Market report

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The market continues its lacklustre performance amid weak transactions and a declining CASE30. The week ending 7 August witnessed a further four per cent loss in the bourse's main index resulting form heavy selling by Egyptian and Arab investors. Non- Arabs, however, were net buyers attracted by the low prices. The average daily transactions came in at around LE950 million.

On the macro level, the Ministry of Finance announced that between July 2007 and May 2008 subsidies reached LE76 billion, up 130 per cent from the comparable period last year. On a positive note, tax revenues increased 31 per cent to reach LE121 billion, and non-tax revenues increased 47 per cent to reach LE66 billion through the same period. Moreover, Egypt's domestic debt dropped from 79 per cent of GDP in March 2007 to 73 per cent in March 2008.

In a move expected to bolster the real estate sector, the Central Bank of Egypt (CBE) increased the ceiling on mortgage loans to 15 per cent of local banks' overall loan portfolio, compared to only five per cent before.

EGYPTIAN COMPANY FOR MOBILE SERVICES (MOBINIL), Egypt's largest mobile network operator, posted a marginal four per cent decrease in its net profits for the first half of 2008 to reach LE887 million. The decrease in income resulted from a 187 per cent increase in interest expense during the first six month of 2008, compared to the corresponding period of 2007. Nonetheless, the company's subscriber base witnessed a 47 per cent surge from 11.9 million subscribers in June 2007 to 17.5 million subscribers in June 2008.

The company is launching its 3G services on 1 September, more than one year after its two rivals, Vodafone Egypt and Etisalat Misr, started offering the service.

PALM HILLS DEVELOPMENTS, the real estate developer, realised a 16 times increase in its net income for the first half of 2008, to reach LE362 million compared to LE22.6 million in 2007. The impressive increase came on the back of an 859 per cent increase in consolidated net sales of LE765.9 million.

The total contract values of the reserve's units in the company's Hacienda Bay Casa Bamboo Extension and Golf View projects rose 785 per cent, recording LE1.897 billion, versus LE214.4 million in the first half of 2007.

TALAAT MUSTAFA GROUP HOLDING (TMG)'s Chairman and Member of Parliament Hisham Talaat Mustafa was rumoured to be fleeing the country due to financial problems. However, state-owned television aired an interview with Mustafa where he talked about the sound financial position of his companies, as well as charity and corporate social responsibility plans it is undertaking.

Moreover, TMG revealed plans to increase the share of its Saudi activities to 40 per cent of its overall turnover in the coming years, and added that it will expand the combined area of land it owns in Saudi Arabia to 30 million square metres.

GB AUTO sales during the first half of 2008 recorded a 32.9 per cent increase, to reach LE2.62 billion. This increase was fed by both higher sales and hikes in car prices. GB sales include passenger cars, commercial vehicles and two and three- wheelers.

The increase also boosted GB's net income to reach LE237.2 million, marking a 61.7 per cent increase than levels in the first half of 2007. A 32.2 per cent drop in net interest expenses is another factor which inflated the bottomline.

With a market share of 23 per cent -- slightly less than last year's 25 per cent -- in passenger cars, GB is Egypt's largest car retailer.

ORIENTAL WEAVERS (OW), the rug manufacturer, is expected to post a 6-8 per cent growth in its revenues for 2008, compared to five per cent in 2007.

The company's founder and chairman, Mohamed Farid Khamis, was quoted as saying that the company's net income growth rate in 2008 would reach its slowest pace in at least three years, as a US slowdown hit sales. Khamis added that demand in Asia and the Middle East offset the US slowdown.

Meanwhile, Saudi Arabia's Fitaihi Holding Group announced that its wholly-owned investment arm acquired a five per cent stake in OW for LE153 million.

TELECOM EGYPT, Egypt's sole fixed line operator, has so far allocated a total of LE1.5 billion for network investments in 2008. Meanwhile, Chairman Aqil Beshir said TE might sell its 50 per cent stake in Lacom, its subsidiary in Algeria, in the event it does not reach an agreement with Algerian authorities.

Algerian authorities have been tightening investment regulations, with a new requirement issued last month obliging investors to locally reinvest part of their profits to the value of any tax breaks they received. Starting this year, investors have four years in which to make the reinvestment, and those which do not comply will have to repay any tax breaks and be subject to a fine.

ORASCOM CONSTRUCTION INDUSTRIES (OCI)'s 50 per cent-owned contractor BESIX was awarded a BOOT project in Al-Ain and Abu Dhabi cities in the United Arab Emirates. The project is a joint venture with VEOLLA Water, and includes financing, building and operating two new wastewater treatment plants.

The contract was signed with Abu Dhabi Water and Electricity, and covers a period of 25 years. BESIX's role in the new project will be participating by 33 per cent in the operation and maintenance costs of the plants for a period of 22.5 years.

The consolidated contract value is 525 million euros, of which BESIX has a 50 per cent share.

COMMERCIAL INTERNATIONAL BANK (CIB), the leading private bank, revealed in a news release that Dubai Capital Group (DCG), the financial services company affiliated to Dubai Group, owns a 5.24 per cent stake of its equity as of the end of July 2008. DCG focuses on banking insurance regionally and globally.

On another front, CIB began offering a new service for customers with mobile lines with Vodafone Egypt. The new service allows holders of any CIB debit card or CIB- issued Visa or Maestro cards to pay their Vodafone bills and recharge their Vodafone line via the CIB ATM.

Compiled by Sherine Abdel-Razek