OUR ANALYST OF THE WEEK- Mahmoud Gad, senior real estate equity research analyst at Arab African International Securities (Linkedin).

My name is Mahmoud Gad and I cover real estate in Egypt at Arab African International Securities (AAIS). At the beginning of my career I had been working in accounting and corporate finance. While I learned a lot, I grew to dislike the routine and the lack of creativity. When I was offered a buy-side job at Alpha Capital, I jumped at the chance and was encouraged by my mentor Amr Elalfy. I then moved to sell-side and joined MubasherTrade, which I think was an important step for me to gain a better understanding of the market and the economy. After a stint outside of research, I returned to the field and landed my current job, which I’m hoping will be the launching point for the rest of my career.

The best part of the job is that I can be creative and think outside of the box. In our area of work, it’s very important that analysts do things differently and really bring out their own perspectives and voices. I enjoy interacting with many companies and people and getting that exposure. I also have a great manager at AAIS, Ibrahim Mansour, who always encourages and pushes me.

The worst part of my job is that you don’t take the decisions so your recommendations aren’t always applied. In the past period, it’s also been tough with the volatility in the market, which often puts a big gap between the fair value price and the market price of listed companies.

My theory of investment is to combine strong fundamentals with good timing. Look for a company with strong financials when its share price is low but has the potential to go up long-term.

The most important factor to look at in real estate is market position and brand name. There are a lot of companies that have a huge landbank, but no name in the market, which affects the volume of sales. Meanwhile, reputable names often lead in terms of sales.

I always like to come up with scenario and sensitivity analyses when looking at companies, meaning that I jot down a number of factors and study the possibility of them happening and how big of an impact they would have on the stock. It gives me a better understanding of what factors are important to see the stock rerate and what would have a negligible impact on the target price. Investors like having this information related to them so that they have a kind of guidebook that helps them follow up on news and make decisions.

I think 2021 will be a good year for Egypt — mainly due to the interest rate cuts we’ve seen in the past period. The lower rates signal positive investment potential in the country. Egypt’s economy still being forecasted to grow could also drive foreign investors back into the market and I’m hoping we see more direct foreign investment in the local market which will help us get our FX up. The tourism sector picking up post-covid is also something I think will greatly benefit the economy.

The rate cuts are also a good indicator for the real estate sector. In Egypt, real estate has been largely accepted as an alternative to saving in banks, and more people will embrace that as interest rates in banks become less attractive. The rate cuts also mean that the cost of finance for real estate companies will go down as loans become more affordable which could also lead to unit prices going down as the burden the consumers carry goes down.

A recent AAIS report predicted that the sector will begin to recover in 2H2021 as the covid-19 pandemic subsides and allows for the positive catalysts to show on-ground impact. We also estimate that the sector will grow 5.2% over the next four years to reach EGP 68.7 bn by 2025.

If I had to cover another industry, I would go for the consumer sector, which I have covered before. During that time I tried to think as both a consumer and analyst when coming up with my research and I liked that I could see the impact and on ground reality for the sector. I would often come home with products from companies that I was covering and ask my family to try them and see what they thought. I once took my wife to a rug store and she got very excited about getting a new item for the house. She wasn’t as happy when I told her I was just doing some research [laughs].

My favorite writers are Omar Taher and Belal Fadl. I’m always blown away by the way they express and I find it so engaging, satirical, and inspiring. I’m very passionate about writing — I like to write about daily encounters or situations that I felt can be portrayed in an amusing way but still offer a lesson or moral at the end. I often try to emulate the two authors in my own writings. The most recent thing I read though was Eza’et El Aghany by Omar Taher.

In my down time I like to stay home, mostly [laughs]. I try to stay active, however, and the gym is my second home. I also practice swimming two or three times a week and it relaxes me physically and mentally. I always tell people that they can leave me in the water and I’ll be content.

Something that I think is very important for the country is to foster more financial literacy in the younger generation. We need to teach them how to save and invest, even if it’s saving their allowance and deciding to invest in a toy. I saw how impactful it is for children to learn these skills early on when my daughter had a bake sale at school and learned how to value and earn for her work. I believe that some of the things we should ingrain into this next generation is how to be inquisitive, knowledgeable, good communicators, principled, open-minded, caring, and open to taking risks.

---

Orascom Construction is paying out USD 27 mn in dividends to its shareholders in 2021, at USD 0.231 per share, the company said in an EGX disclosure (pdf).

The EGX30 rose 0.6% at today’s close on turnover of EGP 976 mn (23.9% below the 90-day average). Local investors were net sellers. The index is down 2.3% YTD.

In the green: Export Development Bank (+4.0%), Credit Agricole (+3.6%) and Qalaa Holdings (+3.4%).

In the red: GB Auto (-2.6%), Telecom Egypt (-1.5%) and Oriental Weavers (-1.4%).