Beltone brings in foreign institutional investors as record EGP 10 bn capital increase closes

Wednesday, 19 Jul 2023

Beltone brings in foreign institutional investors as record EGP 10 bn capital increase closes

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Capital markets

Beltone’s record EGP 10 bn capital increase closes; firm adds global institutional investors to shareholder roster.

M&A WATCH

MM Group to acquire 40% of B Investments’ B Pharma.

INDUSTRY

Investors are pitching for the right to build three fertilizer complexes worth a combined USD 1.6 bn.

WHAT WE’RE TRACKING TODAY

Gulf investors are reportedly interested in Banque Misr’s digital bank.

DEBT WATCH

Talaat Moustafa plans EGP 500 mn future flow securitization.

LAST NIGHT’S TALK SHOWS

All tourism projects to be handed golden licenses as gov’t looks to boost the sector.

ALSO ON OUR RADAR

Gov’t to launch international mineral exploration tender this year.

ALSO ON OUR RADAR

MEDCOM signs EGP 1 bn MoU to develop infrastructure at Madinet Masr’s Taj City.

HARDHAT

How EGX-listed infrastructure players performed in 1Q 2023.

WHAT WE’RE TRACKING TODAY

Foreign investors are interested in Banque Misr’s digital bank

Good morning, wonderful people, and happy last-workday-of-the-week. We’ll have EnterprisePM in your inboxes this afternoon and are then off until Monday, 24 July in observance of Islamic New Year and Revolution Day.

Enterprise Climate and Enterprise Logistics will also be off. We’ll all be back at the the usual time on Monday. Until then, we wish you a restful weekend with family and friends.

Speaking of Enterprise Climate:

SOUND SMART- El Niño is here — this is what it means for the MENA region. Enterprise Climate takes a look at what the weather phenomenon in an easy-to-read two-part explainer here and here.

As was the case yesterday, this morning’s issue again has plenty of news from the private sector — a welcome development after months during which policy news has dominated the headlines.

PSA- This heatwave isn’t going anywhere. The mercury in the nation’s capital will continue to hover in the 41-42°C band through to at least next Wednesday, according to our favorite weather app. Sahel weather looks a lot nicer — a daytime high of 32-33°C as far as the eye can see, though the mercury will cool to just 26°C overnight.

Let’s get started with the FDI rumors, shall we?

FROM THE RUMOR MILL-

#1- A piece of the company rolling out Banque Misr’s digital bank could be up for sale to an investor : Several Gulf investment funds are eyeing a minority stake in Misr Digital Innovation(MDI), a company set up by Banque Mis r to launch its digital banking arm, Al Mal reported yesterday, citing sources it said are familiar with the matter. The state-owned bank is willing to sell 10-20% of the bank, according to the sources. Foreign interest was later confirmed by Chairman Mohamed El Etreby, who told Asharq Business that the bank has received offers from foreign investors to become partners. El Etreby didn’t provide further information.

Going for the license: Banque Misr has applied to receive its digital banking license from the central bank, El Etreby said. Under new regulations (pdf) published last week, digital banks will need at least EGP 2 bn in capital to receive a license, and will need EGP 4 bn to be able to finance large companies. The bank’s current paid-up capital is EGP 2 bn and its authorized capital is EGP 2.5 bn.

Saudi branch inauguration in September: Banque Misr will open up its first Saudi branch in September, El Etreby said. The bank received the license to operate in Saudi from the Saudi Central Bank back in 2021.

#2- Offers for Wataniya could be in : The Sovereign Fund of Egypt has reportedly received three offers to buy stakes in military-owned fuel retailer Wataniya, Al Borsa reports. The Abu Dhabi National Oil Company (ADNOC), the Emirates National Oil Company (ENOC), and Saudi firm Petromin have all reportedly submitted offers, the news outlet says, citing informed sources.

Remember: Planning Minister Hala El Said said last week that the government had qualified three companies to conduct due diligence on the company after receiving six non-binding offers. The transaction is expected to close in October or November. The company — whose sale has been in the pipeline for a few years — was reported earlier this year to have attracted the interest of Adnoc.

HAPPENING TODAY-

Egypt Mining Forum concludes today: International and local mining chiefs, investors and policymakers are gathering at the Nile Ritz-Carlton for the two-day Egypt Mining Forum.

HAPPENING THIS WEEK-

Seven gold exploration licenses up for grabs: The Oil Ministry will this week award seven gold exploration licenses to LSE-listed gold miner Centamin and Canadian firm Barrick Gold (listed on the NYSE).

The deadline for two USAID scholarships is approaching: The application deadline for the USAID Scholars Activity and USAID Egyptian Pioneers scholarship programs is this Thursday, 20 July. The programs offer scholarships to 250 Thanaweya Amma students in public, experimental and STEM schools. Know someone who should apply? Send them this link .

NEXT WEEK-

The National Dialogue is back: The National Dialogue will resume sessions on Tuesday, 25 July, Kamal Zayed, member of the dialogue’s board of trustees, told Al Masry Al Youm. The dialogue kicked off in May, holding three weekly sessions discussing political, economic, and social issues.

When does the national dialogue process end? Sessions have been on pause since the Eid Al Adha break, and officials have said it’s too early to tell when the public policy-making fest might wrap up.

THE BIG STORIES ABROAD-

Key Ukrainian port targeted as Russia leaves grain pact: Russia yesterday fired missiles at Ukraine’s Black Sea Odesa port, one of the country’s most important ports for shipping grain, in what it said was a revenge attack following Ukraine’s targeting of the bridge linking mainland Russia with Crimea.

Grain pact dead: The strike on Odesa came a day after Moscow said it would not be renewing the grain export pact with Ukraine, a move that prevents Kyiv from using its Black Sea ports to export grains and other commodities overseas. The end of the agreement is stoking fears of a return to the soaring food prices and global shortages prior to the signing of the pact in 2022.

ALSO- Trump targeted for election interference: The former president’s statements yesterday that he is under investigation by a grand jury for his efforts to remain in power following the 2020 election are getting a lot of attention globally this morning. ( Associated Press | Reuters | Financial Times | New York Times | Washington Post)

AND- Israeli protests spread: Israeli protests against the hard-right government’s push to overhaul the justice system are spreading, with demonstrators yesterday marching into the Tel Aviv stock exchange and train stations, according to Bloomberg.

CIRCLE YOUR CALENDARS- The Enterprise Finance Forum is taking place on 18-19 September at the St. Regis Hotel in Cairo. This flagship forum is the latest in our must-attend series of invitation-only, C-suite-level gatherings that allow senior members of our community to openly and frankly discuss critical issues in key sectors of the economy.

TAP OR CLICK HERE if you want to express interest in attending. We’ll be sending out the first batch of invitations soon.

Do you want to become a commercial partner? Ping a note to Moustafa Taalab, our head of commercial, or fill out this form and we’ll be in touch.

ENTERPRISE IS LOOKING FOR SMART, TALENTED PEOPLE of all backgrounds to help us build some very cool new things. Enterprise — the essential morning read on all the important news shaping business and the economy in Egypt and the region — is looking for writers, reporters and editors to help us build out new publications.

NEVER WORKED IN A NEWSROOM BEFORE? We have the Enterprise Business Writing Development Program. Whether you are a recent graduate, an industry vet, or looking to switch careers, the Enterprise Business Writing Development Program will give you the tools you need to tell the most important stories to our audience of C-suite officials, government ministers, diplomats, financiers, investors and entrepreneurs.

Not an internship program — a career: The three-month program will see full-time, paid participants take part in workshops and lectures from veteran business journalists, while also working on and filing stories that will run on any of our publications. Those who have successfully completed the program, will then be given long-term job offers.

Apply directly to jobs@enterprisemea.com and mention “reporter development program” in your subject line.

*** It’s Hardhat day — your weekly briefing of all things infrastructure in Egypt: Enterprise’s industry vertical focuses each Wednesday on infrastructure, covering everything from energy, water, transportation, and urban development, as well as social infrastructure such as health and education.

In today’s issue: Infrastructure players reported solid 1Q 2023 earnings, thanks in large part to the EGP weakening against the greenback.

Tags:

banking Banque Misr investment watch M&A Watch WHAT WE’RE TRACKING TODAY

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Capital markets

Beltone’s EGP 10 bn capital increase covered as subscription closes, the largest transaction of its kind on the EGX

Beltone wraps up huge capital increase: Investors fully subscribed to Beltone blockbuster EGP 10 bn capital increase, the company said in an EGX disclosure (pdf) yesterday. The rights issue was 98% covered by investors during the first phase of subscription, which ended last week. The remaining shares were sold during a second subscription phase that closed yesterday — and that was nearly 5.5x oversubscribed. In total, the transaction placed 5 bn new shares in the market.

Beltone now has global institutional investors on its shareholder list, group CEO Dalia Khorshid said in a statement (pdf) out last night. “We are pleased [with] … the support we have received from existing shareholders as well as new investors who have participated, amongst them prominent global institutional investors,” she said, calling it a “testament to our transformation plan aiming at value-driven growth.”

Beltone has done a 180° shift since Khorshid’s appointment by the UAE’s Chimera last year, recruiting an all-new team of senior execs (including CEOs for key lines of business), restructuring, and “investing in our digital future,” she said. “As a team, we look forward to building on that foundation as we grow at home and across global markets, calling on data-driven fundamentals to create growth for our shareholders,” Khorshid added.

A reinvigorated Beltone is good for the market, as we’ve written previously, harkening back to a day when the three-way race between EFG Hermes, CI Capital and Beltone delivered strong competition at home and beyond.

Beltone’s capital increase ≠ Orange or CIB: The nature of the transaction is fundamentally different. The largest single capital increase in Egypt was in March 2020, when France’s Orange used a capital increase to inject EGP 15 bn into Orange Egypt. CIB last year executed a capital increase of a bit less than EGP 10 bn by issuing new shares to existing stockholders, paid out of the company’s reserves.

The key here is that Beltone went to market to raise fresh capital — and welcomed plenty of new shareholders in the process, including both high-profile global and regional institutions. Egyptian retail investors also clamored to be allocated shares, as the oversubscription ratio on the second round of the increase shows.

Chimera is Beltone’s majority shareholder: Abu Dhabi-based investment company Chimera Investments last year acquired 56% of the company from Orascom Financial Holding in a transaction that valued the company at EGP 690 mn. Chimera, a unit of Royal Group, is helmed by our friend Seif Fikry, a veteran of regional financial markets.

Market reax: Beltone’s shares closed down 2.4% at EGP 4.07 per share yesterday. The benchmark EGX30 was up 0.6% yesterday in weak trading ahead of the holiday long weekend.

Tags:

Ahmed Abou Hashima Beltone Financial capital markets Chimera Investment financial services M&A Watch non-banking financial services

M&A WATCH

Egypt’s MTI to acquire 40% of B Investments’ B Pharma

MTI joins with B Investments to invest in pharma sector: EGX-listed firm MM Group for Industry and International Trade(MTI) is set to acquire a 40% stake in B Investments subsidiary B Pharma for EGP 205 mn, it said in an EGX disclosure (pdf) yesterday . MTI’s board of directors has approved the acquisition and its CEO is on course to sign the investment and subscription agreement. This values the firm at some EGP 512.5 mn, according to our math.

It’s a 40-60 split: B Pharma is set to be a joint venture between MTI and B Investments, with the latter set to hold a 60% stake, MTI’s investor relations head Ashraf El Ghannam told us.

B Pharma? Conceived recently by private equity firm B Investments, B Pharma is an SPV with a mandate to invest in the pharma sector, according to B Investments’ IR Head Omar El Labban, who told us that it will invest in El Ezaby Pharmacy. It will invest EGP 500 mn in an investment platform that B Investments established jointly with the Sovereign Fund of Egypt (SFE), with that platform in turn owning a 49% stake in El Ezaby pharmacies.

Remember: The SFE’s healthcare sub-fund and private equity firm B Investments in May set up EZ International, a pharma logistics and distribution firm in partnership with El Ezaby. This came a few weeks after the private equity outfit agreed to invest up to EGP 500 mn in the SFE’s sub-fund under two separate agreements.

B Pharma to get off the ground very soon: B Investments and MTI will complete the capitalization of B Pharma in the next few days, El Labban said.

Big plans ahead: B Pharma and the SFE aim to expand El Ezaby’s presence, with plans to double the number of its branches to 500 over the next five years, El Labban said.

Tags:

B Investments B Pharma El Ezaby Pharmacy investment watch M&A Watch MM Group pharma private equity Sovereign Fund of Egypt

INDUSTRY

Investors pitch for three three fertilizer complexes worth USD 1.6 bn

More investment into the local fertilizer sector could be on the way:The General Authority for the Economic Zone of the Golden Triangle has received three offers from local and international investors to establish fertilizer complexes in the so-called Golden Triangle in Red Sea governorate, authority Chairman Adel Saeed told Asharq Business on the sidelines of the Egypt Mining Forum. The three facilities would require a combined USD 1.6 bn of investment, he said.

The Golden Triangle: The Golden Triangle refers to an area of land stretching from the Red Sea port towns of Safaga and Quseir to Qena on the Nile. The area is known for being rich in phosphates, minerals that can be used to manufacture fertilizer.

#1- A consortium of Australian companies including consultancy firm Lionsbridge and electrical contractor Westech wants to invest USD 875 mn to set up a phosphoric acid production plant. Asharq first reported on this proposed project in May, citing an anonymous government official.

#2- The EGX-listed Egyptian Financial and Industrial Company has requested to build a USD 600 mn fertilizer factory on a 100-feddan land plot. The government is in the process of forming committees to appraise the land and allocate it for industrial activity .

#3- Egyptian businessman Mahmoud Moharram wants to establish a phosphate fertilizer and phosphoric acid factory with initial investments of around USD 150 mn.

Egypt is a major fertilizer exporter: Fertilizer is one of Egypt’s largest exports and last year brought in more tha n USD 2.3 bn , making it the ninth largest export of fertilizer in the world, according to UN data . Most of the production of the proposed factories will be directed to export, a plan that’s especially viable considering the proximity of the factories to Red Sea ports at Safaga and Ain Sokhna.

Tags:

fertilizers industry Manufacturing petrochemicals

DEBT WATCH

Talaat Moustafa plans EGP 500 mn future flow securitization

Talaat Moustafa to issue EGP 500 mn securitization: Talaat Moustafa Group (TMG) is planning to raise EGP 500 mn by securitizing future cashflows, Al Mal reports, citing sources it says are in the know. The bonds will be backed by future income generated by subscriptions to its sports clubs in Madinaty and Al Rehab. Enterprise was unable to reach representatives of TMG for comment on the report.

Future flow securitization: Future flow securitization differs from traditional securitization in that it allows the securitization of payments that aren’t yet on the company’s balance sheet, giving companies access to liquidity without needing a big portfolio of accounts receivables. Future income is packaged into securities and offered to investors to raise capital, giving companies a new way to access liquidity.

A first-of-its-kind: TMG will be the first company to use income from sports memberships as collateral for a securitized bond issuance, and would be only the second to issue future flow securities after CIRA debuted them in the local market last year.

Advisors: EFG Hermes will provide financial advice on the issuance, according to the news outlet.

Tags:

debt watch EFG Hermes real estate securitization Talaat Moustafa Group

Real estate

Heliopolis Housing has received an offer for its Heliopark project

HHD receives Heliopark offer: Heliopolis Housing and Development’s (HHD) board of directors has agreed to study an offer submitted for the Heliopark project, the company said in a filing (pdf) t o the EGX, without providing further details.

HHD is on the hunt for a new co-developer: The state-owned, EGX-listed company put the New Cairo project back out to tender after scrapping a partnership agreement with Mountain View earlier this year, citing the current economic conditions and rising land valuations.

Gulf investors have apparently shown an interest: Emirati real estate giant Aldar Properties reportedly expressed interest earlier this year in co-developing the project. Saudi real estate developer Alameriah has also been rumored to be offering to acquire 70% of the company for USD 400 mn. HHD denied receiving any offers at the time.

Tags:

Heliopolis Housing and Development real estate

EARNINGS WATCH

CIRA Education revenues climb but rising rates squeeze profits

CIRA revenues climb 23% in 9M 2023: CIRA Education reported adjusted net income EGP 353.1 mn in 9M 2023, down 21% y-o-y on the back of higher financing costs, according to its earnings release (pdf ). Revenues climbed 23 % y-o-y to EGP 1.80 bn during the same period, driven by its expanding K-12 network and early childhood education offering, and adding Badr University in Assiut to its higher education platform.

K-12 + higher ed enrolment is growing: CIRA’s higher education segment is growing rapidly, with two universities now in operation: Badr University in Cairo (BUC) and Badr University in Assiut (BUA). CIRA’s overall student capacity increased by 36% y-o-y to 34k students following the inauguration of BUA. Utilization declined by 9% following the opening of the university, which CIRA said “creates significant potential for future growth.” Meanwhile, the group’s K-12 education segment saw a 5% y-o-y increase in student numbers, which reached 32.7k. Capacity also increased by 3% y-o-y. The company owns and operates 25 K-12 schools across Egypt, and recently added a new school in Qena at the beginning of the academic year.

What they said: “Despite the current challenging economic landscape, our organization has achieved exceptional results and continues to make significant strides in the education sector,” CEO Mohamed El Kalla said in a statement. “In the midst of mounting inflation, our focus on efficiencies and economies of scale has allowed us to maintain a minimal margin contraction on the operational level. While our operational profitability came in slightly 2-3% below the initially targeted margin, we anticipate a positive shift in our margins for the upcoming academic year,” he added.

Tags:

CIRA Education earnings watch Education

LAST NIGHT’S TALK SHOWS

Talk shows cover latest efforts to boost tourism investment

It was a busy night on the airwaves, with the nation’s talking heads covering the cabinet meeting on tourism, the latest on the dengue fever outbreak in Qena, and the prolonged problems facing the automotive sector amid the FX crunch.

Madbouly meets private-sector tourism investors: Prime Minister Moustafa Madbou ly yesterday chaired a meeting with a number of private-sector players focused on increasing hotel rooms and improving transport networks for tourists, according to a cabinet statement. “The meeting focused on hotel investment and ways to increase it over the coming five years by 200k hotel rooms,” tourism investor Hossam El Shaer told Kelma Akhira’s Lamees El Hadidi ( watch, runtime: 7:06). “A large number of the upcoming hotel rooms will be constructed in the North Coast … We need to add the North Coast to our tourism map,” he added. Private-sector players will also meet with officials from the Sovereign Fund of Egypt to discuss plans to transform the vacated government buildings in Downtown Cairo into hotels.

Investment incentives to boost tourism investments: All tourism projects will be eligible for single approval, known as the “golden license,” and will receive the necessary approvals to start operations within 20-days of applying, Madbouly said. The government is also working on a number of incentives to ensure land availability for tourism projects, and will also offer “incentives in the form of tax breaks, financing facilities, and land allocation,” El Shaer told Yahduth Fi Masr ( watch, runtime: 6:31).

REMEMBER- The Tourism Ministry wants to attract a record 15 mn tourists to Egypt this year, with the aim to attract as many as 30 mn tourists per year by 2028.

ALSO ON THE AIRWAVES-

All is not well in the car market: “We have an issue with importing … new cars are unavailable in the market, while the user cars market is either nonexistent or extremely overpriced.” Khaled Saad, secretary-general of the Egyptian Association of Automobile Manufacturers, told Ala Mas’ouleety ( watch, runtime: 5:21). “Vehicle prices at the moment are unacceptable and the Egyptian consumer cannot afford to pay them,” he said, adding that the core of the problem is the FX crisis.

Remember: Auto sales have plung ed more than 70% y-o-y in the first five months of 2023 as the FX crunch and soaring inflation weighs on the sector. Sales volumes fell more than a third in 2022 after capital controls in place for most of the year made it almost impossible for distributors to import cars and components, and forced a number of global car manufacturers to suspend sales to Egypt.

Dengue fever was still on the airwaves: After the Health Ministry diagnosed the mysterious disease outbreak in Qena as dengue fever, the nation’s talking heads continued to discuss what it all means, how it is transmitted, and how to prevent its spread. Yahduth Fi Masr ( watch, runtime: 4:50) and Masa’a DMC ( watch, runtime: 8:06) had the news.

How to avoid a heat stroke 101: Masa’a DMC’s Ramy Radwan ( watch, runtime: 12:25) walked his viewers over the necessary steps to avoid heat exhaustion and heat strokes amid the intense heat wave sweeping the globe. “Avoid direct sun exposure between the hours of 12 pm and 4 pm and drink loads of water,” he said.

Tags:

automotive health LAST NIGHT’S TALK SHOWS tourism

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EGYPT IN THE NEWS

Egypt court hands human rights researcher 3-year jail term

Human rights is leading the conversation in the international press this morning: Human rights researcher Patrick Zaki has been sentenced to three years in prison for “spreading false news,” the Egyptian Initiative for Personal Rights ( EIPR ) said yesterday. Zaki spent almost two years in pre-trial detention for writing an article in 2019 about his experience as a Coptic Christian, before being released in December 2021 ahead of the trial. Zaki will not be able to appeal against the judgment. ( Associated Press | AFP | BBC | New York Times | DW)

Tags:

human rights

ALSO ON OUR RADAR

MEDCOM signs EGP 1 bn MoU to develop infrastructure at Madinet Masr’s Taj City. PLUS: New mining exploration tender, Shanghai Shengda

REAL ESTATE-

MEDCOM to develop infrastructure at Madinet Masr’s Taj City project: EGX-listed real estate developer Madinet Masr has inked a EGP 1 bn MoU with Misr Engineering Development Company (MEDCOM) to carry out infrastructure works in its Taj City development, it said in a statement (pdf) yesterday. Under the memorandum, the contractor will develop the water networks, roads, lighting and utilities at Taj Ville, Shalya, Lake Park, Taj Gardens, and the northern road to Park Residence, all located in Taj City. The work is expected to be completed within 15 months.

MINING-

Gov’t is cooking up an international bid for mineral exploration: The government plans to launch an international tender for the exploration of minerals in the eastern and western deserts before the end of the year, Asharq Business reports, citing sources with knowledge of the matter. The tender is part of the state’s plans to draw USD 1 bn of fresh investment in the mining sector. It will see companies bidding for ores and other minerals — such as iron, phosphate, copper, and white sand — in over 200 blocks of at least 16 sq-km each.

Remember: The Oil Ministry is expected to award seven gold exploration licenses to LSE-listed gold miner Centamin and Canadian firm Barrick Gold this week.

MANUFACTURING-

Shanghai Shengda to set up shop in SCZone: Chinese textile manufacturer Shanghai Shengda will establish a USD 40 mn ready-made garments factory at the Abo Khalifa Industrial Zone, under an agreement inked with the Suez Canal Economic Zone (SCZone), according to a statement. The factory is expected to produce 43 mn items each year, all of which would be exported to the US. It is also expected to create 1.2k jobs.

Remember: The company signed an MoU for the project during the SCZone’s recent roadshow in China and Hong Kong , where CEO Walid Gamal El Din and his accompanying delegation met with a number of Chinese business leaders and investors in efforts to drum up interest in Egypt.

FINTECH-

Egyptian startups join Fintech Galaxy: Over 10 Egyptian startups — including BNPL platform Sympl, AI startup Synapse Analytics, and regtech company Valify Solutions — have joined the Dubai-based open finance platform, Fintech Galaxy, taking advantage of its application programming interface (API) FINX, according to a press release. The companies will be able to access financial data, allowing them to offer personalized services, expand their customer base, and accelerate operations.

FINX? The API allows firms to offer “ flexible BNPL schemes, personalized, AI-driven financial services, accurate credit scoring, risk assessment, and predictive financial management tools,” the statement reads. The API was developed by Fintech Galaxy, an open banking platform operating in Egypt, the UAE, Bahrain, Saudi Arabia, Lebanon, and Moldova.

Tags:

ALSO ON OUR RADAR Egypt-China relations infrastructure Madinet Masr Manufacturing MEDCOM mining real estate Shanghai Shengda

PLANET FINANCE

Global banks are pricing in a soft landing as greenback weakens

Investment banks bet on weakening USD: Major global investment banks — including Morgan Stanley, JPMorgan, Goldman Sachs, and HSBC — have all decreased their optimistic USD forecasts or cut their negative forecasts even further after US inflation fell to its slowest pace since March 2021 in June, the Financial Times reported. The inflation figures pushed the USD to a 15-month low on increasing expectations that the Federal Reserve can follow through with its monetary tightening policies without hurting the economy. “Signs of further improvement in the global growth-inflation mix and a US soft landing sow the seeds for USD weakness ahead,” HSBC analysts said in a note.

The EUR is rallying as the USD sinks: The EUR is on track for its longer rally against the USD since 2004 as the greenback weakens, according to Bloomberg. The EUR jumped 0.4% during yesterday’s trading to USD 1.1276, its highest level since early 2022.

Rising rates are taking their toll on corporate debt: The rising threat of corporate debt defaults around the world is becoming more pressing as more companies see their debt downgraded to junk and borrowing costs continue to climb, Reuters reports. Retailer Casino is in court-backed talks with lenders over some EUR 6.5 bn of net debt while Swedish landlord SBB got downgraded to junk in May, threatening Sweden's precarious property market — among others engulfed by debt. S&P Global expects default rates for junk-rated companies in the US to rise to 4.25% by March 2024 from 2.5% this March, with their European counterparts expected to see an increase to 3.6% from 2.8%.

The market is shrugging it off: Last week, t he cost of insuring exposure to a basket of European junk-rated securities hit its lowest level in a little more than a year, implying that investors aren’t taking the idea of a coming mass-default all that seriously. “You have a lot of complacency in the market, if you think that statistics show that we have had already as many defaults globally in the first five months of 2023 as in the whole 2022,” said one fixed income analyst.

EGX30	17,608	+0.6% (YTD: +20.6%)
USD (CBE)	Buy 30.84	Sell 30.96
USD at CIB	Buy 30.85	Sell 30.95
Interest rates CBE	18.25% deposit	19.25% lending
Tadawul	11,769	-0.1% (YTD: +12.3%)
ADX	9,698	+0.2% (YTD: -5.0%)
DFM	4,022	+0.1% (YTD: +20.6%)
S&P 500	4,558	+0.8% (YTD: +18.8%)
FTSE 100	7,454	+0.6% (YTD: 0.0%)
Euro Stoxx 50	4,370	+0.3% (YTD: +15.2%)
Brent crude	USD 79.63	+1.6%
Natural gas (Nymex)	USD 2.62	+4.3%
Gold	USD 1,981.10	+1.3%
B T C	USD 29,781	-0.5% (YTD: +80.0%)

THE CLOSING BELL-

The EGX30 rose 0.6% at yesterday’s close on turnover of EGP 1.52 bn (21.3% below the trailing 90-day average ) . Foreign investors were net sellers. The index is up 20.6% YTD.

In the green: Heliopolis Housing (+5.5%), Qalaa Holdings (+4.1%) and Ibnsina Pharma (+4.0%).

In the red: Taaleem Management Services (-1.3%), Ezz Steel (-0.8%) and Egypt Kuwait Holding (-0.8%).

Tags:

ADNOC banking Financial Markets interest rates Planet Finance

AROUND THE WORLD

Saudi Arabia, Turkey strengthen ties with fresh economic agreements

Saudi-Turkish economic ties are warming: A number of Saudi and Turkish companies signed 16 coordination agreements and MoUs worth SAR 2 bn (c.USD 533 mn) during Turkish President Recep Tayyip Erdogan’s visit to the country on Monday, Asharq Business reports, citing Saudi Housing Minister Majid Al Hogail. The agreements cover a number of sectors, including industry and real estate, he said on the sidelines of the Turkish-Saudi Business Forum. The two countries also signed five MoUs that will see them strengthen ties in energy, defense, and direct investment, the news outlet reported separately.

Remember: Erdogan is visiting KSA, Qatar and the UAE this week to try and attract as much as USD 25 bn in fresh investment to shore up the ailing Turkish economy.

Tags:

Around the World MbS Middle East politics Recep Tayyip Erdogan Saudi Arabia Turkey

HARDHAT

How EGX-listed infrastructure players performed in 1Q 2023

Infrastructure players reported solid 1Q 2023 earnings, thanks in large part to the EGP weakening against the greenback, with rising revenues and stabilizing margins seen in the construction and infrastructure industry. The positive performance in the first quarter of the year comes despite expectations that these companies may struggle to maintain the same momentum through the end of 2023, according to analysts we spoke with. Falling volumes of new projects as the government cuts back on non-priority infrastructure spending will likely push these companies to tap international markets for FX-denominated projects, our sources suggest.

Today, we look at three major infrastructure players: Hassan Allam Holding, as well as EGX-listed Elsewedy Electric and Orascom Construction (OC). All three companies have continued to face inflationary pressures that are weighing on the macroeconomic environment, but still reported rising net income during the quarter:

Elsewedy Electricbooked (pdf) EGP 2.91 bn in net income after minority interest, jumping 281.8% y-o-y, with revenues rising 79.5% y-o-y to EGP 33.3 bn during the quarter. The company’s performance was buoyed by its wires and cables, and turnkey projects segments, as well as its “export-driven focus.”
Meanwhile, Orascom Construction’s net income attributable to shareholders almost tripled y-o-y to USD 36.1 mn in 1Q 2023 as FX gains resulting from its net asset position in Egypt offset a decline in revenues, which fell 18% y-o-y during the quarter. The company’s Middle East and Africa operations saw a 40% y-o-y decline, while US revenues rose 50% to USD 356.9 mn. OC’s backlog — a large part of which is in Egypt — dipped a marginal 1.2% to USD 5.5 bn during the quarter.
Hassan Allam Holdings saw a 180% y-o-y increase in newly awarded projects across different sectors in the quarter, although its new awards in Egypt’s infrastructure sector saw a “slowdown,” a company representative told Enterprise. “This increase was predominantly driven by projects in the industrial, transport, power, and healthcare sectors,” the representative told us.

Renewable energy projects played a big role in these companies’ 1Q performance, with green hydrogen projects leading that push, Prime Securities analyst Abdel Khalek Mohamed told Enterprise. Hassan Allam Utilities and UAE clean energy giant Masdar signed in November a framework agreement for a 2 GW green hydrogen plant in the Suez Canal Economic Zone. The two companies, along with Infinity, also announced a separate 10 GW wind project in Egypt, for which it signed a land allocation agreement last month. Elsewedy’s renewables segment also saw a 63% y-o-y increase in revenues.

A weaker EGP played in these companies’ favor: The EGP falling against the greenback over the past several months has actually done good things for these companies’ financials. The EGP slipped c.7% at the beginning of January to 26.49 against the greenback, marking the biggest single-day drop since last October’s devaluation. Throughout the quarter, the local currency fell c.24.9% to settle at EGP 30.96 / USD 1 at the end of March. For Elsewedy, for example, the changing FX rate resulted in EGP 1.3 bn in FX gains.

However, the country’s FX shortage is biting: Infrastructure and contracting companies are under pressure from Egypt’s ongoing FX crisis, as the government is pushing the timelines for implementing projects and rearranging its spending priorities to limit its FX spending. This will likely show its effects on the companies’ financials in the back half of the year, Al Ahly Pharos’ Radwa El Swaify told Enterprise.

Hiking prices can only go so far — and only for so long: Infrastructure companies raised their contract prices to protect their margins in 1Q 2023, while also taking advantage of stockpiled inventory that was purchased at lower costs in 4Q 2022, according to Mohamed. However, these companies won’t be able to hike their prices again unless the official FX rate rises, particularly as global commodity prices are cooling off, El Swaify suggests.

Margins weren’t affected by building material prices: Soaring prices of building materials, including cement and rebar steel, didn’t have a significant impact on companies’ margins because the costs were passed on to the end consumers, Mohamed explained to Enterprise.

This is all driving companies to look for new business outside of Egypt: Infrastructure players are likely to focus on securing projects that will be financed by international institutions, or else seek business outside Egypt, including in the Gulf, Mohamed predicts. Hassan Allam is also looking at markets such as Saudi Arabia, where the country’s Vision 2030 “is driving significant infrastructure reforms and investments,” the company representative told us.

Any renewed fall in the EGP’s value against the greenback before the end of the year would be a big help for the sector, although there’s no certainty that companies’ performance for the rest of 2023 will be as positive as the first quarter, El Swaify said. The sector is also expected to grapple with high levels of competition amid limited infrastructure spending, which will likely bite companies’ revenues and net income throughout the rest of the year, El Swaify said.

Your top infrastructure stories for the week:

Alstom to invest EUR 300 mn in Borg El Arab factories: French rail manufacturer Alstom plans to invest some EUR 300 mn in Egypt over the next three years to establish two factories in Borg El Arab to produce electrical systems and metro and monorail rolling stock.
More Chinese investments are coming to the SCZone: The SCZone and a number of Chinese companies have signed agreements to establish projects worth a combined USD 60 mn in investment.
Sprea Misr opens sulfuric acid factory: Egypt Kuwait Holding’s (EKH) petchem subsidiary Sprea Misr inaugurated a EGP 1.4 bn sulfuric acid production plant.
Concrete Plus brings in Saudi investor for tire plant: Concrete Plus has set up a JV with an unnamed Saudi investor to partner on its EUR 750 mn tire factory in the SCZone.

Tags:

earnings Elsewedy Electric Hardhat infrastructure Orascom Construction

CALENDAR

JULY

18-19 July (Tuesday-Wednesday): Egypt Mining Forum, Nile Ritz-Carlton, Cairo.

19-20 July (Wednesday-Thursday): Gov’t to pay out subsidies to second wave of applicants under its sixth export subsidy program.

20 July (Thursday): National holiday in observance of Islamic New Year.

22 - 24 July (Saturday - Monday): US Assistant Secretary of State for International Organization Affairs Michele Sison in Egypt.

23 July (Sunday): Revolution Day.

23 July (Sunday): National holiday in observance of Revolution Day.

25 July (Tuesday): National Dialogue.

25-26 July (Tuesday-Wednesday): Federal Reserve interest rate meeting.

27 July (Thursday): National Dialogue.

31 July (Monday): Application deadline for the Smart Green Projects initiative.

31 July (Monday): Emigration Ministry’s Egyptians Abroad conference.

Late July: Egypt’s first Environment and Climate Investment Forum.

Late July-14 August: 2Q2023 earnings season.

AUGUST

August: Hassan Allam Utilities + Agility to open Yanmu East logistics park.

2 - 3 August (Wednesday - Thursday): Gov’t to pay out subsidies to second wave of applicants under its sixth export subsidy program.

3 August (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

10 August (Thursday): Shalateen Mineral Resources gold mining tender closes.

22-24 August (Tuesday-Thursday): BRICS summit, Johannesburg, South Africa.

SEPTEMBER

September: Sustainable Debt Coalition Initiative agreed at COP27 to launch.

September: IDH to open first branch in Saudi Arabia.

September: The Egypt-Germany trade and investment joint conference in Cairo.

September: JETRO’s second delegation arrives in Cairo.

9-10 September (Saturday-Sunday): G20 summit, New Delhi, India.

10-12 September (Sunday-Tuesday): The International Agricultural Exhibition for Africa and the Middle East, Sahara.

13-14 September (Wednesday-Thursday): Hydrogen Egypt Summit, Nile Ritz Carlton, Cairo.

15 September (Friday): IMF to review USD 3 bn program.

15 September (Friday): Deadline for FX bureaus to comply with new capital requirements.

17-18 September (Sunday-Monday): Arab Security Conference and Exhibition, Nile Ritz Carlton, Cairo.

17-19 September (Sunday-Tuesday): Sharm Rendezvous, Rixos Premium Seagate, Sharm ElSheikh.

18-19 September (Monday-Tuesday): Enterprise Finance Forum, St. Regis Hotel, Cairo.

19-20 September (Tuesday-Wednesday): Federal Reserve interest rate meeting.

21 September (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

21-23 September (Thursday-Saturday): Narrative PR Summit, Somabay.

25 September (Monday): Nasdaq deadline for Swvl Holdings Corp to increase its market value of publicly held shares to a minimum of USD 15 mn.

25-26 September (Monday-Tuesday): Egypt to host the Asian Infrastructure Investment Bank’s annual board meeting, Sharm El Sheikh.

26 September (Tuesday): Prophet Muhammad’s birthday (TBC).

28 September (Thursday): National holiday in observance of Prophet Muhammad’s birthday (TBC).

28-29 September (Thursday-Friday) Medical Tourism Conference, Sharm ElSheikh.

OCTOBER

October: Deadline for ins. providers to link their databases with the FRA.

2-4 October (Monday-Wednesday): Sharm Rendezvous - Ins. Market, Rixos Premium Seagate, Sharm ElSheikh.

2-5 October (Monday-Thursday): ADIPEC 2023, Abu Dhabi National Exhibition Center.

6 October (Friday): Armed Forces Day.

9 October (Monday): The Narrative PR Summit, Somabay Red Sea.

9-11 October (Monday-Wednesday): Arabs Savings and Financial Literacy Conference, Four Seasons Hotel.

13 October- 20 October (Friday-Friday): The sixth edition of El Gouna Film Festival (GFF).

Late October-14 November: 3Q2023 earnings season.

15-17 October (Sunday-Tuesday): Egypt Automotive Aftermarket Exhibition, Cairo International Convention Center.

26 October (Thursday): Daylight saving time ends.

29-31 October (Sunday-Tuesday): Egypt Energy, Egypt International Exhibition Center.

29 October - 2 November (Sunday- Thursday): Cairo Water Week.

30-31 October (Monday-Tuesday): Intelligent Cities Exhibition and Conference, Dusit Thani LakeView, Cairo.

30-31 October (Monday-Tuesday): Global Business School Network (GBSN), American University of Cairo.

31 October - 1 November (Tuesday-Wednesday): Federal Reserve interest rate meeting.

NOVEMBER

2 November (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

9-15 November (Thursday-Wednesday): Intra-African Trade Fair, Cairo.

14-15 November (Tuesday-Wednesday): Destination Africa, Royal Maxim Palace Kempinski Hotel.

15-24 November (Wednesday-Friday): Cairo International Film Festival, Cairo.

19-22 November (Sunday-Wednesday): Cairo ICT, Egypt International Exhibition Center.

23 November (Thursday): Worldview Education Fair, Cairo. (Register here)

30 November-12 December (Thursday-Tuesday): COP28, Dubai.

DECEMBER

10-11 December (Sunday-Monday): eGlobe Expo, St. Regis Almasa Hotel, Cairo.

12-13 December (Tuesday-Wednesday): Federal Reserve interest rate meeting.

12-14 December (Tuesday-Thursday): Food Africa Expo, Egypt International Exhibition Center.

21 December (Thursday): Central Bank of Egypt’s Monetary Policy Committee meeting.

EVENTS WITH NO SET DATE

2023: The inauguration of the Grand Egyptian Museum.

Summer 2023: EGX to launch a shariah-compliant index.

1H 2023: GAFI roadshow set to launch to drum up foreign investment for golden licenses

1H 2023: Abu Dhabi Islamic Bank intends to launch a digital consumer finance company

2H 2023: Egyptian government expected to sign agreements with a consultant for the EuroAfrica electricity interconnector.

2H 2023: President Abdel Fattah El Sisi and Turkish President Recep Tayyip Erdogan expected to hold a summit.

3Q 2023: E-Finance to launch in Saudi Arabia.

4Q 2023: EGX to launch its new futures exchange.

End of 2023: A Developments’ first phase of the Lazoghly development completed.

2024: Standard Chartered Bank to open a branch in Egypt.

November 2024: Egypt to host the 12th session of the World Urban Forum (WUF12).

2Q 2025: Safaga Terminal 2 to initiate operations.

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