Monday, 16 November 2015
Two Egyptians killed in Paris attacks (What We’re Tracking Today)
Ministers call Lamis to defend handling of flooding crisis, infrastructure spending; Borg El Arab remains paralyzed by water outage (Last Night’s Talk Shows, Speed Round)
Third quarter earnings season roars to a close (Speed Round)
Canada’s Valeant has completed its USD 800 mn acquisition of Amoun (Speed Round)
China devaluation would add fuel to the U.S. Fed’s emerging markets fire (Speed Round)
Russian delegation due “in days” to finalize Dabaa nuke agreement (What We’re Tracking This Week)
By the Numbers + Three reasons extreme caution is in order for investors over the coming month
WHAT WE’RE TRACKING TODAY
Two Egyptians were killed in this weekend’s terror attacks on Paris, while a victim of the assault who international media had implied was a terrorist remains in critical condition: Lamia Mondeguer, a 30-year-old dual Egyptian-French national, died at a restaurant on rue de Charonne, a source close to the family tells Enterprise. Mondeguer worked in performance arts in France and was a communications manager at talent agency Studio Noma in Paris. Another Egyptian national named as Salah Emad has been confirmed dead, Egyptian Consul General Serenad Gameel told MBC Masr on Sunday evening, according to Al Shorouk. Gameel added that no information indicates the involvement of any Egyptians in the Paris attacks. The Egyptian passport found in Stade de France stadium, which initial reports in international media suggested (but have since been updated) belonged to one of the attackers, actually belongs to the third known Egyptian victim in the attack: Walid Abdel Razeq Youssef, who is in reportedly in critical condition.
The annual two-day G20 Summit came to a close yesterday in Antalya, Turkey. As noted by Fortune magazine, while the summit is usually a forum to talk economics, the attacks in Paris and the world’s response to Daesh dominated instead. Reuters notes that the output of the conference is a communique due for release today. In the document, as seen by Reuters, world leaders acknowledged that “Global economic growth is uneven and falls short of our expectations…” The leaders also endorsed the Base Erosion and Profit Shifting (BEPS) measures, which aim to close loopholes in international tax rules. With regard to terrorism, Reuters reports that “leaders agreed to step up border controls and aviation security and cut off channels of financing.” However the most significant thing that happened at the G20 was when three street cats started running around onstage during live broadcast. No world leaders were harmed in the making of this video. (Watch, running time: 42 seconds)
The two-day 17th Arab Businessmen and Investors Conference opens in Abu Dhabi.
WHAT WE’RE TRACKING THIS WEEK
A delegation from Rosatom is to arrive in Cairo “in the coming days” to finalize an agreement on the Dabaa nuclear power plant, according to domestic media reports. At issue; financing, the project timeline and an agreement to provide training for plant workers, according to Electricity Ministry sources.
The 3rd Africa Global Business Forum in Dubai, 17-18 November (Tuesday-Wednesday).
The 13th International Operations & Maintenance Conference in the Arab Countries, 17-19 November (Tuesday-Thursday) in Cairo.
ON THE HORIZON
30 November – 11 December: The United Nations Climate Change Conference (COP21), Paris. The conferences serves as a meeting for the parties of the Kyoto Protocol of 1997.
What’s at stake? The conference aims to win commitments from commit parties of the Kyoto Protocol to reduce their carbon emissions. As Greenpeace notes: “That’s where Intended Nationally Determined Contributions – or INDCs – come in. These are the pledges that countries responsible for over 80% of emissions have made towards emissions reductions in advance of the talks.” As we noted on Thursday, Egypt pledged the government’s previously-stated commitment to lift all fuel subsidies by 2020 as part of its Intended Nationally Determined Contribution to the United Nation Framework Convention on Climate Change. (Read, pdf)
Are the INDCs legally binding? This has been a point of contention in recent days — US Secretary of State John Kerry told the FT (paywall) last Wednesday that COP21 will not produce a legally-binding treaty. French president Francois Hollande replied with a stern rebuke, saying, “If the agreement is not legally binding, there won’t be an agreement, because that would mean it would be impossible to verify or control the undertakings that are made.” French Foreign Minister Laurent Fabius said, “The fact that a certain number of dispositions should have a practical effect and be legally binding is obvious, so let’s not confuse things, which is perhaps what Mr Kerry has done,” Reuters reports. The contentious matter is set to be decided one way or the other at COP21.
The Egyptian Private Equity Association (EPEA) is holding a number of events later this month, including:
LAST NIGHT’S TALK SHOWS
The second round of parliamentary elections is scheduled to begin next week, Lamis El Hadidy reminded viewers at the top of Sunday night’s episode of Hona El Assema. She then transitioned to a discussion on the government’s strategy for addressing the country’ sewage and flooding crisis. Several minister called-in with insights.
Housing Minister Moustafa Madbouli: “We have obtained USD 2.5 bn in loans and grants that will be used to develop our sewage and water networks… We have already commenced work on several sewage system upgrade projects in Alexandria and Beheira. They will enter service within three year’s time.”
Irrigation Minister Hossam Moghazy: “We visited Alexandria with Prime Minister Sherif Ismail to determine the areas in the governorate that were in need of require immediate attention… We have to commence work on several emergency projects for the governorate’s sewage networks that will be be completed by December.”
Solidarity Minister Ghada Wali: “We have decided to station emergency teams from the Red Crescent in each of Beheira’s villages. This will be done in partnership with the Physicians’ Syndicate.”
El Hadidy then spoke with Cabinet spokesperson Hossam El Qawish about assistance the government will provide business affected by the flooding. El Hadidy was visibly dissatisfied with the majority of his responses, interrupting the spokesman at one point to say: “This government doesn’t know how to speak with the press. We have a Prime Minister who only speaks to the president.”
Shortly afterward, Mahmoud Tolib head of the Egyptian Iron and Steel’s export division, telephoned-in to express his dissatisfaction over the government’s recovery efforts in Beheira and Alexandria, adding that his company has suffered significant losses as a result of the flooding: “Our storage facilities have been flooded with water since 4 November. We have contacted authorities over the matter. They have failed to assist. Our situation continues to get worse… We have been unable to export steel to European markets as a result of the flooding.”
Magdy El Galad, host of CBC Egypt’s Lazem Nefham, sat down for an hour-long interview with Trade and Industry Minister Tarek Kabil.
Kabil: “The Chinese government’s decision to devalue to its currency had a negative impact on Egyptian exports… Factory owners’ complaints about the high price of energy came to an end following the arrival of natural gas shipments… We will implement import tariffs on any companies that subsidize their steel industry… We believe that Egypt’s industrial sector is set to experience rapid growth once the Zohr prospect comes on line…. 2.2% of Egyptian exports are high-value products… We would like to increase the ratio of high-value products that comprise our exports… We would like to enter into additional trade agreements over the coming period. Specifically, we are focusing on increasing exports to Latin America, the Eurasian Economic Union, and Africa”
He also added that his ministry plans to create an “integrated exhibition city” at a cost of USD 600 mn. Kabil said that exhibition centers are a way of marketing products and, as such, “the absence of exhibition centers affects industry and trade.”
Ibrahim Eissa on Al Kahera Wal Nas criticized his countrymen for their lack of empathy for the victims of this past weekend’s Paris attacks before placing the attacks at the feet of Saudi Arabia, which he claimed was indirectly responsible as it has spread Wahhabism and extremist thought.
Finally, Amr Adeeb devoted the entirety of his show to coverage of the Paris attacks. Egypt’s Ambassador to France, Ehab Badawi telephoned-in with information on the status of the Egyptian who was hospitalized as a result of the attacks. “The Egyptian youth’s status is worrying… Egypt stands in solidarity with France after the terrorist attacks. We will continue to cooperate with France in the fight against terror.”
A MESSAGE FROM SODIC
Leading real estate developer SODIC said it was “on track to achieve full-year targets” as it reported strong 9M2015 results, including a 46% year-on-year rise in net contracted sales to EGP 3 bn. The company reported net earnings of EGP 224 mn on revenues of EGP 890 mn for the period. Strong demand saw projects in East Cairo account for 68% of total sales for the period, and the company launched Caesar, its first secondary homes development on the Mediterranean North Coast, in mid-August. Caesar contributed to 17% of SODIC’s net sales as of September 2015. Notably, gross margin surged to 40%, up 500 bps from 9M2014 while the company’s net margin more than doubled to 25%, driven in large part by delivery of high-margin units in Allegria and the Strip. Going forward, SODIC continues to explore potential land acquisitions in East and West Cairo as well as in coastal and secondary cities. Planned launches in 4Q2015, it said, “include more phases of the Company’s residential products in Eastown, Villette and the Courtyards as well as the launch of two new buildings in the Polygon, the award winning office development in SODIC West.” Tap here for the company’s full 3Q2015 earnings newsletter.
Egypt Kuwait Holding (EKH) recorded attributable net income of USD 5.5 mn in 3Q2015, dropping 61.9% y-o-y. EKH said its 9M2015 attributable net income of USD 33.1 mn, which fell 32.6% y-o-y, reflects “a basket of factors including low oil prices and exceptionally low utilization rates at fertilizer producer AlexFert due to supply constraints on natural gas in the first nine months of 2015.” Critically, Chairman Moataz Al-Alfi noted that the company is “increasingly optimistic … AlexFert reports it that has received its full contracted daily allocation of natural gas since 1 November 2015. That follows the government of Egypt’s announcement that it has brought into service a floating storage and regasification unit (FSRU) to directly feed the national grid, with natural gas earmarked solely for industrial use.” Going forward, the company will “continue to search for opportunities to diversify and deepen our exposure to potentially high-growth sectors while ensuring the efficient allocation of capital and resources. We have, in this respect, c. USD 185 million in cash on hand to support this drive to create or unlock shareholder value,” Al-Alfi noted. Read EKH’s full 3Q2015 earnings newsletter here (pdf).
Oriental Weavers released 3Q2015 earnings on Sunday, posting sales of EGP 1.52 bn, up 1% y-o-y, with domestic sales up 9% y-o-y. Export sales to the United States also grew by 13% over the quarter, opposed to the drop in sales to Europe by 21% and a 28% drop in sales to the GCC market. Muted top line growth and a basket of additional factors pushed ORWE’s attributable net income for 3Q2015 down 53% to EGP 32 mn compared with a net profit of EGP 68.8 mn in 3Q2014: “EBITDA for the quarter came in at EGP 192 mn, down 8% y-o-y and posting an EBITDA margin of 12.6% compared to 13.8% in 3Q 2014. The company realized EGP 24 mn in FX losses during 3Q 2015 on the back of the devaluation of the EGP vs. the USD. Additionally, Oriental Weavers booked EGP 75 mn in provisions during the quarter,” the earnings release read. (Read, pdf)
Other companies that released earnings on Sunday as 3Q2015 earnings season came to an end:
Water contamination in Borg El Arab stops operations in factories, leads to poisoning cases: Twenty people were hospitalised in west Alexandria after being exposed to contaminated water with high salinity levels, Al Masry Al Youm reports, quoting Mohamed Farag Amer, the head of the Borg El Arab investors’ association. Factories operating in Borg El Arab have not been supplied with water in over a week, sources told us, with some factories having to resort to and deplete their emergency tanks, causing operations to halt completely. There are reports that wastewater treatment plant reservoirs are overflowing after flash floods hit Alexandria, carrying industrial and agricultural waste to the plants and forcing them to put operations on hold. The head of the Holding Company for Water and Wastewater confirmed that salinity had indeed risen sharply, saying after the company recorded 8,000 parts per mn, four plants were shut down. At those levels, even after reducing them to 4,500 parts per mn, the plants cannot return to operation, he added. The Armed Forces Engineering Authority is currently working to resolve the issue, AMAY notes.
EGPC has asked banks to grant it extensions for interest payments owed in USD-denominated borrowing, sources told Al Shorouk. EGPC has reportedly asked for a two-month extension as it is facing the same foreign currency crunch as the rest of us. EGPC is largest borrower in the market and currently has a USD 1.8 bn loan outstanding.
The CBE kept the exchange rate unchanged at EGP 7.7301 per USD1 at yesterday’s FX auction. The rate has remained stable since the CBE strengthened the EGP by EGP 0.2 per USD 1 last Wednesday. Reuters says the parallel market rate strengthened to EGP 8.52 per USD 1, down from EGP 8.70.
Canada’s Valeant completed its USD 800 mn acquisition of Egypt’s Amoun Pharmaceuticals last week, according to “sources closely involved with the merger” speaking to Al Mal. While details on the exact date of the transaction remains scarce, those sources did state that Valeant has yet to pay an additional agreed upon amount, contingent on Amoun’s performance in the market. Valeant, which inked the agreement in July, had stated in its 3Q15 earnings release that it was expecting to complete the transaction on 19 October, as we noted last Wednesday, but had remained tight-lipped on the transaction ever since. Business Insider chronicles the Canadian pharmaceutical giant’s fall in “Here’s former stock market darling Valeant crashing in one chart,” complete with a timeline that does a decent job of explaining what happened.
The tourism ministry is setting out to convince operators to swap Sharm bookings to Hurghada while also promoting domestic tourism: The Tourism Ministry is negotiating with UK-based travel agents to reroute bookings destinations from Sharm El-Sheikh to Hurghada, which isn’t covered by the UK travel ban, said Tourism Minister Hisham Zaazou. The Ministry is also considering supporting Egyptian airlines in promoting flights to Egypt, Al Borsa reports, though he stopped short of saying what form that support could take: per-passenger or per-flight subsidies or marketing co-op, for example. Zaazou is also scheduled to meet with a number of EU ambassadors to shore up Egypt’s image as a secure destination, Al Mal reports. Key to this strategy is the global tourism PR campaign, to which the cabinet had allocated USD 5 mn last week. The Minister also announced the launch of the “Sharm El-Sheikh in our Hearts” initiative to promote domestic tourism. The initiative is offering rock-bottom prices to bargain hunters: Packages of EGP 270 for a four day stay in the resort town for those travelling by bus, and a EGP 1000 package for those flying in, according to Al Mal. Zaazou had stated that the Russian and English tourists had spent USD 100 mn in September alone, adding that a preliminary estimate of overall losses from the Metrojet disaster has now reached EGP 2.2 bn.
A General Authority for the Suez Canal Economic Zone will be formed and formally announced before the end of the year, said Hani Sarie El Din, legal counsel to the Suez Canal Development Axis project. He said that the Suez Canal Economic Zone Law would be amended to change tax rates, tax breaks and other benefits in addition streamlining its board of directors to four ministers from seventeen, Al Mal reports. Authorities reviewing the law have yet to determine the investment structure for projects in the zone. He added that the Egyptian Businessmen’s Association had recommended a build-operate-transfer structure instead of direct ownership.
Marriage, divorce and birth will all cost you a tiny bit more: It’s going to cost you an extra EGP 50 (or a total of EGP 100) in surcharges to get married or divorced: President Abdel Fattah El Sisi issued amendments to the Family Insurance Law raising marriage or divorce processing fees to EGP 100 from EGP 50. The hike will be used to top-up the Family Insurance Fund, Al Shorouk reports. The amendment also establishes a one-off fee of EGP 4 for issuing civil documents for marriage, EGP 9 for divorce documents, and EGP 20 for issuing a birth certificate, all funds that would go into the public health insurance program. (Read in Arabic)
Unemployment inched up to 12.8% in 3Q2015 from 12.7% in 2Q2015. The rate is still lower than the 13.1% recorded in 3Q2014, Reuters said.
China may fuel the the EM pullback sparked by expectations the Fed is going to raise rates: The Wall Street Journal thinks that if China is included in the IMF’s reserve currency basket as expected later this month, it might embolden Beijing to let its currency fall. If that’s the case, the Journal says: “it wouldn’t take much to unsettle markets again. This summer’s yuan devaluation was relatively minor, falling by just 3% versus the dollar over three days. Yet it set off fears of a series of competitive devaluations. Other currencies fell against the dollar, and commodity prices came under heavy pressure.” The results for emerging markets could be exaggerated if the devaluation were to coincide with the U.S. Fed’s expected decision to start hiking interest rates. Meanwhile, the International Business Times (which is increasingly readable in places) has a worthwhile backgrounder on how and why a likely U.S. rate hike could impact emerging markets. The Fed is due to meet 15-16 December.
French warplanes struck Daesh militants in Syria on Sunday, according to a French government official, the Guardian reports. The strikes focused on the northern city of Raqqa in Syria—the de facto capital of the Daesh terror group. French President Francois Hollande described the Paris attacks as an “act of war” and named Daesh as the perpetrator.
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EGYPT IN THE NEWS
The top story on Egypt in the foreign press on Sunday evening and early Monday morning is news that Egyptian police killed 15 Sudanese migrants near the border with Israel, according to unnamed hospital and security officials speaking to the AP. The migrants were apparently bound for Israel and were caught in the middle of a firefight between the police and Bedouin smugglers. Reuters had originally reported earlier on Sunday that the bodies of the dead Africans were found near the border by the police, quoting unnamed sources. The AP report added the cause of the deaths and that a further eight were injured in the crossfire. Xinhua quotes an earlier version of the story appearing in Al Arabiya when the cause of the deaths was still unknown. The AP story appeared in Haaretz; and the New York Times’ report references Haaretz.
The best thing we’ve read thus far on the Paris attacks encapsulates a refrain we turn to often in Enterprise: Terrorism is a hydra that can only be severely diminished by going after its sources of financing. Charles P. Pierce argues in Esquire: “The F-35 fighter plane will not stop a group of motivated murderous fanatics from detonating bombs at a soccer match… It is long past time for the oligarchies of the Gulf states to stop paying protection to the men in the suicide belts … The example of Qatar and the interesting business plan through which that country is building the facilities for the 2022 World Cup is instructive here … These are the societies that profit from terrible and tangled web of causation and violence that played out on the streets of Paris. These are the people who buy their safety with the blood of innocents far away … the money for foreign terrorism came from … countries and not from a faith. It came from sovereign states and not from an organized religion … As long as people are dying in Paris, nobody important is dying in Doha or Riyadh…” (Read There Is Only One Way to Defeat ISIS)
IMAGE OF THE DAY
One of the Pyramids of Giza illuminated in the colors of the French flag in solidarity with France following the Paris attacks. (View image via Reuters; Also see this image gallery of structures throughout the Arab world lit up in the colors of the French flag, via Al Arabiya)
The Cairo Film Festival (CIFF) is ongoing this week at the Cairo Opera House. Here are the trailers for some of the more notable films that were screened yesterday:
I am Nojoom, age 10 and divorced. A film by Khadija Al Salami, 2014, Yemen. (Watch the trailer in Arabic with English subtitles, running time: 1:53) As noted by France 24, the film is “Based on the true story of Nujood Ali, a gutsy Yemeni girl who became the world’s youngest divorcée in 2008 after escaping her marriage.” According to the same report, one out of every three girls in Yemen is married off before reaching the age of 18, according to UNICEF, and one out of every seven is married before reaching 15 years of age.
Tuk Tuk, Romany Saad, 2015, Egypt. One of a record seven films competing in this year’s CIFF is Romany Saad’s documentary Tuk Tuk, focusing on the lives of children who drive the ubiquitous three-wheelers through the streets of Cairo. (Watch the trailer in Arabic with English subtitles, running time: 1:18)
Ingrid Bergman in Her Own Words, directed by Stig Björkman, 2015, Sweden. This documentary first screened at the 2015 Cannes Film Festival and tackles the life of Sweden’s biggest film star, Ingrid Bergman. (Watch the trailer, running time: 1:39)
DIPLOMACY + FOREIGN TRADE
Oil Minister Tarek El Molla was in Amman, Jordan to meet with the Jordanian Energy Minister and the Iraqi Oil Minister to discuss regional energy cooperation, Al Masry Al Youm reported. For context: Egypt is imported excess regasified LNG from Jordan’s Aqaba Terminal and EGPC has made its first overseas investment in Basra, Iraq in March 2015. Amwal Al Ghad says El Molla signed an MoU with the two ministers, according to which Iraq will supply Egypt and Jordan with excess crude and natural gas. “The latest agreement will also study how best to export Iraqi crude oil to Egypt and Jordan through a pipeline connecting the Iraqi city of Haditha to the Jordanian port of Aqaba,” Reuters says.
MP Jeffrey Donaldson was appointed as the UK Trade Envoy to Egypt, the first MP from Northern Ireland to be appointed to the role, according to Northern Irish media. Donaldson says he has “already been in touch with Invest NI about taking a Northern Ireland trade delegation to Egypt next year” and will also be leading a UK trade delegation in Egypt.
Trade Minister Tarek Kabil and Investment Minister Ashraf met with a delegation headed by China’s Deputy Commerce Minister to discuss Chinese premier Xi Jinping’s state visit to Egypt, scheduled to take place early next year. The Chinese President is expected to be accompanied by a delegation of importers who will explore goods and services which can be imported from Egypt. The meeting also looked into alleviating hurdles on goods exported to China, and reviewed progress on 15 Chinese projects in Egypt, according to State Information Service. (Read in Arabic)
Dana Gas posts quarterly loss, expects oil prices to remain low
Dana Gas posted a 3Q2015 loss of USD 7.6 mn and expects low oil prices to continue to be a challenge, Bloomberg reported. “The business environment has been difficult for the whole of the petroleum sector over the course of this year and it appears that it will continue to remain difficult during 2016,” CEO Patrick Allman-Ward said. Dana Gas is on track to cut operational expenses by 10-20% this year and will be looking to reduce administrative costs by 55%, Allman-Ward said. He also added that “the company is still in discussion with Egypt about planned investments and capital expenses on field developments there, he said.” Dana Gas is owed USD 252 mn as of September’s end, and Allman-Ward says it could take until 2019 to recover the whole amount. (Read)
Ministry of Housing to sign protocol with NUCA and NREA on Monday to implement solar energy projects in new urban communities
Minister of Housing and Urban Development and Moustafa Madbouli is set to sign a protocol with the New Urban Communities Authority (NUCA) and the New and Renewable Energy Authority (NREA) to implement solar energy projects in new urban communities around the country, Youm7 reports. Kamal Fahmy, NUCA vice president, previously said that the transition to the use of solar energy in new urban communities started with the construction of a solar energy station in the NUCA headquarters in Sheikh Zayed City. The Nilesat Road in 6 October will also see solar energy implementation, Fahmy said. (Read in Arabic)
Arab Contractors completes 75% of Taba storm drainage channel project
Arab Contractors said it completed 75% of the project to prepare storm drainage channels in the South Sinai resort town of Taba, Amwal Al Ghad reported. The project costs EGP 55 mn and is designed to unclog channels and prepare them to channel stormwater to prevent flooding in residential areas and main roads. The project is set to be completed by the end of the year. Taba and Nuweiba are high-risk flood areas in Egypt. (Read in Arabic)
BASIC MATERIALS + COMMODITIES
Misr Cement to borrow EGP 950 mn from three banks
Misr Cement Company – Qena is borrowing EGP 950 mn from National Bank of Egypt, CIB, and Banque Misr, Al Borsa reported. The loan is divided between the three banks equally, a source said noting that internal measures are being put in place to give a final decision on the tenure and terms of the loan. Misr Cement is looking to finance its acquisition of Qalaa Holdings’ ASEC Minya and ASEC Ready Mix. (Read in Arabic)
Supply Ministry to tender for meat imports
The General Authority For Supply Commodities (GASC) will launch the first tender to import meats this week, as part of the government’s program to flood the market with essential commodities to keep their prices low. Tender winners will be announced on Monday, said Mamdouh Abdel Fattah who heads GASC, who did not reveal details on the size of the tender. He also said that the Ministry is keeping a tight lid on future food import tenders for the time being. (Read in Arabic)
Ministers miss Carrefour’s Tanta opening as El Sisi meets with cabinet econ group
President Abdel Fattah El Sisi held a meeting yesterday with the cabinet economic group to discuss progress on the government’s price control strategy, which led the Supply, Investment, and Local Development Ministers to miss the their scheduled appearances at the opening of Carrefour Tanta. The opening of the retail outlet on land provided by the Internal Trade Development Authority (ITDA) is part of a wider government program to increase retail outlets and the goods they sell. (Read in Arabic)
Rubex ready to build new factory complex in Beheira
Borg El Arab-based plastics manufacturer Rubex announced it was ready to begin construction of its new factory complex within a month after obtaining the necessary licensing, said company Chairman Magdy Taher. Rubex purchased a 100k sqm plot of land in Beheira in September for EGP 19.5 mn to build the complex. Rubex’s plans have been delayed due to government backtracking on allocating a 50k sqm plot of land in Borg Al Arab, which subsequently delayed expansion plans. (Read in Arabic)
TELECOMS + ICT
NTRA extends ban on selling SIM cards through unregistered outlets by 1 month
The NTRA has extended its ban on mobile phone SIM cards being sold by non-registered mobile operator outlets by an additional month. By extending the ban to December, the ban will have been in place for seven months. The decision, taken for national security reasons and to ensure complete user data is available, was reflected in a drop in mobile penetration rates of 3.4% y-o-y to 108.6%, according to Amwal Al Ghad. (Read in Arabic)
AUTOMOTIVE + TRANSPORTATION
Siemens contracts Mammoet consortium to transport equipment for three power stations
A consortium made up of Dutch industrial lifting company Mammoet and Egyptian shipping firm the National Transport and Overseas Services Co. (NASCO) won a tender to transport the necessary equipment and machinery for the three Siemens projects to Kafr el Sheikh, Assiut, and Beni Suef, said Mammoet North Africa Regional Manager Khaled Hamdallah. The cost of the project is over USD 100 mn, he added, noting he expects transportation to begin in April. The Mammoet consortium will also complete the contract to transport components for the Egyptian Refining Company in Mostorod in April. (Read in Arabic)
Transportation Ministry to run online poll / survey to increase Metro ticket prices
In his visit to the second metro line on Sunday, Transportation Minister Saad El Geyoushi said that the ministry will run an “online poll” to survey users about increases in Metro ticket prices, according to Youm7. El Geyoushi explained the initiative was being launched given that the Metro’s monthly losses amount to nearly EGP 20.5 mn due to solely to the heavily subsidized ticket fare, Youm7 reports. “We will not increase ticket prices unless people are satisfied,” El Geyoushi said. However, El Geyoushi also said that upgrades to third-tier trains will be completed by 31 December without an increase to ticket prices, Al Shorouk reports.
Transportation Ministry receives three offers to install road surveillance cameras
The Transportation Ministry is working on a new project to install road surveillance cameras on 18 roads and highways, Minister Saad El Geyoushi said as reported by Al Borsa. The cameras will collect necessary toll fees and traffic violations electronically and will be installed over a 1.5 year period. The ministry received offers from three companies in Austria, UAE and Saudi Arabia, who would implement the USD 2.5 bn project and collect both fees and fines. El Geyoushi added that the Transportation Ministry is currently working on modifications to the Ring Road and the Alexandria Agricultural Road from Banha el Kafr El Zayat and Mansour. (Read in Arabic)
Transportation Ministry conducts feasibility studies on 3 dry dock and logistics projects
The Transportation Ministry has begun conducting feasibility studies on three dry dock and logistical centers in Sadat City, Beni Suef, and the border town of Argeen—ahead of issuing tenders for the project in the second half of 2016. The move is part of a Ministry program to develop dry docks nationwide, the most recent of which was the issuing of a tender for the USD 100 mn 10th of Ramadan dry dock. Five other dry dock facilities are currently under development, said Gamal Hegazi head of the General Authority for Ports and Dry Docks. (Read in Arabic)
BANKING + FINANCE
Banque Misr to borrow USD 50 mn from AfDB
Banque Misr has reportedly reached an agreement to borrow USD 50 mn from the African Development Bank (AfDB). Banque Misr is looking to secure foreign currency funding in order to be able to finance national projects. Al Shorouk says financing demands are set to increase for projects related to the Suez Canal Axis development. (Read in Arabic)
Banque Misr studies EGP 1.7 bn loans to three sectors
Banque Misr is studying granting EGP 1.7 bn in loans to companies in three sectors in the second quarter of the current fiscal year. The lion’s share would go to the new and renewable energy sector with EGP 600 mn, followed by EGP 400 mn to the food industry sector and the balance of EGP 300 mn being earmarked for the fertilizers sector. (Read in Arabic)
Hassan Allam negotiates EGP 163 mn loan from CIB
The Nasr General Construction Co. (Hassan Allam) is negotiating an EGP 163 mn loan from CIB to buy equipment necessary to complete expansions to the Cairo-Suez road in the area between the Ring Road and Badr City. The expansions include adding a third lane in both directions. Hassan Allam currently has a book infrastructure projects worth EGP 1.1 bn including the Cairo-Suez road. (Read in Arabic)
EFSA issues regulations on electronic insurance paperwork
EFSA issued new regulations yesterday permitting and organizing electronic insurance registration and transactions, for “standard insurance policies”. These include travel insurance policies and life insurance policies that do not require medical examinations. The regulations places the onus on insurance providers to provide a platform for secure electronic and confidential transactions. (Read in Arabic)
LEGISLATION + POLICY
Cabinet forms unit to link up government database
Prime Minister Sherif Ismail formed a cabinet-level unit in charge of establishing and linking the databases of different government bodies. The unit will provide and make accessible metadata on the Egyptian populace and citizenry across government agencies to facilitate intergovernmental communications and functions. The unit will include the Planning, Interior, Social Solidarity, and ICT Ministers as well as the head of CAPMAS. (Read in Arabic)
EGYPT POLITICS + ECONOMICS
El Sisi allocates EGP 2 bn for disaster relief, orders compensation of victims
President Abdel Fattah El Sisi allocated EGP 2 bn for disaster relief efforts at a meeting with Prime Minister Sherif Ismail yesterday. EGP 1 bn would be supplied from the Tahya Masr fund, and another EGP 1 bn from the state budget, AMAY reports. The president also ordered compensation for the families suffering from the effects of flash flooding. (Read in Arabic)
Misr for Central Clearing Depository and Registry (MCCDR) will sign with a consortium of five banks for EGP 500 mn in loan facilities to cover T+1 securities transactions, said MCCDR head Mohamed Abdel Salam. The agreement with the unnamed consortium will be signed on Tuesday, according to Al Borsa.
ON YOUR WAY OUT
Egyptian Navigation Company workers are the latest to demand the 10% “Sisi raise”
Workers of the state-owned Egyptian Navigation Company (ENC) have raised calls through their union reps for the company to pay the 10% raise decreed by President Abdel Fattah El-Sisi for workers not covered under the Civil Service Law. The issue has seen a number of strikes from public sector workers demanding the raise, most prominent of which was the Misr Spinning and Weaving Company’s workers strike in October. (Read in Arabic)
USD CBE auction (Sunday, 15 November): 7.7301 (unchanged since Wednesday, 11 November)
USD parallel market (Sunday, 15 November): 8.52 (-0.18 since Wednesday, 11 November, Reuters)
THE MARKET ON SUNDAY: The EGX30 tumbled 4.2% for the day, on top of the 9.8% it lost last week, driving some stocks to touch their lowest levels YTD during yesterday’s session. The day came as earnings season roared to a close and the S&P cut its credit outlook for Egypt from ‘positive’ to ‘stable’ as the credit agency chose to rule out further financial support from GCC allies. Also, unemployment rates inched up to 12.8% during Q3-15 from 12.7% during the previous quarter, even after the Egyptian labor force grew by 218,000 people during Q3-15. The Tadawul and DFM also closed yesterday in the red. At a market turnover of EGP 291.3m, local investors were the sole net sellers of the day
EGX30 (Sunday): 6522.12 (-4.18%)
Turnover: EGP 291.3 mn (33% below the 90-day average)
EGX 30 year-to-date: -26.93%
Foreigners: Net Long | EGP +10.2 mn
Regional: Net Long | EGP +7.6 mn
Local: Net Short | EEGP -17.8 mn
Retail: 67.6% of total trades | 70.8% of buyers | 64.4% of sellers
Institutions: 32.4% of total trades | 29.2% of buyers | 35.6% of sellers
Foreign: 9.5% of total | 11.3% of buyers | 7.8% of sellers
Regional: 12.2% of total | 13.5% of buyers | 10.9% of sellers
Domestic: 78.3% of total | 75.2% of buyers | 81.3% of sellers
Reverting to Extreme Caution
This week, we advise clients to “materially” increase cash holdings in their portfolios for three primary reasons: First, foreign investors will likely dump CIB, the index’s largest constituent and their key holding in Egypt, in fear of intensifying military action against ISIS and flee Egypt assets in specific for fear of deteriorating access to foreign currency. Second, Paris attacks will likely trigger a sharper reaction by the government and monetary authorities to stem off “the incremental” pressures on the EGP, such as fiscal austerity measures, another round of rate hikes or stiff capital controls. These measures, particularly high rates, will continue to raise the opportunity cost of holding equities, on a risk-adjusted basis. Third, the ongoing Fed-driven selloff in global equity and commodity markets will not be helping in the short-term, even if Egypt’s selloff had started a lot earlier. The Fed-driven selloff, or at least super volatility, will likely reach its zenith in the second week of December, ahead of the Fed’s meeting in 15/16 December 2015.
Based on the three reasons outlined above, we strictly advise clients to exercise the maximum degree of risk aversion until further notice or until valuations fall by another 10-15%, at least. If you have to be invested, continue to park in defensives and dollar-positive stocks. This may soon lead us to materially increase our market risk premium (currently 7%, mostly based on the historic excess return method) over and above the current increase in the risk free rate. If so, current valuations will no longer look cheap. Tap here for the full run-down.
WTI: USD 40.74 (-2.42%)
Brent: USD 44.47 (-1.59%)
Gold: USD 1,083.40 / troy ounce (+0.23%)
TASI: 6,881.4 (-2.9%)
ADX: 4,096.6 (-2.5%)
DFM: 3,146.2 (-3.7%)
KSE Weighted Index: 392.4 (-1.3%)
QE: 10,860.3 (+0.3%)
MSM: 5,837.9 (-0.2%)
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