AM — Maait eyes panda bonds.
Plus: MNHD shareholders nix SODIC’s bid.

Good morning, friends, and welcome to another uncharacteristically busy August news day. We have an absolutely packed issue for you this morning, so let us jump right in:

SIGN OF THE TIMES- It’s the first day of school for kids at Cairo American College. The resident 15-year-old, who was barely seven when Enterprise first published, returns to high school this morning, making us feel very old indeed.

Your morning commute is going to get steadily worse over the next five weeks or so as the kids trudge back into class. BISC and NCBIS go back on 28 August, AIS on 1 September, Alsson and the Lycée Français du Caire on 4 September. Public schools follow suit on 24 September.

FROM THE DEPT. OF GOOD NEWS- The healthcare tithe paid by all businesses could soon become tax–deductible. The Madbouly cabinet will soon review a bill that, if passed, would allow businesses to deduct the healthcare tithe from their taxable income, Finance Minister Mohamed Maait told investors this week, according to a ministry statement. All businesses pay a 0.25% tithe on their revenues to fund the new universal health ins. system which is currently not tax-deductible.

WATCH THIS SPACE- Another round of presidential pardons are happening today: Twenty-five prisoners will be released, Tarek El Khouly, a member of the Presidential Pardons Committee, said yesterday. Prominent activist Alaa Abdel Fattah’s name does not appear on the list El Khouly posted online.

HAPPENING TOMORROW-

Consensus in the market is that the Central Bank of Egypt will go for a rate hike tomorrow. As of yesterday, six of eight analysts and economists we surveyed in our interest rate poll see the CBE going for a rate hike: Four are calling a 100-bps hike, one is forecasting a 200-bps rise and another a more modest 50-bps increase. A Reuters poll out earlier this week is also calling a rate hike, with the wire service saying the sweet spot is 50 bps. Economist Nabil Zaki added his voice to the chorus yesterday, predicting a 200-bps hike in an interview on Salet El Tahrir (watch, runtime: 3:17). “The CBE has to make up for the rise in inflation and raise the interest rate in tandem with the US Federal Reserve’s rate hikes in order to bring back hot money into the country,” he said.

The Madbouly government will hold another round of consultations on its privatization strategy: Tomorrow it’s the turn of mining companies to voice their thoughts on the state ownership document. Every Sunday, Tuesday, and Thursday see workshops on how privatization plans will affect specific industries. You can find med-blog.com on the schedule of the meetings here.

What’s being said at the meetings? Broadly speaking, we think attendees are using the meetings more to discuss current industry conditions and problems than they are the state’s current involvement in their industry. Still: The government officials are due credit for staying the course with the consultations. We have roundups in our weekly Inside Industry vertical (presented in association with IDG) covering consultations with the FMCG, pharma, engineering and printing and packaging industries.

Expect more details on how gov’t plans to cut back on electricity: The Electricity Ministry will hold a press conference in the next few days to announce details of measures to curb electricity use that cabinet approved last week, Electricity Minister Mohamed Shaker reportedly told Al Mal.

THE BIG STORIES ABROAD- There are two stories dominating the front pages of the US press this morning:

#1- Biden seals his administration’s big legislative win in time for the midterms: US President Joe Biden has signed his flagship legislation increasing climate investment, raising corporate taxes and cutting drug prices into law. (Reuters | AP | NYT | Washington Post | WSJ)

#2- Trump 1, Liz Cheney 0? Anti-Maga Republican resistance leader Liz Cheney looks set for defeat in the Wyoming House primary against Trump-backed candidate Harriet Hageman. (AP | Reuters | NYT | Washington Post | WSJ)

CIRCLE YOUR CALENDAR-

Prequalification deadline for sea water desalination project proposal: Companies and consortiums have until 3pm CLT on 22 September 2022 to submit a prequalification application for sea water desalination projects, according to a statement (pdf) out yesterday. Folks who are interested should email desalrfq@sovfundegypt.com to request details on the documentation you’ll need to submit.

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

CORRECTION- In our coverage yesterday of foreign holdings of Egyptian treasury bills, we incorrectly reported the figures for May and June. Based on Central Bank of Egypt FX rates at the end of May and June, foreign holdings in June were USD 8.35 bn, and May holdings were USD 8.10 bn. The story has been updated on our website. H/t Ahmed A.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: For the past several years, Egypt has been working to position itself as the hub for liquefied natural gas (LNG) in the region. This morning, we look at Egypt’s LNG infrastructure and our plans to expand it as the country looks to ramp up LNG exports from the Idku and Damietta facilities, particularly to fill the Russia-shaped hole in Europe’s natural gas supply.

EXCLUSIVE- Progress on panda bonds, Maait tells Enterprise: Egypt is in talks with Chinese officials to issue CNY-denominated bonds in the world’s second-largest bond market, Finance Minister Mohamed Maait told Enterprise. The minister declined to be specific about the size of the potential offering.

FinMin is still searching for bookrunners and has not yet signed final agreements with investment banks, Maait said, adding that the ministry has finalized most procedures and expects to wrap negotiations on the size of the issuance “soon.”

The issuance is part of the ministry’s plan to diversify its debt portfolio and would come on the heels of our maiden samurai bond debut in late March. The government had been mulling selling the JPY- and CNY-denominated bonds back in 2019, but the sales were delayed because of complications caused by the pandemic. Marketing foreign bonds in Asian markets is a different ball game and also requires new ratings assessments by Asian agencies.

Speaking of bonds — Egypt has no plans to issue any other fresh international debt, Maait tells us. “We haven’t presented any international bond offering plans to the cabinet since the start of FY 2021-2022 while we wait for an improvement of conditions in the global financial markets,” he said. Bloomberg Asharq earlier this week reported that the ministry was planning to issue USD 5-6 bn worth of bonds this fiscal year, citing a government source. The impact of the Russia-Ukraine war and heightened geopolitical tensions make it impossible to estimate when we might again tap the international bond market, Maait said.

No news from the IMF, Maait says: The government and the IMF have not yet settled on the size of the assistance program the multilateral lender will offer to Egypt — and no date has been set to conclude the talks, Maait tells us. Some parts of the program have already been agreed upon in the negotiations, he added, and talks are ongoing.

REMEMBER- Maait in recent weeks refuted talk of Egypt requesting anything close to the USD 15 bn figure that Goldman Sachs has said Egypt may need to secure from the IMF to meet its financing needs over the next three years. Talks have been ongoing with the IMF since earlier this year over the package, which will likely offer us a smaller sum, in return for what the IMF calls “decisive” steps on fiscal and structural reforms to reduce our exposure to external shocks.

Maait again emphasized the Madbouly government’s commitment to improving both the business and investment climate, pointing to recent moves to leave electricity prices for industry unchanged as well as a three-year real estate tax holiday announced last month for SMEs as well as manufacturers in a number of strategic industries.

MNHD shareholders back board, say offer price was too low: Madinet Nasr Housing and Development (MNHD) shareholders meeting in a general assembly yesterday rejected a takeover bid from SODIC, saying the offer price was too low, an exec at MNHD told Enterprise. Just three investors voted in favor of allowing the upmarket developer to start due diligence, leaving almost all the company’s shareholders siding with the board, which last month rejected the offer that valued the company at up to EGP 6.36 bn.

The two companies hit a deadlock weeks ago: SODIC has said it will not revise its offer upwards without getting the green light to conduct due diligence. The upmarket developer had offered to pay EGP 3.20-3.40 per share to purchase up to 100% of the state-owned developer in a potential all-cash transaction. MNHD’s shares on the EGX closed at EGP 2.40 yesterday.

The offer price is far lower than what MNHD thinks is fair value: MNHD CEO Abdullah Sallam said last month that MNHD believes its portfolio of undeveloped land is worth 3-4x more than what SODIC has offered for the company as a whole.

MNHD’s current owners: State-owned institutions collectively own the largest stake in MNHD, with the Holding Company for Construction and Development holding 15.2%, the National Investment Bank owning 3.7% and Banque Misr holding 3.5%. BIG Investment Group is the largest single shareholder with a 19.9% stake, B Investments owns 7.5% and 20.4% is held by foreign institutions.

MNHD and SODIC have been dancing (on and off) for years: With different shareholding structures on both sides and a different management team at MNHD at the time, the two started talking about combining their businesses in early 2018, which months later saw SODIC make an offer to acquire at least 51% of MNHD through a direct share swap that the two positioned as what would have been Egypt’s largest-ever M&A at the time. Talks fell through after they failed to reach an agreement on the share-swap ratio.

Advisors: CI Capital is acting as SODIC’s financial advisor, while MNHD has not appointed an investment bank. Zaki Hashem & Partners is MNHD’s legal counsel.

ALSO FROM SODIC-

Goco Hospitality coming to The Estates: Bangkok-based spa and wellness consultancy Goco Hospitality will provide its services at SODIC’s The Estates development in Sheikh Zayed, according to a press release (pdf) out yesterday.

Auf Group makes its first acquisition of the ADQ era: Egyptian food outfit Auf Group has acquired a 75.5% stake in Modern International Confectionery Co (MICC), Chief Marketing Officer Rasha Ghaly confirmed to Enterprise. Auf Group declined to make public the value of the transaction. The acquisition comes less than a month after Abu Dhabi wealth fund ADQ acquired a 60% stake in the company for EGP 2.9 bn via its F&B subsidiary Agthia.

The two companies already had a relationship: MICC was already a supplier to Auf Group prior to the acquisition, according to its website.

What does MICC do? The company produces a wide range of pretzels as well as soft and hard candies.

More money, more pretzels: Auf Group plans to invest USD 400k in MICC to expand production of its pretzel line and other products, as well as increase exports, Ghaly said.

And a healthy makeover: Auf plans to offer in the future “healthier versions of [MICC brand] snacks including biscuits and wafers,” she said.

REMEMBER– Auf plans to invest EGP 60 mn in 2022 to boost its manufacturing capacity, Ghaly told us following its acquisition by Agthia in July. Auf will first target upping regional exports and will follow that up with USD 5-7 mn of investment in 2023 as it expands in the Gulf, she said.

The Financial Regulatory Authority (FRA) has greenlit Expedition Investments’ bid to acquire a 34% stake in cheesemaker Domty, the regulator said in a disclosure (pdf) yesterday. A consortium led by Expedition has offered to purchase up to 96.2 mn shares for EGP 5 a piece in a mandatory tender offer, giving the transaction a potential value of around EGP 481 mn.

REMEMBER- The acquisition would give the consortium ownership of 90% of Domty’s shares. The Damati family, which founded Domty and already control 56% of the EGX-listed company, are also part of the group and own minority stakes in Expedition. Expedition is an offshore special purpose vehicle domiciled in Mauritius and controlled by unknown investors in Egypt and the Gulf. It counts veteran investment banker Mohamed El Akhdar as a board member.

The market reaction: Domty’s shares rose 2.8% during trading yesterday to close at EGP 4.81.

What’s next? With the mandatory tender offer approved by the regulator, the details should be made public within the coming days and shareholders will be given the chance to weigh in (and with the Damaty family owning a controlling stake in Domty, we don’t expect many objections.) MTOs typically give shareholders 10-30 working days indicate they’re on board and Expedition has the right to adjust its offer price throughout the process.

Advisors: EFG Hermes is quarterbacking the transaction and Matouk Bassiouny & Hennawy is acting as counsel to Expedition.

Deutsche Bahn, Elsewedy Electric sign to manage and operate high-speed rail: The National Authority for Tunnels (NAT) yesterday inked a preliminary agreement with German railway operator Deutsche Bahn and El Sewedy Electric to manage and operate the three lines of our planned high-speed rail network, according to a Transport Ministry statement.

Meet Deutsche Bahn Egypt: Deutsche Bahn and Elsewedy will form a JV, Deutsche Bahn Egypt, through which they will manage and operate the network. The final contract will see Deutsche Bahn Egypt run the rail network for 15 years, with the option to extend for another 15 years, the statement read.

About Deutsche Bahn: The state-owned firm is Germany’s national passenger rail operator and runs rail and other public transport services across the UK and Europe, as well as an international freight and logistics business.

Deutsche Bahn is the second German company to join forces with local players for the high-speed rail project, after the government signed Siemens Mobility alongside Orascom Construction (OC) and Arab Contractors to design, install, commission and maintain the three high-speed rail lines. Siemens is providing the trains and will install the signaling systems and power supply for the project.

The move comes as part of the government’s plans to increase private sector participation in the economy and benefit from international expertise to upskill local workers, Transport Minister Kamel El Wazir said in the statement. Egyptians will account for 90% of the project’s workforce, he added, with local engineers and technicians set to receive training from the international firms.

BACKGROUND- The USD 23 bn, 2k-km line will connect 60 cities across the country, linking Cairo, Aswan, the North Coast and the Red Sea. Trains are set to run at up to 230 km/h.

Saudi Arabia has secured more than USD 3.5 bn in funding for its part of the 3 GW Egypt-Saudi electricity interlink project, according to the Saudi Press Agency. The Saudi Electricity Company (SEC) secured a 14-year USD 567.5 mn export credit agency facility to fund “capital expenditures” and a five-year USD 3 bn facility from a syndicate of 15 regional and international banks to refinance an existing facility that was initially raised in 2017 and is set to mature this month.

The banks involved: Standard Chartered Bank and Sumitomo Mitsui Banking Corporation arranged the 14-year ECA facility, with guarantees from the Swedish Export Credit Agency and funding from the Swedish Export Credit Corporation. The syndicate includes Standard Chartered Bank, HSBC, Intesa Sanpaolo, Mizuho Bank, MUFG Bank, Sumitomo Mitsui Banking Corporation, Industrial and Commercial Bank of China, State Bank of India, Bank of China, Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, First Abu Dhabi Bank, National Bank of Kuwait, KfW IPEX-Bank and Societe Generale. SEC has appointed Mizuho Bank and Abu Dhabi Commercial Bank as the agents for the facility.

Refresher: The project will allow Egypt and Saudi to exchange up to 3 GW of electricity at peak times, providing power to upward of 20 mn people. The project is scheduled to start operations in late 2024 with a capacity of 1.5 GW, which will be increased in mid-2025.

B Investments’ net income rose 74% in 2Q 2022, reaching EGP 38.15 mn, according to the company’s consolidated financial statement (pdf). Revenues for the quarter came in at EGP 44.8 mn, up 19% y-o-y. The company’s bottom line fell 17% y-o-y to EGP 60.5 mn in the first six months of the year, while consolidated revenues dropped 40% to EGP 59.6 mn. The 1H 2022 bottom line includes a EGP 25 mn FX gain, primarily from Infinity Solar assets, it said in its accompanying earnings release (pdf).

The breakdown: The decline in 1H 2022 revenues was mainly due to the firm not including Giza Systems’ income starting FY 2022 — as B investments is in the process of selling its 65.7% stake in the systems integrator — along with new investments in B Healthcare Investments and taking part in capital increases at Madinet Nasr Housing and Development and Basata, which led to a reduction in cash balance. The lower revenues also came on the back of MNHD not distributing dividends in 1H 2022.

Raya Customer Experience saw its net income rise 46% y-o-y in 1H 2022 to EGP 14.2 mn, the company’s latest earnings release (pdf) showed. Its top line grew 44% y-o-y to EGP 540.8 mn. Revenue growth was led by an expansion of the Raya Holding subsidiary’s operations, growing business at its recently acquired call center firm Gulf Customer Experience (Gulf CX), and higher utilization rates across its facilities, it said.

Contact center outsourcing remains Raya CX’s primary revenue generator, reporting EGP 272.1 mn in the first six months of the year, accounting for more than half of total revenues. The company’s insourcing business came in second place with 32% of total revenue, followed by hosting, which made up the remaining 18%.

A Gulf boom: While the firm’s Egyptian operations continue to account for most of its business, its Gulf operations saw revenues grow nearly sevenfold y-o-y to EGP 78.1 mn thanks to the Gulf CX acquisition. “One of RCX’s strategies is to grow its geographic footprint into more high value markets in the region and beyond,” the company said. “Our expansion in the Gulf area has proven to be a successful step in realizing our regional growth strategy.”

Raya Holding’s net income rose 14% y-o-y in 1H 2022 to EGP 144 mn, according to the company’s earnings release (pdf). Revenues were up 10% during the first six months of the year, coming in at just over EGP 9.1 bn, as trade, fintech, non-banking financial services (NBFS), IT, and FMCG sectors continued to outperform.

The breakdown: Raya’s trade and distribution business unit generated 46% of Raya’s total revenues. The second biggest contributor was the firm’s fintech and NBFS business, accounting for almost 19% of revenues, followed by IT, which made up 17% of the total.

IPO WATCH? The boards of Raya Holding and Aman Holding are hoping that market conditions will soon be favorable to list their NBFS platform Aman on the stock exchange, the company said. The Aman IPO was recently pushed to 2023 due to turbulence in the financial markets.

CORRECTION- In our coverage yesterday of Contact Financial Holding’s 2Q 2022 earnings, we misattributed the cause of a 60% rise in the company’s operating expenses, which we have since learned was the result of increased investments in the company’s physical branch network, digital infrastructure, and product offering. The company’s financing operating income was up 27% y-o-y during the quarter, while total operating income grew 30% y-o-y. Contact also recorded portfolio growth of 38% during 2Q. Net income for 1H 2022 was up 18% y-o-y to EGP 258 mn.

Uber has appointed Frans Hiemstra (LinkedIn) as its regional general manager for the Middle East and Africa, based out of Dubai, according to a press release (pdf). Hiemstra has worked at the ride-hailing giant since September 2015, most recently as general manager for sub-Saharan Africa. He succeeds Abdellatif “Tino” Waked (LinkedIn) who held the position since 2018 and previously ran the company’s Egyptian operations.

Things we learned on the airwaves last night: The country’s new local development minister, Hisham Amna, was not seriously hurt in his car crash yesterday; Rep. Mostafa Bakry really doesn’t like Naguib Sawiris (shocker); and…

Transport Minister Kamel El Wazir hit us with a barrage of updates on various transport projects in an interview on Ala Mas’ouleety. Here are the highlights:

#1- The upcoming hikes to metro and train fares won’t come into effect until the government’s new social security measures are fully implemented and have given the country’s most vulnerable citizens some respite from the soaring cost of living, El Wazir said (watch, runtime: 4:41). The ministry hasn’t confirmed how much prices will rise but the minister said earlier this month that they wouldn’t climb by more than 25%. A package of new measures to protect the poorest from rising inflation — including an expansion of the Takaful and Karama program and increased support for ration card holders — are set to come into effect as of 1 September.

#2- Bashteel station will be finished by the end of the year: About 75% of construction on the Bashteel rail station has been completed and the ministry hopes to complete the station by December. The station lies between Ramses and Giza and aims to alleviate congestion at the Ramses station (watch, runtime: 6:29).

#3- Egypt does not have any plans to sell its ports or railways, but will continue to focus on partnering with private companies to operate and manage its assets, the minister said (watch, runtime: 6:49). Several recently-announced projects will see foreign companies expand the capacities of several Egyptian ports: AP Moller-Maersk is expected to invest USD 500 mn to develop the East Port Said port while Hutchison Ports could spend USD 800 mn alongside other multinationals to develop the ports at Sokhna and Dekheila.

#4- The National Egyptian Railway Industries Company (NERIC) will begin assembling electric locomotives at its East Port Said factory in mid-2023, shifting the timeline for the second time from the end of 2022 (watch, runtime: 6:09). The company was set up in late 2020 as a JV between several private-sector firms, the Sovereign Fund of Egypt, the Suez Canal Economic Zone, and the Transport Ministry.

Local development minister escapes car crash with minor injuries: Hisham Amna, who was sworn in as the country’s new local development minister just two days ago, was involved in a road accident on the Wadi El Natrun-Alamein road yesterday. The minister is reportedly just fine and only suffered mild bruising in the collision (Statement | watch, runtime: 6:09).

B’naire Naguib Sawiris came under fire yesterday from Rep. Mostafa Bakry, who accused him of “inciting hostility against the state” and “spreading fake news” after tweeting a call for an investigation to find the “perpetrator” of the Abu Sefein church fire in Imbaba on Sunday. An enraged Bakry called on the prosecutor-general to open an investigation into Sawiris, who he accused of inciting hatred and violence in an interview with TEN TV’s Nashaat El Deehy (watch, runtime: 2:05). Sawiris’ tweet came on the day of the fire, which authorities said was caused by a short circuit in an A/C unit.

The aftermath of the tragic church fire in Imbaba on Sunday is still dominating the conversation on Egypt in the foreign press. The Washington Post and AFP report that many Egyptians have accused ambulances and firefighters of being slow to respond to the situation and voiced anger at the emergency services. Another story from the French news agency covers the memorial service held yesterday for the victims.

Also making headlines:

• Is rationing electricity in Egypt a long-term solution to our economic woes? Some experts doubt the practicality — and sustainability — of the government’s recent measures to ration electricity use. (Deutsche Welle)
• A 27-year-old French backpacker who went missing in Egypt for a year has safely returned home to Paris, a family lawyer said. Yann Bourdon’s family had suspected he was detained by Egyptian police, though the student has so far refused to publicly explain what happened to him. Bourdon reportedly “presented himself at the French consulate,” which said it would respect his wishes to not discuss where he had been for the past year. (Associated Press)
• Judge receives death sentence for killing wife: Egyptian judge Ayman Haggag was sentenced to death yesterday for the murder of his wife, TV Presenter Shaimaa Gamal. (AFP)
• Amr Hamzawy shifts his views on the state of politics as he returns from six-years of self-imposed exile to participate in the Sisi administration’s ongoing national dialogue. (Haaretz opinion piece)

Aman + Taqa’s fintech venture to launch in 4Q 2022: Raya Holding subsidiary Aman and Qalaa Holdings’ Taqa Arabia hope to launch their fintech company in 4Q 2022, Raya Holding CFO Hossam Hussein told CNBC Arabia (watch, runtime: 8:29). The as-yet unnamed joint venture — which was announced earlier this year — will provide e-payment services to Taqa customers, and will be 51% owned by Aman. An Aman representative earlier told us that Aman will invest EGP 300 mn in the venture over the next three years, but declined to disclose the company’s start-up capital.

Hend El Sherbini ups IDH stake: Integrated Diagnostics Holdings (IDH) CEO Hend El Sherbini has raised her stake in the company from 25.5% to 26.71%, after acquiring 7.3 mn new London-listed shares, the company said in a statement (pdf) yesterday. El Sherbini purchased the shares during the first two weeks of August. El Sherbini said she believes the company is “well-placed to take full advantage of the vast growth opportunities offered by our markets.”

CIB has launched an instant payment network allowing customers to transfer money from different banks and types of accounts, including Meeza cards and e-wallets. (Press release, pdf)

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

• Appetito gets Saudi partner: Saudi-based IT firm Purity will finance Cairo-based grocery delivery startup Appetito’s expansion in Saudi Arabia and across the MENA region. The company declined to provide further details when we reached out. (Statement, pdf)
• Elmenus will provide offers to Etisalat customers via its My Etisalat app after signing an agreement with the Emirati telecom operator. (Statement, pdf)
• Corporate bond transactions on the EGX will now be settled during the same trading session after the Financial Regulatory Authority approved executive rules that were put forward by Misr for Central Clearing, Depository and Registry (MCDR). (Statement, pdf)