Market report

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On the macroeconomic level, the annual growth in broad money supply (M2) jumped to nine per cent in September 2009, from seven per cent in August on the back of higher growth in local currency deposits.

As for the Producers' Price Index (PPI), it rose 6.7 per cent in September from 8.4 in August 2009, due to the higher rises in the prices of items in agriculture, mining and quarrying and manufacturing.

ARAFA FOR INVESTMENT & CONSULTANCIES (ARAFA GROUP): The men's wear manufacturer is expanding in Europe with the signature of its 35 per cent owned Italian Forall Group, of an agreement with Cerruti to expand its geographic coverage of its "Cerruti 1881" brand licence to include European countries namely the UK, France, Spain, Germany, Eastern Europe, the Scandinavian and former USSR regions. Forall had previously concluded an agreement with the high end Cerutti Group to sell the CERRUTI 1881 brand in 33 countries in the Middle East, East Asia and Latin America. Beltone Financial noted that "CERRUTI is expected to achieve 12 million euros in sales to Forall by 2010 to reach 20 million euros in 2011," with a projected profitability of 20 per cent for Arafa.

Commenting on the new agreement, CI Capital, the research arm of CIBC brokerage, said it will support Arafa's vertically integrated strategy. "We believe that suits manufacturing within the company's production lines will enhance the company's margins given that the (earnings) of the manufacturing line of business is higher than that of the retail segment.

THE EGYPTIAN COMPANY FOR MOBILE SERVICES (MOBINIL): Egypt's largest mobile operator in terms of number of subscribers posted an 8.1 per cent decline in net profits from a year earlier in the third quarter to reach LE497 million. The decline came on the back of the aggressively competitive pricing schemes it followed during the period especially in Ramadan which "caused lower usage and higher costs" as one analyst quoted by Reuters put it.

All three mobile operators in Egypt offered rate cuts for calls during the holy month of Ramadan, which last year fell in the fourth quarter, including rate reductions for Egyptian pilgrims travelling to Saudi Arabia. The blended average revenue per user (ARPU) decreased by 19 per cent to LE38, indicating that aggressive promotions during the period had cut into sales revenue, which came in at LE2.793 billion compared to LE2.664 billion a year ago. On a positive note, the company added 1.771 million new customers in the quarter for a total of 24.625 million by the end of September.

AL-SEWEDY CABLES: The company's management revealed expectations for sales and profit in each line of business for the period 2009-2011.

Al-Sewedy stated that while the outlook for each of the Wire and cables and Turnkey segments was unchanged, the Electrical Devices and Wind Energy Line of Businesses (LoB) may well experience some delays. In reaction , CI Capital lowered its estimate of the company's long-term fair value by 11 per cent to reach LE90.1.

PALM HILLS DEVELOPMENT (PHD): The real estate developer plans to set up a resort for senior citizens in "Amoun village" in Aswan. The resort will be established on 200 feddans and will be promoted in the British market.

ORASCOM TELECOM HOLDING (OTH): The company's Canadian arm Gloablive Wireless (operating under the brand name Wind Mobile received a strong blow after Canadian Radio-Television and Telecommunications Commission (CRTC) decided that the company is currently not in compliance with the Canadian ownership and control rules, and is therefore not eligible to operate. The decision comes only a few weeks before WIND Mobile's intended launch date.

The decision came 14 months after the Canadian Ministry of Industry said that WIND Mobile is in compliance with the Canadian ownership and control rules and granted it Mobile spectrum licences.

OT has a 65 per cent indirect equity stake in WIND Mobile, which participated last year in Advanced Wireless Services Spectrum Auction and obtained the licence for 442 million Canadian dollars.

Beltone expects that OT could sell its share in the investment to Globalive (its Canadian partner) if all future attempts with the CRTC failed on the ownership front.

The market is showing a fluctuating performance led by the zigzagging attitude of international markets. However, there is an overall positive sentiment since the beginning of the week with the ruling National Democratic Party members painting a rosy picture of the economy during the sessions of the party's sixth annual conference. Whether the positive feeling is genuine or not will be tested during the coming period with a number of the market's big caps about to issue their third quarter results.

Compiled by Sherine Abdel-Razek