Monday, 6 June 2022

AM — The state’s privatization program could focus on strategic stake sales while global volatility lasts -SFE’s Soliman

TL;DR

WHAT WE’RE TRACKING TODAY

Good morning, friends. We hope your week is off to a great start.

THE BIG STORY here at home: Our latest PMI reading shows that the non-oil economy contracted for the eighteenth consecutive month in May on the back of global inflationary pressures — which could also put a pin in the state’s IPO plans.

But there’s plenty to be optimistic about, too: Plans to sell stakes in state-owned firms to strategic investors haven’t yet been scuppered by global headwinds, SFE boss Ayman Soliman says. A new company that will control a smattering of state-owned hotel assets could be up first and is attracting interest from the Saudi sovereign wealth fund and its Gulf neighbors.

And that’s not all for fresh investment news: We have more details on what the government had to say about the private sector’s role in greening the economy at last weekend’s Islamic Development Bank meetings in Sharm El Sheikh, and more on the USD 10 bn industrial partnership between the UAE, Jordan and us.

Meanwhile in M&A, a former Beltone exec looks to be making a play for his former employer, backed by an undisclosed roster of investors.

FOR THE RECORD- First Abu Dhabi Bank (FAB) isn’t looking to acquire a stake in Banque Misr or United Bank, FAB Egypt CEO Mohamed Abbas Fayed told CNBC Arabia in an interview (watch, runtime: 7:20). Any reports on ongoing acquisition talks between FAB and the banks are unfounded, he said, adding that any potential new M&A would be officially declared through the proper channels. FAB recently called off its bid for a majority stake in frontier emerging markets financial services powerhouse EFG Hermes, citing challenging global market conditions.

WHAT’S HAPPENING TODAY-

It’s the second day of Africa Health ExCon at Al Manara International Conference Center, Egypt International Exhibitions Center, and the St. Regis Almasa Hotel in the new administrative capital. The event wraps tomorrow.

There’s no one BIG STORY ABROAD dominating the front webpages of the global business press this morning. That said, many are focused on the oil markets — which have once again spiked to pass the USD 120-per-barrel mark after Saudi Arabia hiked the price of its key crude to Asian markets as covid lockdowns in China recede. Saudi Aramco will in July sell a barrel of its Arab Light crude to Asia for USD 2.10 more than in June, Bloomberg reports – USD 6.50 above its benchmark, and a much bigger hike than the USD 1.50 increase analysts were expecting.

MEANWHILE- France is looking to our Emirati friends to plug the oil and diesel gap as the EU turns away from Russian fossil fuels, Bloomberg writes. And we have more on all the latest in the oil and gas markets in today’s Planet Finance section, below.

CIRCLE YOUR CALENDAR-

NEWS TRIGGERS you’ll want to keep an eye on as the new month gets underway:

  • Foreign reserves figures for May should be announced sometime this week;
  • Inflation figures for May are due out on Saturday, 9 June (from state statistics agency Capmas) and Sunday, 12 June (central bank figures);
  • The Central Bank of Egypt holds its policy meeting on Thursday, 23 June.

Technology conference Tech Invest 4 will take place on Tuesday, 7 June at the Grand Nile Hotel in Cairo.

LATER THIS MONTH- The Aswan Forum for Sustainable Peace and Development is scheduled (pdf) for Tuesday and Wednesday, 21-22 June under the theme “Africa in an Era of Cascading Risks and Climate Vulnerability: Pathways for a Peaceful, Resilient and Sustainable Continent.” You can register for the event here.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

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*** It’s Blackboard day: We have our weekly look at the business of education in Egypt, from pre-K through the highest reaches of higher ed. Blackboard appears every Monday in Enterprise in the place of our traditional industry news roundups.

In today’s issue: Education stocks slipped during the first quarter of the year, defying the traditional wisdom that the sector is resilient in the face of external shocks. Despite previously proving its defensive mettle during the height of the covid-19 pandemic, EGX-listed education service providers all saw their share prices fall in the first three months of 2022, underperforming the benchmark EGX30.

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Miss Elite will be kicking off its second edition at Somabay from 3-11 June. The international beauty pageant helps contestants showcase and present their nation’s identity, beauty, culture, tradition and ethnicity.

For more information, visit: https://misseliteworld.com/

PRIVATIZATION WATCH

SFE pushing ahead with stake sales to strategics, courts Gulf investors as it lines up new hotels company for high-profile sale –Soliman

Sovereign Fund of Egypt head Ayman Soliman gets credit for being a straight shooter this morning after telling Bloomberg Asharq in an interview yesterday that stake sales are likely the order of the day for the state’s privatization program in the foreseeable future. Volatility in global markets thanks to near-perfect storm of spiraling commodities prices and rising interest rates means conditions are not ideal for new public offerings. Instead, he said, the SFE thinks there’s a window for private sales to strategic and other anchor investors.

What’s coming down the pipe? The Madbouly government has been planning to sell part or all of as many as 10 state-owned and two military-owned companies this year and has previously signaled that it is open to both stake sales and IPOs, all depending on market conditions and individual investor interest. The government has suggested it also open to offering stakes to strategics before selling down additional stakes later via public offering. All of this comes amid a new privatization push after President Abdel Fattah El Sisi said his administration aims to bring in some USD 10 bn in fresh investment in each of the next four years through the sale of state assets.

NEW HOTELS COMPANY UP FIRST?

The government could sell a stake in the new hotel company to a private investor, Soliman told the business newswire. The state is currently working on merging seven or eight state-owned hotels into a single entity, and was initially looking to sell a 25% stake in the firm through an IPO on the EGX.

The Saudis could be buying: The Saudi sovereign wealth fund is “very keen” on investing in the new hotel company, Soliman said. The Public Investment Fund (PIF) said in March that it was looking to invest USD 10 bn in Egypt’s healthcare, education, agriculture and financial services sectors as part of a USD 15 bn package to support the economy.

Other Gulf wealth funds are interested, too: The SFE is marketing investment through partnerships with other Arab sovereign and investment funds, “many” of whom are interested in the hotel company, Soliman told Hapi Journal, adding that multiple investors could come on board as partners with the SFE.

The state is in the process of choosing an investment bank and financial advisor to manage and advise on the sale, with an eye to tap at least the financial advisor in a matter of weeks, Soliman told Hapi.

Gulf sovereign funds are getting more involved in the Egyptian economy: Abu Dhabi wealth fund ADQ invested USD 1.8 bn in five EGX-listed companies in April, while the Qatar Investment Authority said it would invest USD 5 bn.

REMEMBER- The state is also planning to offer a 20-25% stake in Egypt Aluminum (EgyptAlum) to a strategic investor, potentially also an Arab sovereign fund.

ALSO FROM SOLIMAN-

The SFE will look to bring private investors into a new green fund next year, Soliman told Hapi. The fund, which will manage climate-friendly projects, will be launched with minimum initial capital of EGP 2 bn.

Green hydrogen will be key to the fund: The main assets in the fund will be the SFE’s share in green hydrogen projects that are expected to be finalized at COP27, Soliman said. Global companies have inked more than USD 10 bn worth of preliminary agreements for green ammonia and hydrogen projects in Ain Sokhna in the past three months alone.

Is this the SFE’s planned renewable energy sub-fund? The SFE had been working on launching a sub-fund that would hold assets related to national projects in wind, solar, and hydro. The Madbouly government had been reportedly planning to transfer ownership of the assets of both the New and Renewable Energy Authority (NREA) and the Hydro Power Plant Executive Authority (HPPEA) over to this new sub-fund, which will manage investments in climate-friendly projects.

ALSO IN THE WORKS- Net zero data centers. The SFE is conducting feasibility studies with unnamed US firms to build carbon neutral data centers for international cloud computing service providers, and plans to launch the project ahead of the COP27 summit in November, Soliman said.

M&A WATCH

Is Beltone in play?

An investor alliance led by WM Consultancy has submitted a non-binding offer to buy a majority stake in Beltone Financial, the two companies said in filings to the EGX (pdf | pdf) yesterday. The consortium of unidentified “strategic investors” is bidding to acquire a minimum of 51% and a maximum of 90% at an initial price of EGP 1.35 per share, a near 30% premium to the company’s closing share price on Thursday. This would value the company at around EGP 601.6 mn, according to our math.

The final price is subject to change: The offer price will likely change following due diligence, the companies said.

Beltone’s shares rose on the news, gaining more than 11% on the EGX yesterday to close at EGP 1.17.

A former manager makes a play for his old employer? WM Consultancy lists former Beltone head of asset management Wael Mahgary as its CEO. Mahgary currently runs Atuum, an import / export business based in the Netherlands. We’ve been so far unable to dig up much information on WM Consultancy or the identities of the investors backing the acquisition. Repeated calls to numbers associated with the company were unanswered and a number was later turned off.

Who owns Beltone today? Orascom Financial Holding (OFH) currently owns 58% of Beltone, with the rest in freefloat, according to the company’s website. OFH has been trimming its stake in Beltone over the past couple of years, having held 74.5% of the company in 2020.

The Financial Regulatory Authority (FRA) confirmed (pdf) that the investors have informed it of the offer. Following due diligence, a mandatory tender offer will be made within 60 days to Beltone shareholders, the FRA said.

Beltone has some thinking to do: “The board of directors will meet to discuss the offer and study it from all financial and legal aspects,” the company said.

This comes on the back of another lossmaking year for Beltone: The company’s net losses widened to EGP 169.8 mn in 2021, from EGP 132.4 mn the previous year, according to the firm’s financial statement. Revenues rose 27.1% y-o-y in 2021, recording EGP 351.7 mn.

ADVISORS: Zaki Hashem & Partners is acting as legal advisor to the WM alliance, while Deloitte-Saleh, Barsoum and Abdel Aziz is ًWM’s financial auditor.

IN OTHER M&A NEWS-

B Investments moves forward with sale of Giza Systems stake to STC subsidiary: B Investments signed a final share purchase agreement to sell its 44.7% stake in Giza Systems to Saudi Telecom’s subsidiary Solutions by STC, the company said in a bourse disclosure (pdf) yesterday. Solutions by STC plans to take an 89.5% stake in Giza Systems, after the board of the Egyptian systems integrator accepted its bid in April.

ECONOMY

Business conditions decline in May on inflation worries

Activity in Egypt’s non-oil private sector declined for the 18th month in a row in May as inflation continued to weigh on demand, according to the S&P Global purchasing managers’ index survey (pdf). Business activity contracted at a slightly slower pace during the month, with the index inching up to 47.0 from 46.9 in April, remaining below the 50.0 mark that separates expansion from contraction.

New orders hit near two-year low: Input cost inflation rose at its quickest rate in six months due to rising commodity prices, a strengthening USD, and import restrictions, S&P Global said. This contributed to new orders falling to their lowest level since June 2020.

New import restrictions didn’t help: The requirement to use letters of credit (L/Cs) and the banning of some foreign goods due to certification issues tightened supply for some firms and caused customs delays. Suppliers’ delivery times deteriorated for the seventh consecutive month.

REMEMBER- Manufacturers, wholesalers, and importers of production inputs were exempted from the L/Cs requirement in early May.

Firms continued to cut back on staff but at a lesser rate than in April, which saw the biggest fall in employment in a year.

All of this caused sentiment to hit its second-lowest level on record: “While businesses remained on balance positive that output will rise over the next 12 months, there were increased concerns that inflationary pressures will limit growth,” S&P wrote.

The international press is taking note: Reuters | Bloomberg.

ELSEWHERE IN THE REGION-

Business activity in Saudi Arabia’s non-oil private sector continued to grow in May, recording 55.7 for the second consecutive month, according to the country’s PMI (pdf). Backlogs saw their first increase since January 2020 amid constrained supply, while selling prices rose as businesses passed on higher input costs to clients.

Non-oil business in the UAE hit a five-month high in May, with the country’s PMI (pdf) recording 55.6, up from 54.6 in April. New orders and employment were both up, though backlogs began to build as businesses struggled to keep up with high demand and input cost inflation hit a 3.5-year high.

ENTERPRISE ON THE ROAD

Private sector key to the economy’s green transition -Planning Minister

Private sector investment and participation will be a cornerstone of the government’s push to transition to a green economy, Planning Minister Hala El Said suggested at the Islamic Development Bank’s annual meetings in Sharm El Sheikh this past weekend. We were flies on the wall at the event, which acted as something of a teaser on climate policy ahead of COP27 in November.

Gov’t to business: If you want to help us transition to a greener economy, the state is ready to work with you. As the government prepares its new green hydrogen and water resources strategies, El Said said, it’s also reviewed investment regulation and has already signed agreements with several international firms on hydrogen pilot projects. Inclusive growth and the core principle of “leaving no one behind” are part and parcel of its policies, she said.

Investors in green projects get perks: El Said highlighted recent tax breaks announced for projects in key green industries including green hydrogen and green ammonia — and reiterated statements by Prime Minister Madbouly that more incentives are in the pipeline. Green projects should account for 30% of state investments next fiscal year and half of all state investments the year after through cooperation with the private sector, she added.

Public Enterprises Ministry offers projects to private sector: At a private sector forum held on the sidelines of the IsDB meetings, Public Enterprises Minister Hesham Tawfik presented investment opportunities to private firms to partner with government in sectors including EVs, fertilizers, hotel and real estate development, agriculture, and pharma manufacturing, according to Al Borsa.

The IsDB meetings also saw the government and local private sector players sign a total of 13 agreements, including six MoUs between the IsDB’s Islamic Corporation for the Development of the Private Sector and Sarwa Capital, FAB Egypt, and Faisal Islamic Bank to issue sukuk, on-lend to SMEs, and spur private sector involvement in the economy.

But a focus on policy — rather than individual projects — is paramount, noted El Said and other ministry reps during the meeting: Another resounding note struck during the meeting was the ministry’s move away from setting up individual projects to focus on key policies needed to drive the COP27 policy direction towards real implementation and away from empty platitudes seen during COP26.

INVESTMENT WATCH

Elsewedy Electric targets USD 1.5 bn investment in African renewables

Elsewedy Electric could invest as much as USD 1.5 bn in three renewable energy projects in Africa before the end of the year, CEO Ahmed Elsewedy told us, confirming reports by Hapi Journal.

Nothing is set in stone: Elsewedy cautioned that the group’s future plans are still under consideration, adding that no commitments have yet been signed. The push comes as part of a wider plan to launch renewable projects in as many as 10 African countries.

The company has a number of green projects in Egypt in the pipeline. It is:

  • Working with the government to build 28 EV charging stations in Sharm El Sheikh ahead of the COP27 summit in November;
  • Studying the establishment of a USD 400 mn, 300-MW solar energy project in the new Ain Sokhna economic zone, which it could take on solo or work on as part of a consortium;
  • Collaborating with the government on a EGP 1 bn factory to produce water-saving sprinklers, localizing a product that is usually imported. The factory should come online in July.

Regional expansion ahead: The company is investing an undisclosed amount to expand in Egypt, the Gulf, Africa, Latin America, Pakistan, and Indonesia, and is working to up capacity at its existing cable factories, Elsewedy told us recently.

MANUFACTURING

MPs get inside track on UAE-Egypt-Jordan industrial partnership + new tax breaks may be in store for some industries

The industrial partnership agreed between Egypt, the UAE, and Jordan last week aims to set up a total of 27 joint projects over three separate implementation phases, Trade and Industry Minister Nevine Gamea told MPs in a plenary session yesterday.

The stages: The first step in implementing the joint projects “is focused on achieving integration between the three countries,” with a focus on food security and pharma manufacturing, Gamea said. The second stage is designed to “localize certain industries and raise their competitiveness, while the third is related to achieving long-term growth in medium-scale industries,” the minister said, without disclosing the expected time frame for each stage.

The partnership comes as the Madbouly government is working on streamlining procedures for industrial investors, Gamea said, pointing to a newly-formed committee mandated with pricing and allocating industrial lands. The committee, whose board is chaired by the Industrial Development Authority, has been tasked with ensuring that industrial investors have a streamlined process that goes through one authority. Any investor request for industrial land is reviewed within a maximum of 20 days, the minister noted. “As a result of these new steps, 79 investors have been allocated a combined 760k sqm of industrial land” since the committee was formed last month, according to Gamea.

WATCH THIS SPACE- The Madbouly government is also preparing fresh tax breaks for certain industries to boost their export capacity through a new Investment Act that is currently in the works, Gamea said. Madbouly had said last month that his government is aiming to boost exports to USD 100 bn per year within five years as part of the government’s plan to increase the private sector’s role in the economy. The Trade and Industry Ministry has produced a list of sectors in which it is prioritizing domestic manufacturing, as we previously reported in Inside Industry.

A MESSAGE FROM

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Moharram & Partners for Public Affairs and Strategic Communications (M&P) is the “business to government (B2G) meetings partner” at #AfricaHealthExcon2022

To schedule bilateral meetings / consultation sessions with senior decision makers and government officials on the sidelines of the conference, please email: exconb2g@moharram-partners.com, or learn more here.

DEBT WATCH

EFG Hermes Corp-Solutions closes EGP 500 mn bond issuance

EFG Hermes Corp-Solutions has closed an EGP 500 mn bond issuance that the company said is the first component of a “wider EGP 3 bn bond program” for the leasing and factoring player. EFG Hermes investment banking division announced the close of the transaction in a statement (pdf) out yesterday.

What they said: “This issuance is part and parcel of our strategy to deepen our presence in the market, allowing us to finance our operational growth targets and execute on plans to expand and diversify both our leasing and factoring service offerings to reach a wider segment [of] clients looking for sources of alternative corporate financing,” CEO Talal El Ayat said.

EFG Hermes’ MD for debt capital markets, Maie Hamdy, sees investor interest in bonds is picking up: “With the CBE hiking interest rates to curb inflationary pressures, the need for alternative corporate financing solutions continues to grow in tandem in our home market. At the same time, bonds in every corner of the global debt market are recovering as investors turn toward fixed-income assets once again.”

Advisors: EFG Hermes was the sole financial advisor, transaction manager, bookrunner, underwriter, and arranger on the issuance. Dreny & Partners acted as legal advisor and KPMG audited the issuance.

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LAST NIGHT’S TALK SHOWS

Leading the airwaves last night: The new committee tasked with redrafting the Personal Status Act. Minister of Justice Omar Marwan issued a decree yesterday forming the judicial committee tasked with drafting a new version of the Personal Status Act. The ten-strong committee includes two women judges and is tasked with outlining the legislation within four months. Ala Mas’ouleety (watch, runtime: 4:47) and Mas’aa DMC (watch, runtime: 11:19) gave the news major billing.

The committee’s line-up received praise from the National Council for Women, with council head Maya Morsy saying she has full confidence in it to draft a “balanced and fair law” that preserves “family cohesion and stability.” Controversial amendments to a previous bill, which critics argued would curb women’s rights and legal protections, were shelved by the House last year after backlash.

AND- Suez Canal shakes off war in Ukraine: LNG tankers coming from the Gulf and the south towards Europe have “compensated and even overcome the loss of [maritime] traffic from the Black Sea” due to war in Ukraine, Suez Canal Authority head Osam Rabie told Kelma Akhira’s Lamees El Hadidi (watch, runtime: 1:58). The canal is still targeting USD 7 bn in revenues by the end of the current fiscal year in June, Rabie told Ala Mas’ouleety’s Ahmed Moussa (watch, runtime: 3:07)

Also on the airwaves last night:

  • Egypt will provide 30 mn covid-19 vaccines to African states in partnership with the African Union, President Abdel Fattah El Sisi announced (watch, runtime: 3:08) during the Africa Health ExCon. (Al Hayah Al Youm | watch, runtime: 5:47)
  • More details on Mokattam Corniche’s new look: Public Enterprises Minister Hesham Tawfik spoke with Amr Adib about the five-year, EGP 32 bn development plan for the area. (El Hekaya | watch, runtime: 8:14)

EGYPT IN THE NEWS

There’s a smattering of economy stories on Egypt in the international press this morning. On the upside, Quartz says Europe’s gas crisis amid its ban on Russian energy could be a “windfall” for us as we angle to become a major exporter to the continent. Striking a darker note is political analyst Maged Mandour, who writes for Carnegie that a “weak” private sector and high debt levels hinder our economy’s competitiveness.

Some good news on the gender equality front: Egyptian ads are abandoning traditional gender stereotypes and often misogynistic portrayals of women as a younger generation takes the reins on the industry, the National says, while Al-Monitor reports that women are flocking to to seek religious rulings from women preachers newly authorized to issue fatwas.

Imprisoned activist Alaa Abdel Fattah is still on hunger strike, with his his family urging the British government to intervene after he gained UK citizenship in mid-April. (The Guardian)

Also making headlines: Foreign Policy has an insipid piece about demilitarization of Sinai, Newsweek is talking about jailtime for Tik-Tokers, and Al-Monitor is talking about fossils in Fayoum.

ALSO ON OUR RADAR

EU funding to bolster wheat storage capacity, small farmers: The EUR 100 mn in food security funding announced by the EU in April will go towards upgrading Egypt’s wheat storage capacity and supporting SMEs in the agricultural sector, EU Commissioner for Neighbourhood and Enlargement Olivér Várhelyi said on social media last week following his visit to Cairo. Three-quarters of the money will be spent on new siloes that will enable Egypt to store another 300k tons of wheat, and the remaining EUR 25 mn will fund ins. schemes and machinery for small farmers.

We could receive another USD 117.5 mn for upping storage capacity if the World Bank approves a USD 500 mn food security programme that would also allow us to import another 700k tons of wheat.

SPEAKING OF WORLD BANK SUPPORT- Foreign Minister Sameh Shoukry sat down with visiting WB executives to discuss the potential support the bank could offer to help us get through the volatility spurred by war in Ukraine, according to a Foreign Ministry statement. Shoukry laid out at the meeting the government's plan to attract investment, develop the EGX, and help citizens through the crisis, the statement read.

Other things we’re keeping an eye on this morning:

  • Customers of microfinance platform Tanmeyah can now make payments through Fawry after the two companies signed an agreement. (Al Mal)
  • The Trade Ministry has extended anti-dumping duties on Turkish, Chinese and Ukrainian iron imports for another year. (Statement, pdf)
  • UAE-based renewables fund manager Alcazar Energy wants to partner with our government on solar, wind, green hydrogen, and green desalination projects. (Cabinet statement)
  • Real estate developer Egics Development is investing EGP 450 mn in the Egyptian market, starting with a project in the new administrative capital. (Zawya)

PLANET FINANCE

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Oil producers to temporarily up supply: OPEC+ has agreed to boost oil production in July and August by 650k barrels a day from the current 400k bpd, the alliance of oil producers announced in a statement following its Thursday meeting, bringing forward an increase it had initially scheduled for September. This came after weeks of lobbying from the US to convince cartel linchpin Saudi Arabia to ramp up production in response to falling Russian output.

This didn’t stop oil prices from rising: Brent crude rose back above USD 116 a barrel on Thursday as traders digested the news that supply will return to previous levels after August — and was trading above USD 120 as of early this morning.

Washington is turning to its adversaries to calm oil prices: The US could allow Venezuela and Iran to export more oil as it looks to bring down prices and ease pressure on Europe, which is trying to find alternative suppliers after pledging to ban Russian crude, according to Bloomberg and Reuters.

MEANWHILE IN GAS- LNG shipping rates are soaring: Shipowners are charging almost their highest rates in a decade to charter LNG tankers as sanctions on Russia cause energy companies to scramble to secure shipping capacity months ahead of winter. (Financial Times)

Also worth noting:

  • Has the USD “topped out”? The USD has dropped 2% from last month’s peak, leaving some analysts wondering whether the US economy is as strong as it seems and if the US central bank could be forced to slow its tightening cycle. (Wall Street Journal)
  • PIF to buy stake in Jordan’s Capital Bank Group: The Saudi sovereign wealth is acquiring a 24% stake (63 mn shares) in one of the Middle East’s biggest banking groups for USD 185 mn. (Statement)

Up

EGX30

9,986

-0.2% (YTD: -16.4%)

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USD (CBE)

Buy 18.60

Sell 18.68

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USD at CIB

Buy 18.62

Sell 18.68

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Interest rates CBE

11.25% deposit

12.25% lending

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Tadawul

12,656

+0.4% (YTD: +12.2%)

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ADX

9,837

-0.2% (YTD: +15.9%)

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DFM

3,387

-0.3% (YTD: +6.0%)

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S&P 500

4,109

-1.6% (YTD: -13.8%)

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FTSE 100

7,533

-1.0% (YTD: +2.0%)

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Euro Stoxx 50

3,784

-0.3% (YTD: -12.0%)

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Brent crude

USD 121.38

+1.4%

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Natural gas (Nymex)

USD 8.85

+3.9%

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Gold

USD 1,855

+0.3%

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BTC

USD 29,942

+0.6% (YTD: -35.3%)

THE CLOSING BELL-

The EGX30 fell 0.2% at yesterday’s close on turnover of EGP 347 mn (58.8% below the 90-day average). Local investors were net buyers. The index is down 16.4% YTD.

In the green: Ezz Steel (+6.3%), MM Group (+6.1%) and Heliopolis Housing (+1.8%).

In the red: Orascom Construction (-2.6%), Orascom Development Egypt (-2.2%) and EFG Hermes (-2.2%).

Asian markets are in the red this morning with the exception of Seoul’s Kospi. Futures suggest a brighter picture on Wall Street when it opens later in the day, while European markets look set for a more mixed start to the day’s trading.

DIPLOMACY

Qatari investment headed our way? GAFI head Mohamed Abdel Wahab met with members of the Qatari Business Association (QBA) in Doha to discuss potential investment in our petrochemicals, financial services, logistics, real estate, tourism, tech, energy, food, and agriculture sectors among others, state-owned Qatar News Agency (QNA) reported. Abdel Wahab presented the Qatari businessmen with several specific (though unnamed) investment opportunities in Egypt, according to QNA.

REMINDER- After months of warming ties, Qatar has promised to invest USD 5 bn here “in the coming period” as we grapple with the impact of surging food and energy prices on the back of Russia’s war in Ukraine.

blackboard

In times of crisis (or when the going simply gets tough), plenty of investors look to so-called “defensive” sectors — shares of companies that are a bit less likely to fall off a cliff at the first sign that an economy might catch a cold. Defensive stocks may not offer crazy price appreciation, but conventional wisdom has it that a “good” defensive name is one in which you’re a lot less likely to lose your shirt when the stock market goes south.

Among the shares investors tend to think of as “defensive”: Education, alongside healthcare and some consumer staples — companies that produce food, beverages and other things people need to buy every day, regardless of how well the economy is doing.

The problem here in Omm El Donia: Education shares haven’t exactly lived up to their reputation. Four issuers are badged as education by the EGX. They’re moving in tandem with the wider market — down 16.0% year-to-date according to EGX data, compared to -16.4% for the benchmark EGX 30 in the same period. By comparison, the sector weathered the storm that was the peak of covid-19.

How does that compare to other defensive industries? EGX-listed healthcare and pharma shares are together down 13.0% year-to-date, while food, beverages, and tobacco is down just 8.1%. EGX-listed banks — not a defensive sector, but broadly considered a bellwether for the economy — are down 17.1% YTD.

Let’s dive a bit deeper: Meet Egypt’s listed education companies. Industry leader CIRA operates K-12 schools Mavericks and Futures, as well as Badr University, and leads the sector with a market cap of some EGP 7 bn. Then there’s Cairo for Educational Services (CAED, a CIRA subsidiary), the Suez Canal Company for Technology Settling (SCTS, which owns and operates the Sixth of October University) and Taaleem Management Services, which operates a university brand.

Taaleem has led the plunge. The company, which made its EGX debut last year, led all decliners in the sector by a wide margin, with its shares down 50.4% year-to-date, according to market data. CIRA shares are down just 10.8% after a strong rally in mid-April (beating the EGX30’s YTD return of -16.4%), while SCTS is down 13.7% YTD. The much more illiquid CAED bucked the trend, gaining 16.1% so far this year.

How does this correlate to earnings quality?

  • CIRA’s bottom line rose 20% y-o-y to EGP 299 mn during 1H 2021-2022 (September-February), while its revenues were up 24.4% y-o-y to EGP 944 mn, according to its earnings release (pdf) for the period.
  • SCTS reported (pdf) a slight 1.7% y-o-y increase in its bottom line in its most recent quarter to EGP 218.76 mn, while revenues inched up 2.9% y-o-y to EGP 307.57 mn.
  • CAED saw net income rise 11.4% y-o-y in 2Q 2021-2022 to EGP 11.12 mn, while its revenues rose 16.9% y-o-y to EGP 28.62 mn, its financials (pdf) show.
  • Taaleem saw a muted 8% y-o-y increase in its bottom line in 1H 2021-2022, sapped by a weaker second quarter. Revenue was up 5% year-on-year in the half to EGP 334 mn.

Education providers admit they’ve been squeezed by higher prices: We reported back in February on private schools’ struggles meeting additional CAPEX costs on the back of rising inflation. CIRA, for example, faced higher direct operating costs during 1H 2021-2022, including higher wages, maintenance costs, and other expenses related to its newly developed schools, according to its earnings release (pdf). At the same time, the company previously said that it has “been diligent in implementing an effective cost control model across all of our business units to mitigate the effect of current global and local economic conditions on our operations.” For Taaleem, the strategy has been similar, despite its weaker earnings turnout. The company imposed cost controls to maintain its margins, as Nahda University in Beni Suef saw a slight fall in enrollment, it said in its earnings statement.


Your top education stories for the week:

  • The Education Ministry has signed a cooperation protocol with the Federation of Egyptian Industries’ food division to upskill students in food processing and agriculture.
  • Some British universities are looking to increase academic cooperation and investment in our higher education sector.
  • FRA affiliate Egyptian Institute of Directors (EIoD) has launched its first masters program for healthcare sector governance (pdf), with the aim of improving healthcare firms’ access to funding.

CALENDAR

OUR CALENDAR APPEARS in two sections:

  • Events with specific dates or months are right here up top
  • Events happening in a quarter or other range of time with no specific date / month appear at the bottom of the calendar.

JUNE

5-7 June (Sunday-Tuesday): Africa Health ExCon, Al Manara International Conference Center, Egypt International Exhibitions Center, and the St. Regis Almasa Hotel, new administrative capital.

7 June (Tuesday): Technology conference Tech Invest 4, Grand Nile Hotel, in Cairo.

9 June (Thursday): European Central Bank monetary policy meeting.

9 June (Thursday): Digital Transformation Summit, The Nile Ritz-Carlton, Cairo

14-15 June (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15-18 June (Wednesday-Saturday): St. Petersburg International Economic Forum (SPIEF), St. Petersburg.

16 June (Thursday): EU-Egypt Sustainable Food Value Chain conference, Grand Nile Tower Hotel, Cairo.

16 June (Thursday): End of 2021-2022 academic year for public schools.

21-22 June (Tuesday-Wednesday): Aswan Forum for Sustainable Peace and Development, Cairo.

21-23 June (Tuesday-Thursday): Commonwealth Business Forum, Kigali, Rwanda.

23 June (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26 June (Sunday): The deadline for private companies to pre-register ahead of bidding for the second phase of the PPP national project to establish and operate 1k language schools.

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

30 June (Thursday): June 30 Revolution Day, national holiday.

30 June (Thursday): Deadline for bids for National Democratic Party HQ redevelopment contract.

June: Egypt will launch a unified ticketing system for all means of transport at the Adly Mansour Interchange Station.

June: Egypt and Israel will sign an agreement with the EU to increase LNG exports.

JULY

July: A law governing ins. for seasonal contractors will come into effect.

July: Fuel pricing committee meets to decide quarterly fuel prices.

1 July (Friday): FY 2022-2023 begins.

1 July (Friday): Official rollout of e-receipt system begins.

8 July (Friday): Arafat Day.

9-13 July (Saturday-Wednesday): Eid Al Adha, national holiday.

21 July (Thursday): European Central Bank monetary policy meeting.

26-27 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

30 July (Saturday): Islamic New Year.

Late July – 14 August: 2Q2022 earnings season.

AUGUST

August: Work to extend the capacity of the Egypt-Sudan electricity interconnection to 600 MW to be completed.

18 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

SEPTEMBER

September: Egypt will display its first naval exhibition with the title Naval Power.

September: Central Bank of Egypt’s Innovation and Financial Technology Center to launch incubator for 25 fintech startups.

8 September (Thursday): European Central Bank monetary policy meeting.

18 September (Sunday): Deadline for brokerage firms, asset managers and financial advisors to register with the Egyptian Securities Federation.

20-21 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

22 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

26–27 September (Monday-Tuesday): The Africa Women Innovation and Entrepreneurship Forum (AWIEF) at the Cairo Marriott Hotel.

OCTOBER

October: Fuel pricing committee meets to decide quarterly fuel prices.

1 October (Saturday): Use of Nafeza becomes compulsory for air freight.

6 October (Thursday): Armed Forces Day, national holiday.

8 October (Saturday): Prophet Muhammad’s birthday, national holiday.

10-16 October (Monday-Sunday): World Bank and IMF annual meetings, Washington, DC, chaired by CBE Governor Tarek Amer

18-20 October(Tuesday-Thursday): Mediterranean Offshore Conference, Alexandria, Egypt.

27 October (Thursday): European Central Bank monetary policy meeting.

Late October – 14 November: 3Q2022 earnings season.

NOVEMBER

November: Cairo Water Week 2022.

1-2 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

3 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

3-5 November (Thursday-Saturday): Egypt Fashion Week.

4-6 November (Friday-Sunday): The Autotech auto exhibition kicks off at the Cairo International Exhibition and Convention Center.

7-18 November (Monday-Friday): Egypt will host COP27 in Sharm El Sheikh.

21 November-18 December (Monday-Sunday): 2022 Fifa World Cup, Qatar.

13-14 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

15 December (Thursday): European Central Bank monetary policy meeting.

DECEMBER

22 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

JANUARY 2023

January EGX-listed companies and non-bank lenders will submit ESG reports for the first time.

January: Fuel pricing committee meets to decide quarterly fuel prices.

MAY 2023

22-26 May (Monday-Friday): Egypt will host the African Development Bank (AfDB) annual meetings in Sharm El Sheikh.

EVENTS WITH NO SET DATE

2Q2022: The Sovereign Fund of Egypt will invest in two companies in the financial inclusion and non-banking financial services sectors.

End of 2Q2022: The Financial Regulatory Authority’s new Ins. Act should be approved.

End of 2Q2022: Door for bidding for the contract to redevelop the site of the former National Democratic Party HQ to close.

1H2022: Target date for IDH to close its acquisition of 50% of Islamabad Diagnostic Center.

1H2022: e-Finance’s digital healthcare service platform, eHealth, will launch its services.

1H2022: The government will respond to private companies’ bids to build desalination plants.

1H2022: Egypt’s second corporate green bond issuance expected to be announced.

End of 1H2022: Emirati industrial company M Glory Holding and the Military Production Ministry will begin the mass production of dual fuel pickup trucks that can run on natural gas.

2H2022: The inauguration of the Grand Egyptian Museum.

2H2022: IEF-IGU Ministerial Gas Forum, Egypt. Date + location TBA.

2H2022: The government will have vaccinated 70% of the population.

3Q2022: Ayady’s consumer financing arm, The Egyptian Company for Consumer Finance Services, to release its first financing product.

End of 2022: e-Aswaaq’s tourism platform will complete the roll out of its ticketing and online booking portal across Egypt.

2023: Egypt will host the Asian Infrastructure Investment Bank’s Annual Meeting of the Board of Governors in 2023.

**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 above between the actual holiday and its observance.

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