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Stock Analysis
Waiting for the rally to resume
The market closed slightly positive to flat in
the period from March 15 to April 15, as the HFI index added 1.4
percent to reach 64560.75 and the CIBC index closed virtually flat
at 312.51. Again, year-to-date performance is still positive with
returns of 5.3 percent and 7.5 percent, respectively. Yet, market
breadth was not encouraging as declines outnumbered advances 10
to 7, suggesting the market was not ready for a broad-based rally.
The market is still embracing housing stocks as a proxy for the
current real estate boom. This explains the fact that almost all
housing stocks closed in the black led by El-Shams Housing &
Development, up 37 percent at LE 18.29. The one exception was Alexandria
for Real Estate Investment, down 2.4 percent at LE 173.10, though
still the best-performing housing stock this year, up 111 percent
year-to-date.
Among the top gainers in housing were Cairo Housing & Development,
up 28 percent at LE 15.07, Heliopolis Housing & Development,
up 23 percent at LE 198.63, and Nasr City Housing & Development,
up 7 percent at LE 153.96.
Meanwhile, banking stocks continued to make headlines albeit on
a negative note. Indeed, Abu Dhabi Islamic Bank’s LE 11/share
bid for National Bank for Development (NBD) spearheaded a meltdown
in other banking stocks, mainly those that were viewed as merger
or acquisition targets. NBD, whose stocks plunged a whole 50 percent
to LE 16.25, topped the losers’ list followed by Housing &
Development Bank (HDB), which shed 27 percent of its value after
combining its two tranches into one.
On a similar note, Suez Canal Bank and Al-Watany Bank of Egypt –
two acquisition targets – saw their stocks lose 7 percent
each to LE 16.86 and LE 40.99, while Export Development Bank of
Egypt slipped 5 percent to LE 28.07. Bucking the trend was Egyptian
Saudi Finance Bank, which advanced 9 percent to LE 17.58 continuing
its positive performance after Albarak Banking Group expressed interest
in acquiring the public stake in the bank.
Elsewhere, telecom stocks followed the overall market trend of moving
sideways, but market participants, especially foreign investors,
appear to believe that Telecom Egypt (TE) is the top pick. Indeed,
its stock was one of two positive telecom performers, up 5 percent
at LE 16.37. Orascom Telecom, the second positive performer in telecoms,
added another 3 percent to LE 80.13 post its five-for-one stock
split.
Also, Media Production City and Raya Holding decided to distribute
stock and cash dividends, respectively – the first ever distributions
made by them since their listing on the stock exchange. The former’s
general assembly approved a 5-percent stock dividend, whereas the
latter’s approved a LE 0.40 cash dividend. Both stocks closed
in the red, 10 percent and 4 percent at LE 11.08 and LE 12.10, respectively.
While last period’s indicators suggest a continuation of sideway
trading, Egyptian equities have been lagging behind their worldwide
peers and emerging markets in registering a good rebound this year.
Blue chips will definitely be foreign investors’ favorites,
but whether local investors will prefer these stocks to their highly
volatile small caps remains to be seen.
ANALYSE THIS
Paints & Chemical Industries (PACHIN)
Paints & Chemical Industries (PACHIN) stock ended the
period slightly down, by 1.5 percent at LE 53.06, after news
that three companies from Egypt and the Gulf had expressed
interest in acquiring 100 percent of the company. The stock
responded positively on April 5 to the news, rising by 10
percent to close at LE 53.31, having reached a high of LE
55 midday. PACHIN has reportedly been preparing for those
companies to conduct due diligence. In February, PACHIN –
Egypt’s leading paint producer – reported net
profits of LE 58 million in its first-half results, ended
December 31, 2006. It’s worth noting that in early March
2007, a company known as Middle East for Paint had offered
to acquire 100 percent of PACHIN for LE 53/share. However,
the Holding Company for Chemical Industries – which
owns around 40 percent of PACHIN – rejected the offer,
noting that the price was less than its target. |
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