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EGP / USD CBE market average: Buy 17.48 | Sell 17.91
EGP / USD at CIB: Buy 17.55 | Sell 17.85
EGP / USD at NBE: Buy 17.45 | Sell 17.8

EGX30 (Sunday): 11,145.95 (-1.82%)
Turnover: EGP 925 mn (135% above the 90-day average)
EGX 30 year-to-date: +59.09%

Foreigners: Net long | EGP + 35.2 mn
Regional: Net short | EGP – 32.5 mn
Domestic: Net short | EGP – 2.7 mn

THE MARKET ON SUNDAY: EGX30 closed Sunday’s session 1.8% down. Global Telecom and TMG Holding weighed down the index performance as they fell by 4.3%, and 3.5% respectively. Only Arabia Investments and Ezz Steel ended in positive territory. On the downside, yesterday’s worst performing stocks included Emaar Misr, Domty, and Sodic. The market turnover was EGP 925.8 mn and foreign investors were the sole net buyers

Retail: 69.1% of total trades | 78.8% of buyers | 59.5% of sellers
Institutions: 30.9% of total trades | 21.2% of buyers | 40.5% of sellers

Foreign: 7.9% of total | 9.6% of buyers | 6.1% of sellers
Regional: 6.8% of total | 5.2% of buyers | 8.4% of sellers
Domestic: 85.3% of total | 85.2% of buyers | 85.5% of sellers

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PHAROS VIEW

The Golden Time of Equalweight

The market has started to cool off, after three weeks of strong steam. As of Thursday’s close, most of EGX30 constituents were trading within 5-10% of our target prices. Since floatation, market participants have tapped all sectors, with DCF potentials confirmed across the board. In addition, mid and small cap stocks have finally started to move with local investors looking for out of the box ideas, that are away from the blue chips. Market prices have reached close to full potential for FY2016, on DCF and multiples’ basis. Shifting models one-year down the line has created an additional upside potential of 15-25% from the current DCF valuations, with the absence of the 2016 floatation pains for some industrial producers and with potential positive developments that might materialize in 2017.

This improves the financial performance of different sectors, including potential lending and non-funded income growth pick-up by mid-2017, potential upgrade in asset based valuation for real estate companies in specific, due to floatation and the re-pricing of real assets. It also includes higher replacement cost for heavy-capex industrial producers (whether consumer staples, durables or construction and building material players) and higher pricing of products across the board to save margins and to what extent will volumes get affected. <br With EGX30 constituents are still trading at attractive FY2017 multiples, despite the DCF valuations being stretched, this leads us to the conclusion that “short-term” potential is definitely limited, but several developments down the line in 2017, the rerating will start to materialize to eventually reach higher potential from where we are now. According to our calculations on EGX30, the index might hit 14,500 by the end of 2017. The market is currently trading at a market cap weighted average of 9.5x P/E FY2017 and 1.6x P/B FY2017.
We believe that the market steam will cool off over the next 6-8 weeks, especially with fiscal year close and the holiday season, with the potential for revival afterwards.

Tap here for the full note.

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WTI: USD 46.21 (+0.33%)
Brent: USD 47.38 (+0.30%)
Natural Gas (Nymex, futures prices) USD 3.15 MMBtu, (+1.94%, December contract)
Gold: USD 1,195.20 / troy ounce (+1.20%)

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