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Wednesday, 24 February 2021

Vodafone’s Bee and Masary acquisitions confirmed, ElSewedy Electrics sees net profits fall 25% in 2020

The EGX30 rose 0.2% at today’s close on turnover of EGP 1.59 bn (8.7% above the 90-day average). Local investors were net buyers. The index is up 5.44% YTD.

In the green: MM Group (+11.6%), Orascom Development Holding (+2.6%) and Cleopatra Hospital (+2.0%).

In the red: Fawry (-3.9%), Sodic (-2.4%) and Orascom Investment Holding (-2.1%).

ANALYST CORNER- News of Vodafone Egypt acquisition of a 20% stake in each of Bee and Masary has analysts going long on shares of all listed companies involved. B Investments and MM Group — who are joint venture partners in Ebtikar, itself the parent company of Bee and Masary — in particular have seen their shares jump 33% and 20% respectively since the beginning of the month, which is likely to continue as Ebtikar looks towards an IPO, according to Prime Research. MM Group saw its shares climb 11.6% to EGP 12.60 at the close of trading, while B Investments saw shares go up 1.4% to EGP 16.94.

This would have a knock on effect on the other side of the transaction, Vodafone Egypt (and consequently) Telecom Egypt, Prime says. What’s exciting them is the potential for synergies that could see Vodafone open the African markets to Bee and Masary. Telecom Egypt shares rose 1.9% to EGP 11.58.

One stock that could be hit by this is Fawry, says Prime. “The Vodafone partnership could be viewed as a competitive risk to Fawry which has until recently been the major player in the e-payment market,” it said in its research note.

What the sell-side of the acquisition are saying: Both MM Group (pdf) and B Investments (pdf) issued bourse filings confirming yesterday's reports in the local press, while providing little else by way of new details. Key details rehashed include:

  • Vodafone will acquire the stakes through a capital increase.
  • Ebtikar confirmed that it is looking to up its stake in Bee to 80% by acquiring the stake held by software services company Techno Beez
  • The companies will begin the due diligence process, which is expected to take around three months.
  • Advisers: Zaki Hashem & Partners is advising Ebtikar, while Alliance Law Firm is providing counsel to Vodafone on the transaction.

OVER TO BANKING- where the CBE’s mandate that banks raise micro, small, and medium enterprises’ share of their loan portfolios to 25% from 20% is expected to have a strong positive impact on banking stocks, Beltone Financial’s research arm said in a note today. The smart policy will increase the traditional banking sector’s penetration in the market with access to new customers, which will reflect positively on their toplines, said Beltone. It is issuing a buy recommendation for almost all major bank stocks with a hold on CIB and the Egyptian Gulf Bank.

EARNINGS WATCH- Elsewedy Electric saw its net profit after minority interest decline 1% y-o-y in 4Q2020 to EGP 1.3 bn, the company said in an earnings statement (pdf). Revenues for the quarter saw a substantial increase of 24% y-o-y, buoyed by a 20.1% y-o-y increase in the company’s turkey projects segment in FY2020 to EGP 22.7 bn. Despite the segment contributing a larger share to the company’s top-line (49% from 45% in 2020), revenues for FY2020 fell 1% y-o-y to EGP 46.4 bn, on the back of the challenging pandemic year which caused disruptions. This comes as topline from the meters, transformers, and wires and cables segments saw declining revenues for the year. Consequently, net profits for FY2020 declined 25% y-o-y to EGP 3 bn.

2021 is the comeback year: The company adapted to the disruptions caused by the pandemic through improving operational efficiencies and controlling expenses growth. This was achieved through more stringent corporate governance systems and automating a number of business activities. Management believes that these measures will set up the company for a return to growth in FY2021. “As global economic conditions continue to normalize, Elsewedy will work to further expand its footprint into new markets and is working to identify opportunities for profitable investment,” the company said.

Misr Cement Qena reported a 39% y-o-y surge in net profits in FY2020 to EGP 23 mn compared to EGP 16.5 mn the previous year, according to a press release (pdf).

Heliopolis Housing reported a net loss of EGP 84.6 mn in the first six months of FY 2020-2021, compared to a EGP 351 mn profit in the same period a year earlier, according to the company’s earnings release (pdf). This was caused by a collapse in the company’s revenues, which plunged almost 90% to just EGP 77.9 mn, compared to EGP 732.4 mn in 1H FY2019-2020.

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