Pre-Trading Thoughts

Natural Gas Prices Not to Be Raised for Industrial Sector, ESRS is Sparkling. ESRS is perceived to be the stock that is most reactive to natural gas pricing news. ESRS is a key beneficiary of the current spreads between steel and raw material prices, in addition to the weakness in the local exchange rate. Provided that the government does not enforce one more round of lower prices on building material producers, we believe that the current global steel market dynamics and the local exchange rate would warrant ESRS's FV to cross EGP20.00/share.Diesel-HSFO Spreads Crossed USD500/ton; CCAP's ERC and AMOC Earnings Will Surge. Diesel-HSFO Spreads have lagged other commodity prices in terms of rising, but have been showing significant momentum since 1Q2022 (Average USD389/ton), with even higher average QTD (USD541/ton); +39% QOQ. If CCAP did not book any further impairments in 2Q22, as the EGP1.3 bn booked in 1Q22, CCAP profits will turn in the green, thanks to ERC booking profits. AMOC margins have recovered well in 3QFY21/22, and if margins maintain momentum till June 30, 4QFY21/22, GM and NI will be even higher. We remind you that our FV for CCAP is EGP2.00 and AMOC is EGP6.50.CCAP’s Taqa Arabia has acquired the LNG arm of local energy firm Rosetta Energy. SWDY to establish a Buway factory in Egypt, which is the first to be established in Africa and the ME. EFID's BoD signed off on a proposal from management to establish two new companies; investment and microfinance. RACC reported 1Q22 net profit of EGP6.6 mn (+223% YoY, 41.5% QoQ). RACC is currently trading at 2022f P/E of 5.9x, based on management’s guidance.RAYA plans to establish “Mazaya” for the distribution of modern electronic devices, with an initial issued capital of EGP10 million. During 1Q22, RAYA recorded a jump in net profits to EGP53.5 mn (+49.4% YoY), primarily driven by revenue growth. Vodacom is considering a bond issuance to fund its acquisition of a majority stake in Vodafone Egypt.Baraka Bank released 1Q22 net profit at EGP369 million (+37% y/y, +3797% q/q), driven by growth in net-funded income, non-funded income, lower impairments, and lower effective tax rate. SAUD is trading at P/B22 of 0.6x and P/E22 of 2.6x, with ROAE of 20%.FAIT has released 1Q22 standalone financial results, recording a bottom-line of EGP1,188 million (+ 121% YoY). FAIT trading at P/B22 of 0.5x and P/E22 of 2.4x, with ROAE of 18%EMFD and the Decent Life Foundation signed a cooperation protocol which includes supporting the Foundation with a budget of EGP1.0 billion. A court ruled in favor of EGTS regarding its right to receivables of USD6.2 million from a shareholder.HELI is planning to open the first phase of the Merryland Park in late June/early July 2022.The government has cut its FY2022/23 growth forecast to 4.5% from 5.5%.Remittances from Egyptians working abroad increased by 12.8% YoY in March to about USD3.3 billion versus USD2.9 billion a year earlier.The government targets to issue green and development bonds worth around USD500 million in FY2022/23, according to Deputy Minister of Finance.Industrial Development Authority will handle all investor files, licenses, and concerns on behalf of all different government entities, to facilitate the one-stop shop approach.Israel aims to reach a gas supply agreement with Europe in the coming months, and one option would be to export to Europe via liquefaction plants in Egypt and then pipe it north, according to ReutersThe trade deficit decreased by 29% YoY in February, recording USD2.7 billion. Exports increased by 41%, reaching USD4.12 billion, while imports increased by 1.2%, reaching USD6.82 billion.