Market report

---

The World bank's ranking of Egypt as a top reformer in its Doing Business Report gave a boost to the market for the second week in a row. Again the CASE30 is breaking a new record by reaching an all time high of 8,771 points, 1.4 higher than the previous week. Moreover, the value of transactions through the week ending on 5 October was LE21.7 billion, almost 3-4 times the average weekly transactions on CASE during the last three years.

News about the issuing of 14 new licences to establish new cement companies and Minister of Trade and Industry Rachid Mohamed Rachid referral of nine cement companies to the prosecutor- general over monopolistic practices depressed cement company shares but will be welcomed by the construction sector. A recent boom in the latter was mirrored in Ministry of Housing figures showing that the sector's contribution to GDP was 6.2 per cent in 2006/ 2007 compared with nearly five per cent a year earlier.

As for the macro-economic scene the week was a quiet one except for news of Minister of International Cooperation Fayza Abul- Naga signing 10 agreements with the US government granting Egypt $301.1 million targeted to develop the infrastructure and the economy.

ORIENTAL WEAVERS (OW): The company stressed in a press release it sent to CASE that the fire that broke out in one of its factories last week will cause major delays in its carpet deliveries to both the local and international markets. The fire was on the third floor in one of the 25 buildings forming OW's international facility and affected around eight per cent of OW's international finishing department's capacity. The capital loss is limited as the facility is 100 per cent insured.

EGYPTIAN RESORTS COMPANY: The auction for selling the 24 per cent stake the government owns in the company was postponed to a yet undisclosed date to give interested buyers more time for in-depth study of the sector and the company. The NBE, which has been delegated by the government to sell the stake, denied market rumours that it has received an LE9 per share offer. The company's share price has been rallying since talk about selling the stake started and ended the week at LE11.63. The financial offers of the interested buyers will be submitted to the NBE through sealed envelopes on the date determined for the bidding. This is to be followed by a public auction among the highest bidders.

TELECOM EGYPT (TE): Egypt's fixed line monopoly applied to bid for a 49.1 per cent stake in the Slovenian operator Telecom Slovenije. Competitors of TE in the bidding include Croatia's T-Hrvatski Telekom, Hungarian Magyar Telecom, UAE- based Oger Telecom and others. The bidders have to submit non-binding offers by 15 October while the sale is scheduled for the end of the year. On the local front, the company said it expects its lower connection fee offer will last till the end of December to help it add some 300,000 new fixed-line subscribers by that time. TE has received around 3,000 new request for fixed lines per day since it began the offer. This comes in line with the company's efforts to prepare itself for competition when the government issues a second fixed line licence in 2008. Both MobiNil and Etisalat Misr are considering bidding for the licence.

MOBINIL: Egypt's largest mobile network operator has chosen Huawei Technologies China for setting up its central mobile phone network, as a part of MobiNil's expansion plans and upgrading of its current network. MobiNil previously said that it is pumping LE3 billion into investments to improve the efficiency of its wireless network and to build up a central network for the 3G services. The company plans to launch 3G services in early 2008 after concluding negotiations with Telecom Egypt regulators on the LE3.34 billion licence.

Meanwhile, the company's CEO Alex Shalaby expected its capital expenditure to reach LE4 billion with a parallel increase in its subscribers to reach 15 million subscribers by year-end.

"The increase in capex could result in a lower dividend payout ratio unless the company is able to raise the whole LE3.4 billion as debt to finance the 3G licence," Shalaby said. He also revealed MobiNil's interest in bidding for Egypt's second fixed-line licence.

COMMERCIAL INTERNATIONAL BANK (CIB): A major player in the banking sector has started formal discussions with the Arab African International Bank (AAIB) on a possible merger. A press release issued by the CIB said the two banks have agreed to exchange confidential information on an exclusive basis. Meanwhile they haven't agreed on starting a due diligence process or discussed any terms regarding a possible transaction. The merger has to be approved by the CBE as well as the board and shareholders of the two banks after the completion of a due diligence process. There is no specific timetable for any potential discussions. CIB, one of Egypt's top three private lenders, is the country's most profitable bank as it witnessed a 64 per cent jump in first-half net profit to LE635.4 million pounds. After failing to acquire the state-owned Bank of Alexandria in 2006, CIB has been eyeing potential expansion in Syria, Lebanon, Jordan and the Gulf.

Compiled by Sherine Abdel-Razek