Market report

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The contagion of international markets slump reached the Cairo and Alexandria Stock Exchange, stripping its main index of 4.7 per cent through the week ending on 16 July. The plunge came on the back of a selling spree by international investors quitting emerging markets, including Egypt, after they shouldered heavy losses in their home countries.

However, analysts believe that the revival seen in international markets starting Friday, together with an increased interest by local investors in the market, will pull the market out from the slide. The retreat put most of the shares on very appealing low levels. The week saw LE7 billion-worth of shares changing hands. Ahmed Saad, the new chairman of the Capital Market Authority (CMA) stated that the CMA is targeting to increase the daily stock exchange turnover to LE4 billion by the end of 2008.

EFG-HERMES, the regional investment bank, posted its second quarter results for 2007 where its total consolidated revenue came at LE529.2 million -- more than double the figure reached over the same period in 2006. The company's sales figure for the first half reached LE978 million, in comparison to LE1.2 billion for the full year of 2006. According to an EFG-Hermes press release, its regional expansion is one of the main reasons behind the operating revenue stream.

During the first half, the operating revenues originating in the region contributed 24.7 per cent to EFG's consolidated revenues, a figure that has increased from 15.5 per cent in the first six months of 2006. EFG managed assets worth $4.23 billion, $3.8 billion of which are in listed equities and money markets while the remainder in private equity. This is a 41.8 per cent increase over the first quarter of 2007.

EFG was established in 1984 and is listed in both CASE and London Stock exchanges, with an overall market capitalisation of $2.9 billion. The company has full range investment banking activities in the UAE and Saudi Arabia.

MOBINIL, Egypt's first and largest mobile network operator, acquired a LE2.3 billion loan last week to finance its network development plan to accommodate the surge in subscribers. Alex Shalaby, the company's CEO, stressed that this loan will not be used in financing the 3G licence. The seven-year long loan has an interest rate of 10.25 per cent and is offered by four banks, namely Banque Misr, CIB, HSBC and NSGB. These four banks later called 14 other banks to subscribe in part of the loan, which they did at a sum of LE1.245 billion.

Meanwhile, the four banks are currently working on arranging a new LE3.4 billion loan for MobiNil to pay for the 3G licence. The company does not have to pay the total value of the licence since it will only get a five megahertz frequency out of the 10 mega hertz that the full range of 3G services need. This is because there are no available frequencies with the National Telecommunication Regulatory Authority (NTRA).

ORASCOM TELECOM HOLDING (OTH) withdrew from the auction for Iraq's mobile licence when the price reached $1.25 billion, in addition to an 18 per cent revenue share agreement. At this price, OTH considered that this opportunity would not meet its targeted equity rate of return in Iraq, stated a company press release. The move means that OTH's Iraqi subsidiary, Iraqna, will shut down while OTH evaluates alternatives to liquidate the assets of Iraqna, either through sale or forming a joint venture.

Meanwhile, OTH said it will not submit an offer above the LE12 per share for all of Raya Holdings shares. This came after the Capital Market Authority announced that Prime Capital has concluded that OTH's offer is not fair. Prime Capital gave Raya Holding Company a weighted average target price of LE20.89 per share.

CREDIT AGRICOLE EGYPT posted a 121 per cent increase in its net profits in the second quarter of 2007, compared to the same period of last year, to reach LE118 million. The bottom line was boosted by a release of loan loss provisions and zero taxes. Meanwhile, the bank's operating costs increased by 13 per cent in the second quarter of 2007, compared to the second quarter of 2006.

Nevertheless, the cost-to-income has fallen to 49.6 per cent in the first half of 2007 as a whole, from 57 per cent in the corresponding period of 2006. The improvement might be partly related to some exceptional costs in 2006 related to the merger of EAB and Calyon. Pre-merger, EAB had a cost-to-income ratio of around 50 per cent, which is above peers.

EFG-Hermes commented on this fact by saying that it is believed that Credit Agricole will continue to close the efficiency gap with its peers CIB and NSGB (both with a cost-to-income ratio below 35 per cent) in the coming years, on the back of faster revenue growth and moderate costs expansion.

Compiled by Sherine Abdel-Razek