Elsewedy eyes stake in Egypt’s combined-cycle power plants, Naguib looking at other potential investments through Tharaa: Elsewedy Electric is looking into potentially competing to acquire a stake in the three combined-cycle power plants the company co-built with Siemens and Orascom Construction, CEO Ahmed El Sewedy tells Hapi Journal. El Sewedy did not clarify whether his company is eyeing the 70% stake six international investors are already bidding for, or if it would look into some other form of partnership with Egypt’s sovereign wealth fund, Tharaa. Actis, France’s Engie, China Datang Overseas Investment, Edra Holdings, and Blacstone’s Zarou are all competing for the plant stake. Electricity Ministry source had said last week that Zarou is the top contender to acquire the stake, having submitted the best financial offer.

Elsewedy is also looking at other potential investments Tharaa will be offering up, including in the gas sector. El Sewedy noted that the fund may not necessarily have sufficient expertise in the sectors it’s currently eyeing up, but said he expects the fund’s management to tap experienced investors and partners to plug the gaps.

Naguib Sawiris, meanwhile, is keeping an eye out on a chance to invest with Tharaa in Egypt’s mining sector, the Orascom Investment Holding Executive Chairman tells Hapi Journal. Naguib said he would want his gold investment ventures with Tharaa to be limited to providing financing, and would not be looking to acquire a management role in any mining companies or ventures through the fund. The business tycoon also signaled his readiness to bid for a chance to restructure and improve the performance of Egyptian companies in the industries he’s familiar with. Among the projects he’s currently eyeing outside the mining sector is the planned overhaul of the Mogamma’ in downtown Cairo, as well as tourism investments in the area around the Grand Egyptian Museum.

In other Tharaa news, our friends at EFG Hermes reportedly advised on the fund’s USD 20 bn investment platform with Abu Dhabi Development Holding Company, according to Reuters Arabic. Helmy, Hamza & Partners also acted as legal counsel to Tharaa, two government officials tell the newswire. Tharaa and ADDH had signed the agreement last week to set up the joint investment fund, which will invest using a variety of structures in manufacturing, traditional and renewable energy, and technology, among other sectors. EFG declined Enterprise’s request for comment.

BUDGET WATCH- FinMin issues guidelines for state bodies' budgets for FY2020-2021 ahead of drafting full budget: The Finance Ministry has issued a set of guidelines for the state’s administrative units and service bodies to outline their internal budgets for the upcoming fiscal year, according to a cabinet statement. These entities are required to file their spending forecasts to ministry, which is currently preparing the overall FY2020-2021 state budget. The ministry is set to release its preliminary budget in 3Q2019-2020, the statement said.

What we know about the budget so far: The Finance Ministry has indicated it is eyeing GDP growth of 6.4% in FY2020-2021, up from a targeted 6% for the current fiscal year. The ministry is also planning to narrow the overall budget deficit to 6.2% in FY2020-2021, from an expected 7.2% this fiscal year. The budget will also look to lower Egypt’s debt-to-GDP ratio to 80%, as last week’s press reports indicated.

FRA holds consultations to prepare for introduction of short selling by the end of this year: The Financial Regulatory Authority’s (FRA) Capital Markets Advisory Committee has been meeting with industry stakeholders to review the system in place to launch short selling on the EGX, sources told Al Mal. The consultations are meant to put the final touches on the electronic system for the financial instrument ahead of its activation next month, the sources said. EGX Chairman Mohamed Farid said earlier this year that short selling would begin before the year was out, following expectations that it would be launched in the third quarter.

INVESTMENT WATCH- Egyptian healthcare company Speed Medical to invest EGP 160 mn in 2020: Speed Medical aims to invest EGP 160 mn next year in 30 labs and outpatient clinics, Chairman Mahmoud Lasheen told the local press. The company plans to self-finance EGP 100 mn of the investment, and secure a EGP 60 mn loan to cover the remainder. The company is also planning two capital increases this year and next, which would allow the company to move from the small-cap NileX, where it is currently listed, to the main market in early 2020. Lasheen had said last year that his company would list on the EGX within six months of debuting on NileX.

M&A WATCH- EKH’s bid to acquire a majority stake in Emisal Salts looks stalled: Egypt Kuwait Holding’s (EKH) acquisition of a majority stake in state-owned Emisal Salts appears stalled after shareholders pledged stock that in aggregate fell short of EKH’s target, EKH said in an EGX disclosure (pdf). No further details were provided, and it’s unclear if the tender offer has now been called off.

Background: The investment firm reportedly reached an agreement in July with majority shareholder National Bank of Egypt and the Chemical Industries Holding Company (CIHC), which owns 13.1% of Emisal, to acquire a 52.8% stake in the company. EKH submitted the tender offer back in February. It was facing competition from a consortium made up of Kuwait’s Al Madar Finance and Investment and the Saudi-Egyptian Industrial Investment (SEII), which bid EGP 700 mn for the company back in June.

M&A WATCH- Americana minority shareholders turn down Adeptio's offer price: Minority shareholders in the Egyptian International Tourism Projects Company (Americana) have rejected Adeptio's mandatory tender offer (MTO), which offered to buy Americana’s shares at EGP 3.9 apiece, according to Al Mal. The offer price is much lower than the EGP 24 / share range the minority shareholders previously asked for. The Financial Regulatory Authority (FRA) said earlier this week it is looking into the fair value report with Adeptio’s financial advisorafter receiving the original bid last week.

Background: Adeptio acquired 67% in Kuwait Food Company (Americana) in June 2016 following a two-year process, giving it indirect ownership of the majority of Americana Egypt. The FRA then ordered Adeptio to submit an MTO to buy the remaining shares in Americana Egypt earlier this year and cover the 9.563% of Americana that Adeptio didn’t already own, but Adeptio had argued that its indirect ownership in the company is less than 90% of its total capital and therefore does not require an MTO submission. Adeptio submitted an appeal against the order, which the FRA promptly rejected. The company then filed a suit with an economic court challenging the FRA’s rejection, but thecourt also dismissed the appeal. A 15-day grace period was set for Adeptio to submit the MTO after Adeptio had requested a 30-day extension on the initial deadline that expired on 21 October on the grounds that it has yet to complete its fair share evaluation on Americana, which the FRA approved.

M&A WATCH- Ezz Dekheila Steel acquires Ezz Flat Steel in a USD 356.07 mn transaction: Ezz Steel divested its full stake in Ezz Flat Steel, selling 35.3 mn shares to Ezz Dekheila Steel for USD 356.07 mn, according to a bourse disclosure (pdf). The transaction is part of a restructuring plan adopted by the parent company that also includes buying 100% of Al Ezz Rolling Mills.

T-bill yields fall slightly in first auction after rate cut: Yields on three-month and nine-month treasury bills fell yesterday in the first auction after the Central Bank of Egypt (CBE) cut benchmark interest rates by 100 bps. Official data yesterday showed that an auction of three-month t-bills fetched a yield of 15.380%, down almost a half-point from 15.878% on 12 November. Nine-month treasuries, meanwhile, yielded 15.098%, down more than 40 bps from 15.512%. The CBE made its third consecutive rate last Thursday, and its fourth of the year. It has now cut rates by 350 bps since August, having made a single 100 bps cut in February. The overnight deposit rate now stands at 12.25% and the lending rate is at 13.25%. The main operation and discount rates were both cut to 12.75%.

LEGISLATION WATCH- Draft SMEs Act gets early nod from House committee: The proposed SMEs Act, which would provide tax and non-tax incentives for small and medium-sized businesses to join the formal economy, received preliminary House committee approval yesterday, according to Masrawy. The current 76-article draft provides a legal framework to regulate SMEs and integrate them into the formal sector, SMEs Development Authority head Nevine Gamea said. The legislation still needs to pass committee-level discussions before making its way to the general assembly for a final vote. If approved, the bill would then be signed into law by President Abdel Fattah El Sisi.

What we know so far: The Finance Ministry said in September that the act would exempt SMEs from paying stamp tax and land registration fees. Fees to register contracts to set up companies and credit facilities would also be waived for the first five years after commercial registration. The SME tax incentives package could cost the government EGP 1.5-2 bn each year.

The legislation may also give SMEs preferential tax rates: An official with knowledge of an earlier draft told us in April that SMEs would pay a fixed rate of tax over a three-year period regardless of revenue growth. Government entities will also be working to issue licenses and ensure SMEs are included in public procurement tenders and auctions, Trade Ministry advisor Hisham Ragab told the local press at the time.

STARTUP WATCH- Egyptian pharmacy locator Chefaa eyes series A funding round to finance regional expansion: Chefaa, an AI-powered platform for buying pharma products, is planning a series A funding round in January 2020 to help the company begin its expansion beyond Egypt’s borders, the National reports. Chefaa is planning to kick off its regional expansion in the GCC, with Saudi Arabia as a starting point, before expanding into African countries such as Nigeria. The targeted size of its upcoming funding round was not disclosed, but the co-founders suggest they are focusing on experienced investors who will provide expertise along with funding. “We are targeting investors who can act as strategic partners to help us achieve our milestones. This includes investors with experience in the healthcare sector or in start-ups within the GCC and Africa,” co-founder and COO Rasha Rady tells the news outlet. Chefaa last secured a six-figure seed funding round from Flat6Labs and 500 Startups in August.

STARTUP WATCH- Tech investment fund A15 has doubled its initial investment in Dublin-based retail personalization platform Intouch, according to an emailed statement (pdf). The statement does not disclose the size of A15’s investment in the company, which Intouch CEO Sameh Abdallah says will be used to expand its presence in the Middle East. Intouch uses AI to collect data on customers at brick-and-mortar retailers, which it then uses “to optimize customer interactions and operations. The tool helps retailers with physical stores personalize the shopping experience and better connect their customers to appropriate products,” the statement says. Intouch’s technology is used by tier one retailers such as Egyptian convenience store Circle K.

MOVES- Egypt finally has an ambassador from the US of A: The United States’ new ambassador to Cairo is a professional diplomat named Jonathan Cohen (bio), who presented his credentials at the Egyptian Foreign Ministry yesterday, according to the US Embassy. This finally brings to an end a two-year period without a US ambassador to Egypt. Thomas Goldberger has been chief of mission and chargé d'affaires since Robert Beecroft left in 2017. Cohen most recently served as the US’ acting UN Representative from January to September 2019. He has worked in the US Foreign Service since 1987, holding several senior posts including deputy assistant secretary of state for European and Eurasian affairs. He has served in US embassies in Iraq, France, Cyprus, and Italy, among others.

EARNINGS WATCH- Egypt Kuwait Holding 3Q profit up 15% y-o-y: Egypt Kuwait Holding (EKH) a net profit of USD 38.2 mn in 3Q2019, up 15% from USD 33.6 mn a year earlier, according to a company earnings release (pdf). Revenues rose 19% during the quarter to reach USD 141.1 mn. Growth came from “successes across EKH’s segments and subsidiaries, driven by a multitude of operational developments” in its gas and fertilizers and petrochemicals arms. One a nine-month basis, EKH’s profits rose to USD 110.1 mn on revenues of USD 414 mn.

Outlook: EKH is optimistic about the final quarter of the year thanks to its healthy performance during the past nine months, which has “already surpassed its analyst consensus.” With the company’s strong net income in 3Q2019 and “with prospects continuously rising on the back of diverse operational growth strategies, we remain confident in our ability to deliver consistently increasing shareholder value,” said Chairman Moataz Al Alfi.

Palm Hills Developments’ (PHD) net profit after tax and minority interest dropped 54% y-o-y in 3Q2019 to EGP 93 mn, down from EGP 200 mn last year, the company said in a bourse disclosure (pdf). Revenues also halved during the quarter to reach EGP 1.1 bn. PHD’s 9M2019 net profits declined 15% y-o-y to EGP 544 mn, with revenues coming in at EGP 3.6 bn, a 36% y-o-y drop.

B Investments reported net profits of EGP 37.4 mn in 3Q2019, up from EGP 35.8 mn during the same period last year, according to its financial statements (pdf). B Investments is an active growth capital investor managed by BPE Partners.

Arabia Investments Holding’s (AIH) net profits dropped to EGP 7.4 mn in 3Q2019, from EGP 17.4 mn in 3Q2018, while revenues increased to EGP 321 mn from EGP 315 mn last yea, the company said in a bourse disclosure (pdf). The company’s 9M2019 profits dropped 37% to EGP 40.5 mn from EGP 64.3 mn in 9M2018 and revenues fell by 3% to EGP 969 mn from EGP 999 mn in 9M2018.

Porto Group’s 3Q2019 profits plunged to EGP 11.2 mn from EGP 62.7 mn, while revenues during the quarter rose to EGP 587.26 mn from EGP 496.9 mn last year,the company’s financial statements showed (pdf). Net profits during the first nine months of the year also fell to EGP 91.3 mn from EGP 115.8 mn.

Eastern Company reported profits of EGP 1 bn in 3Q2019 up from EGP 991 mn in the same quarter last year, while revenues grew to EGP 3.7 bn from EGP 3.4 bn in 3Q2018,the company said in a bourse disclosure (pdf).

Arabian Cement reported a EGP 7.59 mn net profit in 3Q2019, up from EGP 2.07 mn in the same period last year, according to the company’s quarterly financial statement (pdf). Despite the positive quarter, profits largely collapsed during the rest of the year: The company has made EGP 32.97 mn in profit during the first nine months of the year, significantly down from the EGP 214.86 mn made in the equivalent period in 2018.

Naeem Holding made a net loss of USD 2.16 mn in 3Q2019, down from the USD 972k loss made in the same quarter in 2018, according to the company’s quarterly financials (pdf). Naeem is USD 2.4 mn in the red for the first nine months of 2019, compared to the USD 1.46 mn profit made in 9M2018.