Pre-Trading Thoughts

PHDC (FV: EGP5.59, OW) is a top pick especially in light of potential EGP depreciation and expected inflation given the usual rush to real estate as a store of value. We select PHDC given a number of factors:Solid sales in 2023 and 2024 should be further supported by PHDC’s upcoming launch of its new project, whose proximity to Palm Hills October is expected to dictate a premium in pricing.Large residual land bank and a solid development track record.Stock offers one of the widest valuation gaps among sector peers at 78.0%.Stock trading at one of the lowest EV/sqm multiples among sector peers at EGP835/sqm, below the sector average of EGP1,168/sqm.Stock trading at one of the lowest FY24 P/E multiples among sector peers at 5.6x, below the sector average of 13.3x.Egypt's annual core inflation rate decelerated by 1.7% in December to 34.2%, down from 35.9% in November, monthly core inflation rate rose to 1.3% in December 2023 from 1% in November.Annual urban inflation retreated for the third consecutive month, recording 33.7% YoY in December, down from 34.6% YoY in November. On the other side, monthly urban inflation inched marginally up to 1.4% MoM in December, up from 1.3% MoM in November.JPMorgan announced on Wednesday its decision to exclude Egypt from its index for government bonds of emerging markets (GBI-EM), effective January 31, 2024. The US Treasury Secretary Janet Yellen and the Managing Director of the IMF Kristalina Georgieva vowed full support for the Egyptian economy. The government plans to increase natural gas connections to more than 15 million households by the end of 2024, up from 14.2 million at the end of June 2023. Ministry of Electricity intends to raise electricity prices for MNOs by 20-21%, according to local press. We already factoring in higher energy prices in our ETEL numbers.The General Authority for Investment and Free Zones intends to begin granting the golden license to investors in the healthcare sector next month.The Egyptian Stock Exchange Registration Committee approved the temporary registration of the shares of City Lab Company with an issued capital of EGP64 million distributed over 640 million shares.The FRA BoD has issued a decision to amend granting a license and the rules for owning shares in companies operating in non-banking financial activities. The decision regulates the percentage of contribution and ownership.