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Monday, 29 March 2021

The EGX was the second most active Arab bourse in 2020

The EGX was the second most active Arab bourse in 2020, with some USD 43.9 bn-worth of equities changing hands, and nearly doubling from USD 25.5 bn in 2019, the Arab Federation of Exchanges said in its annual report (pdf). By activity, the EGX trailed only behind Saudi’s Tadawul stock exchange, which executed USD 556 bn in transactions last year, and coming ahead of the Bahrain Stock Exchange’s USD 35.4 in annual turnover. While the level of turnover was high compared to the rest (apart from Tadawul), the EGX’s share in market capitalization was low relative to other Arab exchanges. This points to a lack of new listings and a market vulnerable to external factors such as the March investor sell-off that swept EMs in early 2020.

Egyptian constituents only account for 1.3% of market capitalization: The EGX’s USD 41.1 bn in market capitalization pales in comparison to a total USD 3.2 tn across the region. Companies on the Tadawul accounted for 75% of regional market cap, followed by Abu Dhabi’s ADX at 6.2% and Qatar’s DSM at 5.1%.

Egypt was also the worst performer on an annual basis, with the EGX30 sliding 22% last year to 10,845 points — its lowest level since 2016. However, most other 17 Arab indices also fell on a yearly basis. The Tadawul All Share Index (TASI) was a notable exception, eking out y-o-y growth of 4%.

And our share of new IPOs was tiny. Mid-cap real estate player Emerald was the only new major listing on the EGX in 2020, out of ten Arab companies the report says tapped their local exchanges in 2020. Diagnostics company Speed Medical was the only other new name on the main market in 2020 after completing a jump from small-cap NileX last December.

What happened? The pandemic made an already delicate situation worse. Most of the players who kept volumes up throughout 2020 were retail investors and local institutions whose trades were spread out over the dozens and dozens of small brokerages that have clung to their licenses for years despite anemic business. Foreigners have largely been sitting on the sidelines after having sold out of the market amid the great March selloff of 2020. Plus, the EGX suffered from a dearth of new listings, seeing only one new IPOs in 2020 and two in 2019.

Recent news is raising hopes that the IPO pipeline is heating up this year, with school management company Taaleem kicking off subscription for an offering that’s in final stages and Macro Group Pharma announcing a guidance range for its debut stock price earlier this week. London-listed consumer healthcare giant IDH is also planning a dual listing of at least 5% of its shares on the EGX expected to hit the market soon.


IN OTHER MARKET NEWS- Telecom Egypt’s board of directors approved a dividend payout of EGP 1.3 bn to shareholders from its 2020 profits, the landline monopoly said in a news release (pdf). This amounts to a dividend of EGP 0.75 per share.

EARNINGS WATCH- Sodic’s net income after tax and non-controlling interest rose 14% y-o-y to EGP 820 mn in 2020, up from EGP 719 mn in 2019, the company said in its earnings statement (pdf). Revenues for the year were up slightly to EGP 5.6 bn from EGP 5.3 bn in 2019.

Gross contracted sales grew 2% y-o-y to a record EGP 7.4 bn. Residential sales accounted for EGP 7.2 bn of the gross sales figure, increasing 19% from 2019. The real estate developer sold 1.36k units during the year and delivered 1.16k units, down slightly from 1.17k units in 2019. Sodic also increased its capex spending throughout the year to EGP 3.4 bn from EGP 3.1 bn and is proposing a dividend payout of EGP 0.55 per share despite the pandemic. “Once again the challenges have come to set SODIC apart for its ability to weather uncertainties and its commitment to delivering to its stakeholders,” CEO Magued Sherif said.

East Cairo business is starting to pick up steam: Sodic’s projects on the capital’s east side accounted for 39% of the year’s contracted sales, driven by the company’s relatively recent foray into the area with Villette and Sodic East. Sodic’s “strong legacy in West Cairo,” however, continued to be the larger driver of total sales, with projects on the western side representing 61% of overall sales. Sheikh Zayed flagship Sodic West and new developments recently added to Sodic’s portfolio — including West Cairo apartments complex One16, The Portal, The Strip II, and Westown Medical Center — contributed the most. In 2020, Sodic launched Karmell, its latest edition to the West Cairo line-up, but delayed the launch of Malaaz, which would have contributed EGP 1 bn to its top-line, due to “permitting delays in the North Coast region.”

Sodic is aiming to grow contracted sales 19% to EGP 8.8 bn next year, and expects to deliver some 1.2k units and generate nearly EGP 7 bn in revenue, at the same time increasing its spending on construction and new projects to EGP 3.9 bn, the company said. “Our targeted growth for 2021 echoes our confidence in the Egyptian real estate market and reiterates SODIC’s commitment to delivering value,” Sherif added.

The EGX30 fell 1.2% at today’s close on turnover of EGP 1.1 bn (24.7% below the 90-day average). Local investors were net buyers. The index is down 1.0% YTD.

In the green: EFG Hermes (+3.0%), Pioneers (+2.0%) and GB Auto (+1.8%).

In the red: Eastern Co. (-3.6%), CIB (-2.5%) and Heliopolis Housing (-2.3%).

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