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Stock Analysis

A Year of Doubling Market Capitalization

In the period from November 15 to December 15, the market resumed its upward march to more than double its capitalization in 2004 as is evident in the broad-based Hermes Financial Index’s performance. It closed at 23817.59, up 4.88 percent in the period and 105 percent for the year so far. The broader CIBC Index surged 5.03 percent to 104.99 in the same period.

The market’s positive sentiment was spearheaded by news of Ciments Francais’ interest in purchasing the remaining stake of Suez Cement it does not already own.  The offer was for £E 80 per share, which helped push the share price higher to even surpass the offer price, closing at £E 80.29, probably in the hope that Ciments Francais would be pressed to be more generous.

Elsewhere, spinning and weaving as well as textiles firm shares have all shot up during the period on news of Egypt’s signing a QIZ agreement with the US and Israel.  It is expected that the agreement will re-open the sector for further investments.  Although the growth prospects are as yet not quantifiable, local banks are currently considering extending loans and other credit facilities to companies in those sectors. In line with this, shares of Alexandria Spinning & Weaving, Arab Polvara Spinning & Weaving, Arab Cotton Ginning and Oriental Weavers all advanced, 28.52 percent, 26.43 percent, 23.67 percent and 21.66 percent to reach £E 20.86, £E 5.98, £E 3.71 and £E 58.96, respectively.

Meanwhile, in the telecom sector, it was pay time. Both local mobile operators, MobiNil and Vodafone Egypt, announced interim dividends of £E 4.5 and £E 0.25, respectively. The two companies’ shares added 5.9 percent and 6.9 percent to reach £E 128.38 and £E 54.37, respectively.  Still, MobiNil offered a higher dividend yield. On the other hand, MobiNil’s parent company, Orascom Telecom (OT), was once again in the limelight, albeit unofficially. It’s been reported by news agencies that the owner, the Sawiris family, was involved in a consortium with an Italian investor to acquire Italy’s third mobile operator, Wind, a wholly-owned subsidiary of the country’s energy group, Enel. The offer submitted reportedly fell short of Enel’s expectations. Although OT was not mentioned, its share headed north another 4.2 percent to £E 243.38, hitting historic highs. During the period, OT invited investors to subscribe to 30 percent of its seven-year bond issue, amounting to £E 1.6 billion. Notably, the bond proceeds are earmarked for refinancing the company’s existing debt and financing its operations.

In the realm of banking, Al-Watany Bank of Egypt (AWB) seems to be in dire need of funds to meet the Central Bank of Egypt (CBE) requirement of a minimum of £E 500 million in capital.  The bank will issue 18.5 million shares at £E 10 per share, 0.5 percent higher than the market share price of £E 9.95.

Again, Al-Ezz Steel Rebars and ANSDK soared 35 percent and 68 percent to £E 20.54 and £E 503.01, respectively.  Export opportunities and consistently higher steel prices seem to have spawned a new wave of appreciation for steel shares as Egyptian Iron & Steel shares jumped 39 percent to reach £E 15.12 as well.

With such performance, it’s no wonder that Egypt ranks high on the list of regional markets in terms of stock market performance in 2004. So far, the market has more than doubled in value, with trading volumes back to the heydays, thanks in part to higher share prices. Let’s see if this positive sentiment will hold throughout the New Year.

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