IPO WATCH- EFG Hermes to take Unionaire, Carbon Holdings public in 2018: EFG Hermes will reportedly manage the initial public offerings for Unionaire Group in 1H2018 and Basil El Baz’s Carbon Holding in 2H018, sources close to the matter tell Al Mal. The firm is also quarterbacking the IPO of the state-owned Banque du Caire in the first half of the new year, sharing top duties with HSBC. EGX Chairman Mohamed Farid had said recently to expect a “very strong” current of IPOs in 2018, with transactions slated in the chemicals, pharma, and real estate sectors. State energy company Enppi is also expected to list on the EGX in 2018.

M&A WATCH- Cairo Three A submits higher offer for NCMP, ADM to petition FRA: Cairo Three A submitted yesterday a higher offer of EGP 51 per share for the acquisition of 100% of the National Company for Maize Products (NCMP), the Financial Regulatory Authority (FRA) announced yesterday (pdf). This comes one day after the FRA rejected Archer Daniels Midland’s (ADM) bid of EGP 50 per share, which in turn had come to counter Cairo Three A’s initial offer of EGP 45 per share. The FRA had also turned down ADM’s first offer of EGP 35.56 per share, to the surprise of company executives, who said the acquisition was discussed with Investment Minister Sahar Nasr and meant to mark the launch of ADM’s expansion plans in Egypt. ADM has asked its legal consultant to petition the FRA to understand more about why their bid for NCMP was rejected, says Salah Tawfik, CEO of ADM subsidiary Medsofts.

The Agriculture Ministry is awaiting instructions from cabinet after a court ruling reinstating the zero-tolerance policy for ergot in wheat, Reuters reports. “The ruling was against a decision that was issued by the cabinet so we have to await directions from there to know whether it will affect our process … Until then it is business as usual,” Minister Spokesman Hamid Abdel Dayem says. He added that the court ruling, if implemented, would be retroactive, potentially impacting cargoes that have already been contracted. “If implemented, the court order would restore a strict import rule that suppliers have said is impossible to guarantee and which has them led them to add hefty premiums to their tender bids to account for the added risk of cargo rejection,” Reuters notes. “This will take us back to the zero point, which will lead to zero offers in tenders and a lack of supply for the private sector,” said Hesham Soliman, president of grain traders Med Star.

Natural gas market to be fully deregulated by 2022: The Oil Ministry is reportedly planning to fully implement the Natural Gas Act, which deregulated the market, by 2022, ministry sources tell Al Shorouk. The state will complete its transition to a regulator in five years, leaving the sector wide open for private operators to import and distribute gas to the national grid, the source added. Last month, Prime Minister Sherif Ismail had appointed Karem Mahmoud to head the new regulatory body. The starting gun for the law will be when the executive regulations are ratified, which Oil Minister Tarek El Molla said was coming any day now.

House signs off on Dabaa contracts, moves them along to El Sisi to set a signing date: The House of Representatives’ general assembly signed off on the contracts for the USD 30 bn Dabaa nuclear power plant yesterday, Al Borsa reports. The four contracts with Russia’s Rosatom have been sent to President Abdel Fattah El Sisi to review and set a date for the signing, which Electricity Minister Mohamed Shaker had announced last month would happen before the end of the year after a series of mismatched reports surfaced. Under the agreement, the Russian government will offer Egypt a USD 25 bn loan, to finance development work at the 4800 MW plant, with an annual interest of 3%. The remainder of the amount will be sourced locally, according to House Energy Committee deputy Essam Abdallah. Russian President Vladimir Putin is expected to visit Egypt to attend the signing ceremony.

No link to Egypt flights: President Abdel Fattah El Sisi pointed out in Sharm El Sheikh last week that there is no relationship between Dabaa and Cairo’s bid to get Moscow to restore flights to Egypt that were suspended after the Metrojet terror attack.

Abdallah said we can expect the House to start debate in about two weeks’ time on legislation that will establish an authority to oversee nuclear power projects. Disagreements in the House are currently over tax exemptions and customs breaks awarded to the authority under the proposed law, which the Ismail Cabinet approved in September.

House will not endorse GERD until Egypt’s share of Nile water is secure: Leading MPs said yesterday they would refrain from voting on the 2015 agreement on the Grand Ethiopian Renaissance Dam (GERD) until Egypt’s share of the Nile water is secured in writing, African Affairs Committee deputy Maged Abo El Kheir tells Al Mal. Discussions over GERD had reached a stalemate earlier this week, but El Sisi is expected to meet with Ethiopia’s prime minister in Cairo in December to attempt a work-around the impasse.

LEGISLATION WATCH- Universal Healthcare Act will impose fees on healthcare, pharma sectors: It appears that tobacco isn’t the only sector which is paying into the Universal Healthcare Act. The EGP 600 bn healthcare plan mandates a series of fees on the healthcare sector that range from EGP 10,000 to EGP 500,000 for various licenses and administrative filings. Companies looking to open hospitals, clinics and pharmacies must pay a fee which will go into funding the system. Establishing a pharma factory will also require companies to pay into the system, according to Al Mal. The House of Representatives’ Healthcare Committee, which is currently deliberating on the law, is seeking revenues of up to EGP 40 bn from these fees to fund the healthcare system, according to the committee’s deputy chair Ayman Aboul Ela.

LEGISLATION WATCH- The Ismail Cabinet approved amendments to the Unified Building Code during its weekly meeting yesterday and referred the bill to the Council of State (Maglis Al Dawla) for review, according to an official statement. The amendments focus on facilitating the process of issuing licenses, tightening safety codes, and better enforcement of the legislation. The bill will also establish a supreme council for urban planning and development that will be mandated with setting policy nationwide.

The final draft of the Social Welfare Act also received Cabinet’s stamp of approval yesterday. It will go to the House of Representatives for review at the beginning of next week, unidentified government sources tell Al Borsa. The draft law sets a minimum pension rate, will index annual pension increases to inflation, and will establish a new pensions fund. According to the source, the government wants to finalize all procedures for the legislation by the end of March 2018 and bring it into effect before the start of the new fiscal year in July.

The ministers also discussed a report from the Irrigation Minister on the latest developments in the Grand Ethiopian Renaissance Dam negotiations. Foreign Minister Sameh Shoukry also outlined the political dimensions of the situation.

Other key decisions taken during yesterday’s meeting include:

• Approving a EGP 2.8 bn direct order agreement with pharma companies producing cancer treatment medications;
• Signing off on a KWD 200,000 grant from the Arab Fund for Social and Economic Development to finance technical and economic feasibility studies for the 100 feddans project;
• Ratifying a presidential decree to extend the borders of Al Shorouk City to use the additional land for residential development projects;
• Approving and sent to the Council of State a draft law to restructure the National Council of Women;
• Approving amendments to the Prisons Organization Law that will allow prisoners to be eligible for parole after completing half of their prison sentence, instead of two-thirds;
• Agreeing to set up a committee headed by the Military Production Ministry to manage negotiations for the establishment of a factory to produce solar panels from silica sand.

Separately, Transport Minister Hisham Arafat signed a USD 150 mn agreement with Thales Spain to supply an automated railway signaling system, Al Masry Al Youm reports. The agreement will be funded through a World Bank loan carrying an interest rate of less than 1%, Arafat told reporters after the signing ceremony. The new signaling system will be used for the 180 km Assiut-Naga Hamady rail line and will allow trains to travel at 160 km/hr, up from 120 km/hr currently, Cabinet said in a statement. The system will take three years to be installed.

EARNINGS WATCH- A number of our friends were among those reporting earnings yesterday as the 3Q results season eases to a close. Among those with results out yesterday or overnight:

SODIC reported a 54% y-o-y jump in net profit to EGP 166.2 mn in 3Q2017. Revenues increased 10% y-o-y to EGP 584 mn for the period, driven mainly by deliveries, which remained on track with 297 units delivered compared to 287 in 3Q2016. Eastown Residences made up the bulk of the quarter’s deliveries at 63% of the total. “With gross margins for the quarter hitting the 40% mark in such an inflationary backdrop we are once again demonstrating our ability to generate superior profitability on our developments,” MD Magued Sherif said. “Our sales performance was very much in line with our expectations, given the limited inventory on the Mediterranean north coast and we remain on track to meet our 2017 financial and operational goals.” The company delivered the first units in its Courtyards developments in SODIC West during the quarter and plans to launch its New Cairo project SODIC East over the coming months, with expectations seeing it making significant contributions to profitability in 4Q2017.

Egypt Kuwait Holding Company grew its bottom line threefold during 3Q2017, posting net income of USD 41.7 mn on revenues that were 13% higher y-o-y at USD 86.5 mn. The quarter saw the company make “new headway in our efforts to streamline our portfolio by divesting from legacy businesses and affording our balance additional strength and liquidity that will usher in a new growth phase and continued value creation,” Chairman Moataz Al-Alfi said. EKH completed divestments worth over USD 200 mn during the quarter, in addition to funneling “proceeds from share sell-downs in non-operational platforms to the reduction of our debt exposure in the tune of USD 75 mn.” Management is optimistic about future prospects, especially given developments in natural gas with the Offshore North Sinai concession, and as the company “continues to push forward with other growth initiatives across our portfolio that target import substitute plays.”

Elsewedy Electric posted bottom-line growth of 116% y-o-y for 3Q2017, which came in at EGP 1.56 bn compared to EGP 720.7 mn in 3Q2016. Revenues also increased by 135.2% y-o-y to EGP 11.46 bn, driven largely by growth in the turnkey projects and wires and cables segments. Going forward, Elsewedy intends to remain focused on “the continued creation of sustainable, long-term value for stakeholders,” which has the company “actively seeking new avenues for growth in existing and new MENA markets.” The company is also squarely focused on internal strengthening as it does so, with CEO Ahmed El Sewedy noting that, “We are strengthening our organisation through the standardization of our internal procedures, adopting world-class corporate governance frameworks and developing our human resources as our key success pillar.”

Madinet Nasr Housing and Development posted a net profit after tax of EGP 246 mn in 3Q2017, a drop of 20% y-o-y. Top line was 3% lower y-o-y at EGP 560 mn, despite an increase in contracted sales and deliveries during the three-month period. The company attributed the drop largely to lower contributions from its Capital Gardens project, which is being co-developed with Palm Hills. On a nine-month basis, net profit grew 60% y-o-y to EGP 757 mn as the company continued to push forward with new launches at Taj City and new contracts at Sarai. CEO Ahmed El Hitamy noted that, “As we gear up for an accelerated deliveries and sales performance during the final months of the year, we remain confident in our ability to meet year-end targets, having already generated some EGP 3.6 billion in contracted sales during the nine-month period.”

Also reporting earnings yesterday:

• Orascom Development’s net profit for 3Q2017 reached EGP 92.5 mn, compared to a loss of EGP 46.0 mn in the same period last year. A pick up in unit deliveries led the turnaround. The company also noted it’s preparing to launch phase two of its business hub G-Space in El Gouna by mid-December.
• Oriental Weavers reported an 18% y-o-y drop in net profit after tax to EGP 109 mn in 3Q2017. This came despite a 64% y-o-y increase in sales revenues, which came in at EGP 2.6 bn.

US Congressional committee passes bill that could sanction Qatar: Qatar got a slap from the US Congress on Wednesday when the House Foreign Affairs Committee passed a bill that would sanction countries which finance terrorism, the Associated Press reports. In an apparent show of support to the Arab Quartet blockading Qatar, the Republican-led committee issued a scathing rebuke of the pariah state, particularly its support of Hamas. The legislation cited a March 2014 Treasury Department report that said Qatar "has for many years openly financed Hamas." What a waste of lobbying money.

Zimbabwe's Mugabe joins ranks of ousted state heads? Zimbabwean President Robert Mugabe became the latest state head to be taken into custody when military forces seized him and his wife in what is being perceived as a potential military coup, the Associated Press reports. The whereabouts of the 93 year-old and his wife are currently unknown, but army Major General Sibusiso Moyo confirmed they were in custody. “The Mugabes have joined the ranks of world leaders who were removed from power and taken into custody as a result of developments in their own countries.” Reuters also has the story.