IMF happy with Egypt, PMI not so much. Emaar Misr targeting EGP 2.8 bn from IPO. IDH shares start trading on LSE today. GB Auto closes rights issue. Abraaj, Almarai bidding for Dina Farms. Up to 180k bureaucrats expected to take early retirement this year.

WHAT WE’RE TRACKING TODAY

Shares of Integrated Diagnostics Holdings (IDH), the Abraaj-assembled medical diagnostics group, are due to begin conditional trading on the London Stock Exchange. The company should have an initial market cap in the USD 580-670 mn range. EFG Hermes and Deutsche Bank are joint global coordinators for the transaction; EFG Deutsche and Citi are serving as bookrunners.

The annual Food Africa expo will begin today and run until Saturday, 09 May at the Cairo International Convention and Exhibit Center. More details may be found on the event website.

The Euromoney Saudi Arabia Conference will wrap today at Al Faisaliah Hotel, Riyadh. View the event details here.

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WHAT WE’RE TRACKING THIS WEEK

Minister of Industry and Trade Mounir Fakhry Abdel Nour will visit Milan to promote trade and investment on Thursday, 7 May.

Also on Thursday, the UK General election is set to take place. The International Business Times notes that recent polls indicate that Labour is head-to-head with the Conservative Party, with a hung parliament as a potential outcome, (Read, embedded video on autoplay). Readers may find roundups of coverage on The Telegraph and or The Guardian, depending on political preference.

LAST NIGHT’S TALK SHOWS

Amr Adeeb was full of doom and gloom last night. He began his program with a warning that there have been rumblings about a third revolution lately. “As June 30 approaches, there are people who are doing their utmost to stir the pot. In an interview with Al-Sharq Al-Awsat yesterday, opposition leader Ayman Nourcame out on cue to call for early elections. This came after word got out that the Ikhwan are ready to strike a deal. Their one condition is that El Sisi steps down as President. They’ve basically told us to get anyone we want except El Sisi. They are perfectly fine with [Ahmed] Shafik [Mubarak’s last prime minister and one-time presidential contender].

“Be warned, if we let things collapse, it will not be a revolution, it will be a civil war. Egypt will have its first civil war. If you want to shake the tree to have the apple fall in your lap be careful. The Ikhwan did that and the apple did fall into their lap, they ate it but they choked on it before they could swallow,” said Adeeb. “Now there is an orchestra of people repeating the words of Ayman Nour including exiled Ikhwani leaders and some foreign countries who are thinking, ‘Hmm… not a bad idea.’ I just have one thing to say to these people and those countries. We chose Abdel Fattah El Sisi. He won in a fair election. We will have another election after four years. If he does something good, he stays; if he doesn’t do anything, he will go.”

Youssef El Housseiny apologized for being one of the first television presenters to advocate for Ibrahim Mahlab’s appointment as Prime Minister. It seems that he has had a change of heart. He explained at great length why he thinks Mahlab, despite being “a very nice guy” may not be the right person for the job.

SPEED ROUND

Egypt’s economic policies are starting to pay off, a senior official at the IMF said, according to Reuters. With a technical assistance team expected to be sent to Egypt in June, Reuters reported that “Masood Ahmed, Director of the IMF’s Middle East and Central Asia Department, said the Fund had held ‘good discussions’ with Egyptian officials in Washington last month.” Ahmed added that fund sees Egypt “moving in the right direction” and reiterated that the IMF is willing to provide assistance if Egypt asked for it, but so far, no loan requests have been made.

On a related note: The IMF expects Egyptian economic growth to hit 4.0% in 2015 and 4.3% in 2016and the fiscal deficit to ring-in at 11.8% of GDP in 2015 before falling to 9.4% the following year. The figures come from its just-released Regional Outlook Update for the Middle East, North Africa, Afghanistan, and Pakistan. The fund says “[a] modest recovery is expected to continue … despite a slump in oil prices, raging regional conflicts, and lingering uncertainty of the post-Arab Spring transitions.” The landing page of the report is here and the complete report is here (in PDF). You can watch Masood Ahmed, the IMF’s Middle East and Central Asia director, discuss the outlook here. (Running time 04:54).

Egypt’s non-oil sector business conditions deteriorated for the fourth month running: The Egypt HSBC PMI remained below 50.0 at 49.8 in April as companies said business conditions got worse in April. Employment continued to fall in for the fifth month in a row and input costs and output charges continued to rise, albeit at a slower pace. The upside is that output growth picked up and that there was a second successive monthly expansion in new orders. “Cost pressures eased sharply during the month, with the depreciating pound having less of an impact on purchase prices in the latest period,” Markit economist Philip Leake said in the report, noting that costs increased slower as the headline index is edging closer towards neutrality. The positives are driven by stronger demand reported and an increase in new orders for the second month running. You can check the press release out here (in PDF).

Emaar Misr targets up to EGP 2.8 bn from IPO: Emaar Misr, the Egyptian arm of Dubai’s Emaar Properties, expects to raise as much as EGP 2.82 bn in its IPO, Bloomberg reports. Emaar Misr will be selling 600 mn shares at EGP 4.7 per share — the maximum valuation given by Grant Thornton LLP, an independent financial advisor. Emaar Misr shareholders have yet to approve the board’s decision. Emaar Misr is being advised by EFG Hermes and JP Morgan, according to Ahram Online.

GB Auto announces 99.86% of rights exercised in EGP 960 mn capital increase: GB Auto announced on Tuesday that existing shareholders and purchasers of tradable subscription rights together representing 99.86% of the Company’s shares exercised their right to participate in GB’s EGP 960 mn capital increase, according to an emailed release. The company’s paid-in and issued capital is now set to rise to EGP 1.094 bn, according to the statement. GB Auto’s BOD will not seek an additional subscription period to cover the 0.14% gap and is proceeding with regulatory authorities to finalize the issuance of the new ordinary shares. Proceeds from the transaction will be funneled into growth initiatives including a tires plant and a three-wheeler assembly facility.

Abraaj, Almarai among four bidding for Qalaa’s Dina Farms: Four bidders have submitted offers to acquire Dina Farms from Qalaa Holdings, including Abraaj, Almarai, and Exeed Industries, Al-Mal reports. The paper claims that while Qalaa is no longer accepting offers for Dina Farms (which is Africa’s largest dairy farm and Egypt’s top producer of fresh milk), it is still accepting offers for tahina and halawa maker Rashidi Al Mizan.

As many as one mn government employees will become eligible for early retirement this yearupon turning 50, according to an official at the Ministry of Planning. According to the new civil service law, employees who have at least 20 years of Social Insurance contributions under their belt when they turn 50 can file for early retirement. While the state has yet to open up to requests, the ministry expects 120,000 to 180,000 employees will retire. The government currently employs some 6.4 million individuals.

In related news: EGP 100 bn allocated toward “basic wages” clause in the state budget: According to Tarek Al Hasry, advisor to the minister of planning, EGP 100 bn of the state budget for the 2015-16 fiscal year has now been allocated towards civil service wages as per the “basic wages” clause of the new Civil Service Law, jumping from EGP 19.5 bn in the 2014-15 budget. Al Hasry assuaged fears that this would lead to a marked rise in the budget deficit owing to his estimation that wage increases upon implementing the law will only amount to EGP 20 bn. (Read in Arabic)

The tax considerations of structuring Egyptian renewable investments: UK-based law firm Eversheds issued a release on Tuesday noting that given recent changes to Egypt’s Income Tax Law, namely “dividends paid by Egyptian companies to foreign shareholders will now be subject to a 10% Egyptian withholding tax [and] capital gains realized by foreign shareholders on the sale of shares in Egyptian companies will now be subject to a 10% Egyptian withholding tax,” that these tax costs “can be managed through the tax treaty system Egypt has with other jurisdictions,” citing that the UK is “an attractive jurisdiction through which to hold foreign investments.” (Read)

Amer Group finished building an 18-hole golf course at its Porto Sokhna project, according to Al Mal. The course is built on top of the project’s hills with views of the Red Sea. The course is also half AstroTurf.

There were reports overnight of explosions at the Khalafawy Metro station in Shubra and on Giza’s Haram Street. Al-Mal reports that police are canvassing both areas as part of their investigations.

Do you live in Zamalek, Dokki, or Mohandiseen? If so, there a chance you could experience internet disruptions as part of TE’s replacement of copper wires fiber-optic cables in May. Amwal Al Ghad has the full list of areas that will potentially be affected.

Kellogg released 1Q2015 earnings results on Tuesday, with the new owner of BiscoMisr posting a 5% decrease in revenue, citing a stronger USD negatively impacting foreign sales as well as a decreased demand in the U.S. for packaged foods over fresher, healthier options. (Read the WSJ’s take, paywalled, and or theKellogg earnings release)

U.S. Senator Lindsey Graham declares war on Arabic grammar: Israeli newspaper Haaretz enjoys poking fun at U.S. Senator (R) and potential presidential candidate Lindsey Graham’s fundamental lack of understanding of the Arabic language, revealed during his comments at a Jewish lobby dinner on Monday, with specific regard to the Arabic equivalent of the definite article ‘the.’ “Everything that starts with ‘Al’ in the Middle East is bad news … Al-Qaida, Al-Nusra, Al-Qaida in the Arab Peninsula.” (Read in Haaretz)

***

A MESSAGE FROM PHAROS HOLDING

On FX Policy: The Time is Ripe for Change

Pharos Holding Research is urging the Central Bank of Egypt to abandon the “crawling-peg” policy, where regular level-shifts in the USD/EGP exchange rates are administered in response to balance of payment flows. The CBE’s latest level-shift took place in January 2015, which fixed the retail USD/EGP exchange rate at bid/ask rates of 7.58/7.63.

Pharos instead suggests the CBE adopt an implicit policy of maintaining the annual EGP depreciation rate against the USD at a level below the two currencies’ interest rate differential to contain depreciation expectations — in other words, a policy of two-way volatility with no predefined path. To learn more about Pharos’ reasoning, click here.

***

EGYPT IN THE NEWS

9/11 truther Robert Fisk sits down for a cozy cup of coffee in Istanbul with the Ikhwan’s former minister of planning Amr Darrag, in an interview for The Independent republished on the Pakistani news site Dawn. All the journalistic tropes for painting Islamists as moderates (by getting caught up in the superficial with no regard to actual ideology) are out in full effect: the “American-educated professor of engineering … sits … clean-shaven, smart blue shirt, eloquent in English.” Darrag wants an Islam “which gives you directions in a very moderate way. I like to listen to pop music…”

German press: Experts: Steinmeier’s Egypt visit is ‘wrong’: English-language German publication The Local writes on two political commentators criticizing the German Foreign Minister Frank-Walter Steinmeier’s recent visit to Egypt. Hoda Salah, Middle East specialist at the Free University in Berlin, is quoted as saying “[Steinmeier’s visit] is very sad,” saying that German government officials were “closing their eyes” to human rights abuses in Egypt. Stephan Roll of the Stiftung Wirtschaft und Politik (SWP) claims that the Sisi administration is not yet consolidated, and as such the German leadership should not yet pursue relations with a country he deems as still unstable. (Read)

Qatari media: Achievements of Operation Decisive Storm, Marwan Kabalan, The Peninsula: “The alliance, which took the media name, the ‘Tenth Alliance’ as a reference to the number of its members, is not, unlike the other big alliances, as solid as it is supposed to be, because some of its member countries, like Pakistan and Egypt, were neither fully committed to its goals nor were they passionate to engage in it.” (Read)

WORTH READING

Mina Thabet from Mada Masr writes about the approaching end of Egypt’s Jewish community. According to Thabet, there are only seven Egyptian Jews, mostly elderly women, remaining in the country.

Former CIA official cites agency’s failure to see al-Qaeda’s rebound: “The CIA came to believe that Suleiman was searching for U.S. guidance on how he might survive the uprising, and perhaps even maneuver to succeed Mubarak, by using a communications channel he could keep secret from the Egyptian leader.” (Read) H/t Ahmed F.

WORTH WATCHING

Dramatic footage captured during an avalanche at Mount Everest base camp the moment the earthquake hit Nepal on 25 April. (Watch, running time: 2:27)

DIPLOMACY

President Abdelfattah El Sisi met with European Commissioner for Migration, Home Affairs and Citizenship Dimitris Avramopoulos on Tuesday, Ahram Online reports. The two discussed current crisis of irregular migration from North Africa to Southern Europe, having grown especially acute following the collapse of the Libyan state following NATO’s intervention and an Islamist rebellion. Ahram Online notes: “Around 6,800 migrants were rescued from overcrowded boats crossing to Europe over the weekend.” (Read)

Minister of Defense signs MoU with Spanish counterpart: Minister of Defense Sedky Sobhi met with Spain’s Minister of Defense Pedro Morenés signed an MoU to strengthen defense ties and regional security measures. A Spanish delegation headed by Morenes arrived in Egypt earlier this week for a visit with Egyptian defense authorities. Spanish ambassador to Cairo attended the meeting between the two defense ministers. (Read in Arabic)

Supply and Domestic Trade Minister Khaled Hanafy met with the Paraguayan Embassy in Cairo’s charge d’affaires to discuss economic cooperation. Hanafy discussed importing cattle from Paraguay and exporting the products of the Food Industries Holding Company there, according to Amwal Al Ghad.

ENERGY, RENEWABLE ENERGY & SUBSIDY REFORM

Five industries will be allowed to use coal; minister acknowledges German contribution to developing use regulations
Al Mal | 05 May 2015
After 22 drafts, Khaled Fahmy, minister of the environment has finally announced the completed final draft of the law regulating the use of coal as an energy source, which he says has been met with approval by the ministries of Industry, Electricity, the Interior, as well as the Egyptian Federation of Industries and the Cement chamber of commerce. Five industries will be allowed to use coal to generate energy: cement, power generation, steel, petcoke, and aluminum. Following initial reports last week of new regulations affecting the use of coal, the minister stated that the new regulations have been set according to the standards of the UN’s Industrial Development Organization (UNIDO), thanking the German Development Aid Authority for its help in shaping the new law. (Read in Arabic) (More detail on the sector restrictions may be found here in Al Mal)

OIL & GAS

BG investments in Egypt unaffected by Shell merger, oil ministry says
Youm7 | 04 May 2015
BG Group’s investments in Egypt are unaffected by the merger with Royal Dutch Shell, the Ministry of Petroleum said. An unnamed source at the ministry told Youm7 that the pledges signed at the EEDC are secure and that BG remains contractually obliged to maintain the agreed upon investments even after the merger. (Read in Arabic)

Dana Gas’ 1Q2015 profit falls 73.3%
Reuters | 05 May 2015
Dana Gas posted a 73.3% y-o-y drop in its 1Q2015 profit to record USD 12 mn. The company attributed the fall to lower hydrocarbon prices but said it was moving forward with an offshore gas project in the UAE. Dana is owed USD 243 mn in Egypt and USD 770 in Kurdistan. Reuters reported that Dana that “precomissioning work has begun on the Zora natural gas field in the UAE… is expected to produce up to 6,650 barrels of oil equivalent per day.” (Read)

BASIC MATERIALS & COMMODITIES

Egypt bought 1.6 mn tonnes of wheat domestically thus far
Reuters | 05 May 2015
Egypt has bought 1.6 mn tonnes of local wheat so far, Khaled Hanafy, the Minister of Supplies said. The current season began in mid-April and Egypt expects to take in around 3.7 mn tonnes of wheat this year for EGP 10 bn, according to Reuters. The domestic purchases are set to ensure the country’s reserves will last until October. After reducing wheat imports by 20% in the current fiscal year, Hanafy expects wheat imports to experience a “big drop” in FY2015/16. (Read)

MANUFACTURING

Sidpec signs ethane-propane mixture MoU with ECHEM
Al Mal | 05 May 2015
Sidpec announced the signing of an MoU with the Egyptian Petrochemicals Holding Company (ECHEM) to deliver ethane-propane mixture. Sidpec will use a minimum of 150 thousand tons of the ethane-propane mixture for an ethylene plant in Port Said. Sidpec aims to increase the added value of the available natural resources. (Read in Arabic)

KAPCI Coatings to build EGP 250 mn production plant
Al Borsa | 04 May 2015
KAPCI Coating announced it is going to build a new production plant in Tenth of Ramadan. The plant has an investment cost of EGP 250 mn and the company said it has already finalized the processes to acquire land and will begin the construction process next week. KAPCI had announced expansions in India, with plans to pump USD 50 mn in investments to build plants there. (Read in Arabic)

HEALTHCARE

Ministry of Health issues new restrictions on registering imported drugs
Al Borsa | 05 May 2015
The minister of health, Dr. Adel Adawy, announced on the government news sources that the ministry is drawing up a set of new conditions for licensing the sale of imported medication, cosmetics and other related products. Some of the new guidelines importers of products not classified as vaccinations include demonstrating that their product is currently in use in its country of origin; that the country of origin must be among the ones approved by the ministry; and that the product must be certified and approved for at least one year by the following regulatory bodies: the World Health Organization (WHO), the European Medicine Agency (EMEA), the Food and Drug Administration (FDA), the Therapeutic Goods Administration (TGA) and the Japanese ministry of health. (Read in Arabic)

REAL ESTATE & HOUSING

Société Egyptienne d’Entreprises awarded Borg El Arab Airport road contract
Al Borsa | 05 May 2015
Société Egyptienne d’Entreprises, formerly known as Moukhtar Ibrahim, was awarded an EGP 300 mn contract to construct the Borg El Arab Airport road. The company submitted the lowest bid for the project, beating out competitors including Arab Contractors and Hassan Allam. The road is set to be 16 km long and is expected to be delivered in 24 months. (Read in Arabic)

Alico looking for land in Madinaty, Badr and October City
Al Mal | 05 May 2015
According to sources within Alico Real Estate Investment, the company is seeking to buy land in the areas of Badr and October to develop residential and commercial assets, adding that the company had broached the New Urban Communities Authority to obtain the required licensing and reached out to a number of private sector companies who might interested in joining the project. The company is currently negotiating with the Egyptian Arab Land Bank to obtain financing for the project. According to Al Mal, the company’s profits fell 56.3% during FY 2014, from EGP 8 mn to EGP 3.5 mn. (Read in Arabic)

TOURISM

EGOTH to double its investment budget next fiscal year
Al Borsa | 04 May 2015
Egyptian General Company for Tourism & Hotels (EGOTH) is set to more than double its investment budget in FY2015/16 increasing it to EGP 404 mn from around EGP 200 mn in the current fiscal year. The company has already approved the development plans for the Shepherd, Mena House, and Winter Palace hotels. EGOTH has recorded EGP 111 mn in profits during the first three quarters of FY2014/15 and is projecting a net profit of EGP 122 mn for the whole year. The company expects to increase its profits to EGP 240 mn in FY2015/16. (Read in Arabic)

10.6% rise in the number of tourists during 1Q15 -Minister of Tourism
Al Mal | 05 May 2015
Al Mal is reporting that Minister of Tourism, Khaled Ramy, announced that the number of tourists visiting Egypt has grown 10.6% year on year during the first quarter of 2015, adding that the number of tourists that had visited in April has grown 19% year on year. Enterprise ran an article from Aswat Masrya yesterday which reported that the minister had stated the number of tourists grew 6.9% year on year. Both have reported his prediction of a 20% y-o-y increase in the number of tourists who visit Egypt in 2015.

TELECOMS & ICT

NTRA assessing providing satellite internet
Al Mal | 05 May 2015
NTRA is currently assessing an offer to provide internet via satellite, according to the authority’s head, Hisham El Alayly. The service will benefit remote areas that are off the reach of cable-coverage, El Alayly added. NTRA said its assessment will include processes to ensure user privacy and data protection. (Read in Arabic)

BANKING & FINANCE

NBE to provide financing for Cairo monorail project
Al Borsa | 05 May 2015
NBE is extending EGP 900 mn in financing for the Cairo Monorail project, according to the bank’s chairman, Yehia Abu El Fotouh. The project is expected to cost USD 1.5 bn. NBE’s loan will go through NUCA and is repayable over 14 years. NBE expects the construction of the monorail to being in January 2016 and to be completed by mid-2018. (Read in Arabic)

SinoTharwa borrows USD 50 mn from AAIB
Amwal Al Ghad | 05 May
SinoTharwa has borrowed USD 50 mn from AAIB, an informed source told Amwal Al Ghad. The company, Sinopec’s JV in Egypt, had also borrowed USD 26 mn from NBE to finance the acquisition of drilling rigs. SinoTharwa is participating in the government’s mn feddans reclamation project as currently in talks with Bank Audi to borrow USD 30 mn to finance the drilling of water wells. (Read in Arabic)

EFSA aims to establish Federation of Microfinanciers
Aswat Masriya | 05 May 2015
Egyptian Financial Supervisory Authority (EFSA) chief Sherif Samy says that the regulatory body is interested in establishing a federation of microfinanciers. The federation will be tasked with financing projects that are based outside of Cairo and Alexandria, with a particular focus on those based in Upper Egypt. The EFSA would like to ensure that small businesses have access to a wide array of financing options, added the president. (Read in Arabic)

OTHER BUSINESS NEWS OF NOTE

Al Adabiya could be turned into coal importing hub
Al Borsa | 04 May 2015
The government is studying designating Al Adabiya Port to receive the country’s coal imports. The head of the Red Sea Ports Authority said the government has plans for the port to become the world’s largest coal importing port. The development plans for the port are set to be completed by April 2016 with second-phase developments at the Nuweiba Port continuing. (Read in Arabic)

Military implements 11 projects in several Giza villages
Al Borsa | 05 May 2015
The governor of Giza, Khalid Zakaria, revealed that Egyptian military is undertaking 11 infrastructure projects in three villages in his governorate, namely Manshaa Kasib, Manial Sultan, and Bagaa Shih. The projects include upgrades to the sewage systems of the three village, as well as renovations to a hospital in Kerdasa. (Read in Arabic)

EGYPT POLITICS + ECONOMICS

Suleiman: Gov’t eager to develop free zones
Al Borsa | 05 May 2015
Investment Minister Ashraf Suleiman, in a press conference held after a meeting with businessmen operating in free zones, announced that the government is eager to develop free zones and trade hubs as a means of drawing investors, as they provide the infrastructure required, the expertise, and diminished red tape. The meeting discussed ways by which the government could facilitate the development of free zones, including legislative amendments to the Free Zones law. (Read in Arabic)

ON YOUR WAY OUT

Nissan Egypt has renewed Total’s contract to remain its supplier of motor oils, Al-Mal reports.

BY THE NUMBERS

USD CBE auction (last sale Sunday, 03 May): 7.5301 (unchanged since Monday, 02 Feb)
USD parallel market (Tuesday, 05 May): -no quote-

EGX30 (Tuesday): 8,828.33 (+2.04%)
Turnover: EGP 480.8 mn (14% below the 90-day average)

WTI: USD 60.96 (0.93%)
Brent: USD 67.93 (0.61%)

TASI: 432.3 (-0.2%)
ADX: 4,589.2 (+0.8%)
DFM: 4,069.3 (-0.4%)
KSE Weighted Index: 432.3 (-0.2%)
QE: 12,207.6 (+0.7%)
MSM: 6,351.7 (+0.2%)