held before end of March
Ahram Online | 10 Nov 2014
Egypt’s president Abdel-Fattah El-Sisi said in a meeting with a delegation of American businesspeople on Monday that Egyptian parliamentary elections will take place before the end of March 2015. The statement is the closest estimate given by an official regarding the date of the polls. (Read)

CBE: Annual core inflation rate down to 8.47% in October
Central Bank of Egypt | 10 Nov 2014
The Central Bank of Egypt (CBE) announced in a release yesterday that headline inflation as published by CAPMAS showed an increase of 1.71% in October versus a 1.23% increase in September m-o-m. The annual headline inflation rate also increased 11.84% in October from 11.12% in September. Core inflation increased in October by 0.55% m-o-m. The annual core inflation rate however decreased to 8.47% in October from 9.15% in September. (Read statement from CBE)

Ansar Beit al-Maqdis pledges allegiance to Daesh
Daily News Egypt | 10 Nov 2014
Sinai based militant group Ansar Beit al-Maqdis (ABM) have pledged allegiance to Daesh. An audio recording was released in the early hours of Monday morning via the group’s Twitter account, entitled ‘pledge of allegiance to the Caliph of Muslims Abu Bakr Al-Baghdadi and joining the Islamic State’. The group called for “all Muslims” to also pledge allegiance to Al-Baghdadi, who was named Caliph Ibrahim following the group’s decision to establish an Islamic Caliphate. Speaking directly to Egyptians in the recording, ABM stated that it is “no use to continue with shameful peace or blasphemous democracy” and called on Egyptians to fight against the armed forces. (Read)

ON YOUR WAY OUT

Christians are looking forward to fewer restrictions on church-building if a law now in the discussion phase makes it to Parliament next year.Ahram Online has a solid little piece this morning, noting that the Coptic, Catholic and Protestant leaders have signed-off on a joint position paper on the matter. The 2014 constitution requires that “parliament, in its first session, shall issue a law related to the regulation of the construction and restoration of churches in order that Christians may enjoy the freedom to practice their religious rites.”

The USD 972 mn divorce for fracker: Oklahoma oil billionaire Harold Hamm of Continental Resources will have to pay his now-ex-wife about 7% of his USD 16.1 bn fortune, ending speculation that the judge might award her a chunk of the company. Hamm, the 28th richest man in America, helped develop the techniques of both sideways drilling and hydraulic fracturing (that is, fracking.).Bloomberg has the details.

Trains are running again in Upper Egypt after earlier derailment, Ahram Online has reported, noting a three-hour delay for most southern-bound trains yesterday.

Egypt bashing is so much fun, even law profs are getting in on it: TheBaltimore Sun carries an op-ed by a Georgetown law professor that is — surprise! — critical of US policy toward Egypt and of Egypt in general.

Police are investigating South African President Jacob Zuma’s spending of USD 23 mn of taxpayer money on his personal homestead, the AFP reports.

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