1 - 7 February 2001
Issue No.519
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Al-Ahram Weekly On-line 1 - 7 February 2001 Issue No.519 |
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MobiNil leads turnaround
For the first time in months, the market had reasons for joy. The week ending 25 January saw its main mover achieve better than expected results alongside a resurgence in foreign interest. These phenomena translated into a relatively high volume of transactions during the week, as total market turnover shot up to LE513.4 million, compared to LE341 million during the previous week. And the Capital Market Authority all-share index reflected this surge of interest with a 10-point increase to stabilise at 629.3 points.
Behind this apparent turnaround was MobiNil, operator of Egypt's first mobile network. Right from the opening of the market last week, the telecommunications company capitalised on the announcement of both its fourth quarter and year-end results. For its unaudited net profits for the year 2000, the company posted a 105 per cent increase to reach LE289.13 million ($74.89 million), up from LE137.7 million in the previous year and surpassing analysts' forecasts for net profits of LE225 to LE250 million.
A company press release attributed these results to increased efficiency and a reduction of costs. "We achieved increased profitability quarter on quarter by focused efforts to reduce acquisition costs, to improve staff productivity and to achieve reductions in the procurement of technology and services," President and Chief Executive Osman Sultan said in a statement.
Although the company is facing fierce competition from Click Misrfone, the operator of Egypt's other mobile network, it retains its dominant position in the market, having increased its active subscribers to 1.21 million at the end of 2000, compared to 540,000 for 1999.
The extent to which MobiNil's improved results can be attributed to changes in accounting standards is not entirely clear. However, the company is expected to make public additional details about the calculation of its results imminently.
Change in MobiNil share price since November
But MobiNil is not without its problems. It recently told investors and market analysts that it is in discussions with its creditors about refinancing all or part of a syndicated loan in dollars. Its aim is to convert at least part of the firm's existing $220 million loan into local currency to limit foreign exchange exposure, executives said.
MobiNil executives also told shareholders and market observers that the company has revenues in dollars from its roaming services and an as yet undisclosed dollar cash balance, as well as dollar liabilities.
These concerns, however, did not weigh down MobiNil's stock as it cornered 20 per cent of market transactions through the trading of LE103.7 million worth of its shares. Its buoyant performance was translated into a 9.4 per cent increase in share price to close at LE75.75.
As a major shareholder in MobiNil, Orascom Telecom has reaped the benefits of MobiNil's results, closing at LE45.56, compared to its final price of LE41.9 during the previous week. But MobiNil's results were not the only factor that gave OT a boost, as the company made news in its own right. OT announced that it won one of two contracts to build a GSM network in Syria, and that it withdrew from the auction for GSM licenses in Nigeria due to high bids.
Increased foreign activity was a feature of the market that had been missing for some time. Foreign institutional and individual investors were net buyers with the value of foreign buying transactions reaching LE201.37 million, representing 39 per cent of the overall activity compared to their selling orders which accounted for 14 per cent of all transactions. This interest has been attributed to the recent decline in the Egyptian pound against the dollar which has made securities issued in the local currency attractive buys.
The cement sector had a very good week with three of its players -- Helwan Portland Cement, Suez Cement and Assiut Cement -- included on the list of the 10 most actively traded shares during the week. Of these, Helwan Cement was clearly in the lead. The company has attracted considerable attention recently due to speculation that the government is preparing to sell its 47.8 per cent stake in the company. Helwan's Employee Shareholder Association (ESA) sold its stake in the company to individual employees at LE38 per share -- a 9.56 per cent discount on market prices. The share closed the week at LE37.3.
Another sector that witnessed considerable movement was that of construction, which is continuing to ride a wave of enthusiasm based on predictions that the People's Assembly's approval of the draft mortgage law is imminent. Al-Mahmoudia for Contracting was the market's biggest gainer, capturing 26.64 per cent during the week.
Another lucky stock was that of the Arabian International Construction Company (AIC). The private construction company was heavily traded amid growing demand after it announced that it had won a $94 million contract in Oman.
The week also witnessed an agreement signed to inaugurate the activities of the stock exchange representative office in Port Said governorate.
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