Market report

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August's final weeks usually coincide with the release of first half results. Thanks to the new income tax law, this year's crop came out robust. Combined with good economic indicators, the market's four-week run energised things straight through the week ending 31 August, with the CASE 30 Index closing at 6,233 points, or a full 10 per cent higher than its level at the beginning of the month.

Figures released by the Cairo and Alexandria Stock Exchange showed that the average daily trading value in August revolved around LE1 billion; an LE35 billion upsurge brought the market's capitalisation to LE461 billion.

Foreign transactions fed the boom; they were net buyers in August with net inflows of LE1.57 billion.

Meanwhile, in an important development aimed at reviving the bond market, a CASE committee agreed to list LE140 million in five-year securitised bonds issued by Contact Securitisation at a fixed interest rate of 11 per cent. The bonds, which carry a credit rating of AA, are backed by a LE176 million securities portfolio, and mature on 31 December, 2010.

EFG-HERMES: The company's Extraordinary General Assembly approved UAE-based Abraaj Capital's offer to buy around 25 per cent in a deal worth LE2.5 billion.

Abraaj, a leading regional asset management and private equity firm, will acquire the stake through a capital increase comprising around 97 million shares at LE30 each, a figure that represents Hermes's average market price during the two months preceding the offer.

Capital market authority regulations stipulate that Abraaj must hold on to the new shares for a year. Sources close to the deal said Abraaj plans to set up a company with Duetche Bank and three regional investment funds in order to finance the deal.

Market observers believe the capital increase will help EFG-Hermes's regional expansion plans. Currently operating in the UAE and Saudi Arabia, the company plans to develop its investment banking activities further into the MENA region at an estimated cost of $150 million.

HC Securities has also suggested that the deal will help EFG finance e-trading, at an estimated investment of $20 million, as well as reduce the market risk that investment banking activities are consistently subject to.

EFG shareholders attending the EGA meeting also gave the green light to reduce paid-in capital by 432,040 shares by redeeming treasury stock purchased over a year ago.

TELECOM EGYPT (TE): Egypt's fixed line monopoly decided to put an ambitious regional expansion plan on ice after the Saudi Telecom Authority postponed the sale of its second fixed line licence to mid-2007 instead of the initial end of 2006 date. TE has a 50/50 joint venture with Orascom Telecom Holding that won Algeria's second fixed-line licence in March 2005, as well as an Internet subsidiary, TE Data, in Jordan.

ORASCOM TELECOM HOLDING (OTH): The telecommunication giant announced that it has allocated around $30 million to acquire a 65-85 per cent stake in the telecom unit of Raya Holding. Raya has also received two other offers for its telecom business, which has been experiencing lower than expected returns compared to the company's other units. Telecom sales contributed only 4.6 per cent of Raya's overall sales during the first half of 2006, compared to the retail and distribution unit's 73 per cent and the IT unit's 21.8 per cent. Raya is expected to make a final decision on the sale by next week.

ORASCOM CONSTRUCTION INDUSTRIES (OCI): The regional construction company released its first half results for 2006, which included a 53 per cent increase in net profit, which reached LE1.2 billion. The breakdown of the company's sales figure show that construction activities contributed 69 per cent of sales, compared to 31 per cent from cement production. OCI's operations are divided into cement and construction; its cement group ranks number nine internationally based on announced capacities, while the construction group ranks among the top 150 contractors in the world. The company has operations in more than 20 countries and is currently expanding in the field of natural gas-based fertilisers. In 2006 it bought 30 per cent of the Egyptian Basic Industries Corporation (EBIC) and a 51 per cent share in the Algerian Fertiliser Company (AFC).

Compiled by Sherine Abdel-Razek