OUR ANALYST OF THE WEEK- Nour Eldin Sherif, associate director at Arqaam Capital (Linkedin).

My name is Nour Eldin Sherif and I have seven years of experience in the financial sector. I started my career as an equity analyst in MubasherTrade before moving to Beltone where I covered the industrial sector. I moved to Arqaam Capital three years ago and worked as a senior associate before I was promoted to associate director this year. I still cover industrials, focusing on metals and mining in Egypt, UAE, Qatar, and Saudi Arabia.

I first knew this was the career path I wanted after joining the 2013 CFA Research Challenge. I was part of the Ain Shams University Team and managed to get through the local competition to represent Egypt at the MEA regional competition in London. The challenge allows university students to evaluate a real company by meeting its management and being teamed with a mentor for the industry. After the experience, I decided to volunteer in the CFA society and was tasked as the CFA Challenge Coordinator and in 2019 I was a judge in the MEA competition. I love making new connections and meeting the next passionate generation in the finance sector. I think it’s a great way for students in their senior year to be polished and ready to join the industry.

The best part of my job is that I’m part of a global cycle and I’m always up to date with everything happening. There’s something new to do and look at everyday, and things happening continents away could have an impact on the local market. Since joining Arqaam I am always trying to be the first and be on top of all recent developments in the industry. It’s very competitive and you have to be innovative in writing and quick about stock calls. Most importantly, clients have to trust you and value your work.

The worst part is always being connected even during time off. There could always be a pressing task that has to be done right away no matter where you are or what you’re doing.

Less travelling hasn’t changed my daily routine at my job much. Programs like Zoom and Teams really bridged that gap, but of course we do miss meeting clients physically and sharing thoughts and reactions. In some ways it has also brought us closer as we can now have a chat anytime during the day or night. It’s been a struggle for work-life balance though [laughs]. I don’t think roadshows will be back this year, but as vaccine rollouts progress, maybe they’ll make a reappearance in 2022.

My theory of investment is to stick to quality names, sound valuations, and strong market positioning. These give companies a comparative advantage against peers when paired with a strong investment thesis. When I look at financials I always try to break it down into a contextual analysis based on what’s happening around the world and in the industry and make sure it's aligned. Another thing I’m always careful about is to clearly highlight downside risks in reports to give the full picture to clients.

The factor I look at most when recommending a stock is where a stock is in line with the macro picture. At the height of covid last year, this meant tech stocks and companies that benefited from people staying home, as well as safe haven assets like gold. Analysts should try to play all the global trends that can affect the local market. When it gets dark, however, and market volatility is severe, I think you should stick to the fundamentals as firms with strong names and valuations will usually be the first to recover.

Post-covid, I think the sector players need to be more dynamic, flexible, and avoid sticking to a view forever. We tried to implement this by overweighting stocks and firms that are highly correlated to global growth and looking at reopening themes. I think that the industrial sector specifically still has a lot to do from a private sector perspective to achieve sustainable and inclusive growth, and needs to be more in line with the global cost curve.

We’ve been more focused on ESG in the past period and it's becoming part of our daily communication with clients and our reports. The key focus for green stimulus should come from a new capex cycle, mainly investing in more environmentally friendly sources of energy such as wind and solar. This needs a lot of technological advancement and R&D, but it will have a huge impact on investments. International investors are starting to pay more attention to this and are more likely to invest in companies that achieve high ESG ratings.

I think 2021 will be a year of growth for Egypt — stemming from infrastructure spending from the public sector and a strengthening recovery in the private sector. I also think industrials will grow this year fueled by higher commodity prices in steel, aluminum, copper, petrochemical products though volumes will lag behind the price hikes.

If I had to switch and cover another industry it would be either healthcare or education. I think they are somewhat underserved despite their importance in the market and economy. More companies need to be listed in these areas and I hope to see more players emerge in the future.

My favorite film is The Big Short. Currently, I’m watching Le3bet Newton this Ramadan. In music, I like to listen to underground Arabic music like Massar Egbari, Aziz Maraka, and Dina El Wadidi.

When I’m not on the clock I like to go fishing. In Egypt, we have access to beautiful seas at places such as Hurghada and Sokhna, and fishing really manages to relax and ground me. I also love travelling to Sinai. Abu Galum in Dahab is my favorite place with its untouched nature and iconic snorkeling spots. At home I like to cook when I’m in the mood for it. My favorite dish to make is surf and turf: steak with either shrimp or salmon.

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EARNINGS WATCH-

Qalaa Holdings reported a net loss of EGP 2.5 bn for 2020 compared to its EGP 1.1 bn loss in 2019, the company said in an earnings release (pdf) on Friday. The losses were largely attributed to its Egyptian Refining Company (ERC), as well as booking impairments, write-downs and covid-19 provisions worth EGP 1 bn, the statement said. This comes despite Qalaa’s consolidated topline more than doubling to EGP 35.9 bn.

ERC + improved performance by TAQA Arabia contributed to top line growth: ERC brought in EGP 21.6 bn in revenues during the year, without which Qalaa’s revenues would have held flat at 14.4 bn. “Despite the harsh market conditions, TAQA Arabia was able to deliver an uptick in revenues by 3% y-o-y, driven by growing household conversions and an expansion in its industrial client base,” said Qalaa Holdings Chairman Ahmed Heikal. An improvement in international trade with the easing of covid-19 restrictions worldwide also upped consolidated exports by Qalaa subsidiary ASCOM to USD 118 mn during the year.

Speed Medical more than quadrupled its net income to EGP 40.9 mn in 1Q2021 from EGP 7.2 mn in the same period a year earlier, according to the company’s quarterly earnings release (pdf). The strong bottom line growth was underpinned by a 160% increase in revenues, which reached EGP 65.4 mn during the three-month period. Revenues rose on the back of strong demand for covid-19 tests and contact tracing, along with rising laboratory sales for sister company Prime Speed Healthcare, which “highly contributed to the increase of the consolidated profits of the company during the year,” Speed Medical said.

Maridive & Oil Services turned in a USD 143.3 mn loss in 2020 after making a USD 2.65 mn profit the year before, according to the company’s consolidated financials (pdf). Revenues fell 11% to USD 180.5 mn during the year from USD 202.8 mn in 2019.

Eastern Company reported a EGP 513 mn profit in the first three months of 2021, up 90% from EGP 270 mn in the same period last year, according to an exchange filing (pdf). The tobacco monopoly’s topline increased 16% to EGP 5.7 bn from 4.9 bn in 1Q2020.

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The EGX30 fell 0.1% at today’s close on turnover of EGP 790 mn (37.9% below the 90-day average). Local investors were net sellers. The index is down 3.5% YTD.

In the green: Export Development Bank (+3.2%), Credit Agricole (+2.4%) and Orascom Development (+2.4%).

In the red: Madinet Nasr Housing (-12.1%), CI Capital (-3.5%) and Edita (-3.4%).