Pre-Tading Thoughts

Egypt's PMI rose in June to 49.1, its highest level in almost two years. The cabinet has denied rumors circulating about the Customs Authority banning the import of a list of goods for a three-month period. Cabinet approved a decision lifting current controls on foreign ownership of real estate, provided that foreigners pay for their purchases in hard currency and via bank transfer to a state-owned bank. Ministers approved two draft decisions allocating state owned land in New Cairo and Sixth of October to international real estate developers, to be paid for in USD. Foreign investors will be allowed to register as importers with 10-year licenses. The Parliament's Economic Affairs Committee approved amendments to the Investment Law aimed at expanding incentives, while the Budget and Planning Committee approved a draft bill reinstating taxes on state entities. According to the Institute of International Finance (IIF), adopting a flexible exchange rate will be key to resolving the imbalances and rebuilding reserves. The Finance Ministry will pay out the latest batch of export subsidies on 12-13 July. The cabinet approved a USD733 mn loan from the Japanese International Corporation Agency (JICA) to finance the construction of Cairo Metro Line 4. Cabinet approved in principle a plan put forward by French manufacturer Alstom to establish an industrial complex in Alexandria’s Burj Al Arab. Scatec signed a land allocation agreement with the Electricity Ministry for a planned 5-GW wind farm in Sohag governorate. Infinity Power acquires Lekela power for USD850 million. EGX announced that TAQA will start trading next Sunday, 9 July 2023. We remind you with our multiples-based valuation which valued TAQA at EGP7.8 billion, or EGP5.75/share. According to the IFA report of Both SKPC and Ethydco, SKPC (including 20% of Ethydco) is worth EGP23 billion (EGP30.6/share) and Ethydco is worth EGP33.5 billion. This translates into a 1.45x swap ratio. The valuation of the new combined entity will be EGP50 billion. The new entity’s total number of shares should add up to 1.6 billion with a valuation of EGP30.6 per share. Accordingly, the upside potential here is the difference between the current market price (EGP23.81) and the IFA’s FV of EGP30.6/share, i.e., 28.5% upside potential. At EGP30.6/ per share, the implied multiples for SKPC in 2023e (pre acquisition) are P/E of 9.1x and EV/EBITDA of 7.4x. Chevron will start digging its first oil and gas exploratory well in its red sea concession during 1H2024. HELI is preparing to issue a tender for the design of a residential compound in New Heliopolis. Real estate developer City Edge yesterday signed a partnership contract on behalf of the Housing Ministry with Hilton that will see Hilton manage two new hotels. Temry for frozen poultry recorded EGP500 mn in sales during 1H23 from their FY23 targeted EGP1.2 bn. The company's management are expecting fluctuations in poultry prices in the upcoming period due to disruptions in the birds' life cycle and unsteady feed and medicines prices. Basata's new e-payment platform “Basata Pay” has launched in the Egyptian market. Basata Pay will capitalize on the Bee and Masary's PoS machines.