8 - 14 February 2001
Issue No.520
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Al-Ahram Weekly On-line 8 - 14 February 2001 Issue No.520 |
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Moving on up
In another active week for the market, foreign transactions, though slightly lower than those during the previous week, were one of the main pillars of what seems to be a market revival. A clearer exchange rate policy, together with the investment Bank Merrill Lynch's decision to upgrade Egypt's rating from neutral to positive in its emerging market portfolio, are just two of the factors that revitalised foreign interest in the bourse.
Rumours also worked their magic, as talk about merger and acquisition deals seemed to generate buying orders, which helped push the Capital Market Authority Index up by 5.59 points to settle at 553. And overall transactions surpassed the value of those for the previous week, when they reached LE513.2 million, to increase to LE548.07 million.
Foreigners were net buyers, scooping up low-priced pound-denominated shares after having had their confidence boosted by the pegging of the pound at approximately LE3.85 to the dollar. Their buying orders came in at around LE139.05 million, while their selling orders amounted to LE95.12 million.
Orascom Telecom (OT), one of the leaders in Egypt's dynamic telecom sector, had a mixed performance during the week. This has been attributed to its nine-month results which showed a net loss of LE15.8 million for the period ending in September. This is quite a turn around compared to its performance last year when it realised LE38 million in net profits over 12 months. Not surprisingly, the day following its announcement, selling orders poured in. But these petered out when the voices of naysayers were drowned out by analysts and investors suggesting that for a young company like OT the figures weren't so bad after all.
Analysts were unanimous in suggesting that the results were mainly due to OT's aggressive expansion strategy; with losses coming from African start-ups, foreign exchange and its attempts to win the Jordanian market where it is pursuing an extensive marketing strategy while offering services at competitively low prices. OT now has licences and joint ventures in 20 countries and serves 1.7 million subscribers.
Moreover, those concerned with the bottom line may have been brought back into the OT camp by speculation that it may capitalise its interest expenses in its end-of-year profit statements, which may make it possible for it to post profits in its results for the entire year. By doing this, OT would be following the practice adopted by its sister company MobiNil. After the initial selling tide, OT rebounded slightly later in the week as its share gained a marginal LE0.31 to close at LE45.87. Thus OT took fifth place in terms of most actively traded stocks, having had LE31.8 million of its shares traded during the week.
Still banking on its better than expected results, MobiNil remained the market bell-wether, accounting for 27 per cent of overall turnover, and ending the week among gainers, having captured LE3.54 to close the week at LE79.29.
The construction and cement sectors fared well, accounting for 37 per cent of market transactions. Stock in companies comprising this sector continue to ride the wave of enthusiasm over anticipation that the long-awaited mortgage law will be issued imminently. And Suez Cement got an additional boost due to speculation that it will increase its capital by issuing new shares to be sold to a strategic investor. During the week it gained 10 per cent to close at LE37.
Another company climbing steadily on the back of consolidation rumours was the Olympic Group. Talk of a pending acquisition by a strategic investor pushed its share upward by 26.62 per cent to end the week at LE5.41.
Showing its mettle, blue chip Commercial International Bank (CIB) broke the LE40 barrier for the first time in the last six months. Capitalising on favourable expectations about its year-end results, which will be released by the third week of February, CIB closed at LE40.49.
Orascom Group was on the move not only in telecoms, but also in tourism, having revealed the details of the pending consolidation involving its holdings in this sector. Orascom Hotel Holdings (OHH) will acquire 100 per cent of Orascom Projects and Tourist Development (OPTD) in a share swap. Following this announcement, EFG-Hermes has changed its recommendations for OHH from buy to accumulate as the year ahead will probably see an increase in its cash flow.
EFG-Hermes suggested that the deal would also improve liquidity for OHH's shares, eliminate conflict of interest between the two companies and make it easier for OHH to obtain loans using OPTD's extensive real estate holdings as collateral. OHH, which owns several hotels in both El-Gouna and Taba resorts, was established four years ago when OPTD decided to put its hotel investments under a separate company. The acquisition will be carried out through a stock swap of 1.3 OHH shares for each OPTD share. As a result, OHH will increase its capital by issuing an additional 50 million shares worth a total of LE500 million.
Among the companies that fared less well during the week was Egypt's only locally-owned cigarette producer, Eastern Tobacco. Eastern ended the week with its share having dropped to LE58.51 after posting a small increase in its net profits for the first half of the fiscal year. At LE148.1 million, net profits for the first half of fiscal year 2000-2001 were slightly better, given the results of LE146.4 million in the corresponding period the year before.
Following the release of the results, local brokerage house HC (Hussein Choukri) noted that it would keep its "buy" recommendation and a LE85.14 price target for Eastern.
Some traders predict that Eastern may see its share price slip further amid concerns about foreign exchange exposure due to its importing tobacco leaves. In December, the company ranked eighth among market big caps. It was partially privatised in 1995 with the floating of a 34 per cent stake in an IPO (initial public offering).
The positive sentiment prevailing in the local market carried over to Egyptian shares traded in international markets, with only three of the nine companies that have GDRs (global depository receipts) witnessing a drop in the value of their shares. These are the Lakah Group, Al-Ahram Beverages and Hermes.
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