Market report

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The market resumed its upward trend in full steam after a series of short-lived setbacks. The CASE30 index broke another all-time high in the week ending 22 November to reach 9,800 points.

The obvious improvement in the financial results of the market's blue chips is lowering the price/earning ratio in the market, which makes it less expensive and more attractive than regional markets. Moreover, the outlook on the short term is positive as most traders expect investors who failed to get big chunks of Talaat Mustafa Group's IPO -- due to the low allocation rate of 2.4 per cent -- to channel their money to other stocks, and thus increasing liquidity in the market.

On the macro-level, news was just as positive. According to Central Bank of Egypt figures, Egyptian exports during the first quarter of fiscal year 2007/2008 rose by $600 million. The overall balance of payments surplus reached $1.2 billion, versus $1.1 billion in the comparable period last year. This is attributable to the increase in net capital inflows which totalled $1.7 billion.

In market-related news, Chairman of the Capital Market Authority (CMA) Ahmed Saad pointed out that there is a plan to cancel the five per cent limit on price movements on small caps traded on the market.

TALAAT MUSTAFA GROUP (TMG)'s IPO ended oversubscribed 41.4 times. The total shares demanded equalled 2.692 billion shares, versus the offered 65 million. This means that investors subscribing in the offering will only get 2.4 per cent of what they initially bid for. However, investors participating in both the private placement which closed 17.7 times oversubscribed and in the IPO warmly received the financial results announced last week.

TMG's net profits for the 10-month period ending on 31 October came at LE1.14 billion, with company assets totalling LE37.71 billion. As TMG was formed earlier this year through the merger of four companies, there are no comparable figures for last year.

EFG-HERMES's ownership structure changed, with Dubai Financial Group acquiring a 24.6 per cent stake in EFG- Hermes. The change in Egypt's largest investment bank resulted from a $1.1 billion transaction through which Dubai Financial Group acquired 100 per cent of Abraaj Egypt Ltd and Abraaj SPV. Together, the two entities owned the 24.6 per cent stake.

Meanwhile, EFG Chairman Yasser El-Mallawani denied widely spread rumours that his company intends to sell its 20 per cent stake in the Lebanese Audi Bank.

ALEXANDRIA COMMERCIAL AND MARITIME BANK (ACMB) refuted claims that the UAE's Union National Bank, the largest shareholder in ACMB, will float a stake of the latter any time soon. It was rumoured in the market last week that a 20 per cent stake of the bank will be sold: 15 per cent of which will be divested through an IPO, while the remaining five per cent will be allocated to employees under the employee incentives plan.

ACMB asserted that a decision on initial public offering has not yet been taken. Union National Bank had acquired 94.8 per cent of ACMB in mid-2006.

AL-WATANY BANK OF EGYPT (AWB)'s majority shareholder the National Bank of Kuwait (NBK) has made another offer to buy an additional 2.9 million shares, representing the 3.96 per cent stake it still does not own in AWB. NBK offered LE77.01 per share and the offer is valid until 9 December. Since its acquisition of 51 per cent of AWB in July, NBK has succeeded in collecting shares from the market to push its stake to 96.04 per cent.

TELECOM EGYPT (TE) plans to divest its minority stakes in two Internet Service Providers (ISPs) and focus on its 95 per cent stake ISP TE Data. A senior official in TE was quoted as saying that the company will soon sell both its 27.5 per cent owned NileOnLine and 16.6 per cent in EgyNet. He said the proceeds of the sale will be used to increase TE Data's share in Egypt's Internet market, which currently stands at around 50 per cent.

TE will soon lose its advantage as the sole provider of fixed line phone services in Egypt, after the National Telecom Regulatory Authority (NTRA) finalised the rules and regulations for the second fixed-line operation licence to be offered by the first quarter of 2008.

ORASCOM CONSTRUCTION INDUSTRIES (OCI), along with the French engineering company Alstom, won a bid to build a new power plant in the Ain Temouchent region in Algeria. The two companies are part of a consortium which will soon sign a contract worth $1.98 billion.

OCI's contracting line of business has been expanding recently, since it is currently involved in 100 construction and engineering procurement projects in more than 20 countries. These include projects in the fields of power plants, sewage stations, maritime and railways. Alstom is a leading multinational company in power generation, as well as the manufacturing of railways and trains. Its sales during 2006/2007 reached 14 billion euros.

ORASCOM TELECOM HOLDING (OTH) has filed a suit against the Kuwaiti- based Mobile operator Wataniya after an international arbitration tribunal ruled that the latter is not obliged to transfer its 50 per cent stake in Tunisiana, Tunisia's second mobile operator to OTH.

OTH owns the other 50 per cent stake in Tunisiana and is arguing that Wataniya breached their joint contract by not suggesting a board chairman for Tunisiana. OTH wants Wataniya to give up its stake as a result of this breach of contract, but the tribunal did not ask Wataniya to pay for any damages to OTH.

On another note, Reuters News agency said that OTH approached French media group Vivendi regarding a possible tie-up, but a price was not agreed upon.

BANK OF ALEXANDRIA, the first public sector bank to be privatised in Egypt, has posted a sharp drop in its net profits during the first nine months of 2007. The bank's net income reached LE578.8 million, compared to LE2.1 billion in the corresponding period of the previous year. The decline was due to the fact that the bank's revenues in 2006 were inflated by LE3.3 billion capital gains on the sale of investments before its privatisation.

The bank is expected to float a 10-15 per cent stake in the Cairo and Alexandria Stock exchange.

Compiled by Sherine Abdel-Razek