By Mariam Elsaadany/ Sunday, 9 March, 2025
Palm Hills Developments (PHDC EY): The company’s 4Q24 consolidated net income surged c72% y-o-y to EGP914m, its earnings release showed. In other news, the company plans to set up representation offices in Saudi Arabia and the UAE as it is studying implementing projects there, according to its co-CEO and managing director. PHDC raised its selling prices in 2024 by c50% across its projects, especially in its North Coast projects, and current selling price increases range from c20–25%, in line with inflation, he added. (Company data, Al Borsa)
Our comment: The company delivered solid numbers, supported by better-than-expected deliveries and high selling prices. Revenue increased c49% y-o-y to EGP9.20bn (c7% ahead of our estimate) as the number of units delivered surged c66% y-o-y to 852 units (c55% higher than our estimates). Gross profit grew c73% y-o-y to EGP2.94bn (c1% ahead of our estimate) as GPM narrowed c4 pp y-o-y to c32% (c2 pp lower than our estimate). SG&A expenses surged c2x y-o-y to EGP1.19bn (c18% lower than our estimate). Net interest expenses surged c77% y-o-y to EGP744m, mainly on higher interest expense, which reached a very high EGP936m. The higher-than-expected financing expenses reversed the beat into a miss at the pre-tax level which reached EGP1.06bn, higher c40% y-o-y (c7% lower than our estimate). A low effective tax rate of c11% and lower-than-expected minorities reversed the miss into a c9% net income beat, c72% higher y-o-y. Sales dropped c16% y-o-y to EGP20.7bn (c33% lower than our estimate, as we had expected sales to grow y-o-y in 4Q24). Sales were dominated by West Cairo sales (c51% of sales), backed by continued Badya, P/X, the Crown and Palm Parks sales, followed by North Coast and Alexandria sales (c38% of sales) and East Cairo sales (c12% of sales). The average price in West Cairo units was the lowest at EGP19.4m/unit, c81% higher y-o-y (c36% lower than our estimate). East Cairo units were priced the highest at EGP56.6m/unit, c4x higher y-o-y (c64% higher than our estimate), while North Coast and Alexandria units were priced at EGP26.0m/unit, c31% higher y-o-y (c2% higher than our estimate). PHD’s strong sales are reflected in its backlog, which surged c2x y-o-y to 147bn, while CAPEX spending dropped c20% y-o-y to EGP2bn (in line with our estimate). PHD’s net debt-to-equity stood at 0.75x by the end of the quarter, higher than 0.58x a year earlier on increased borrowings.
Egypt's banking sector net foreign asset (NFA) position widened by USD3.48bn m-o-m to USD8.71bn in January from USD5.23bn in December, reversing a net foreign liability (NFL) position of USD29.0bn a year earlier, according to CBE's data. Excluding the CBE, the banking sector narrowed its net foreign liability (NFL) position to USD3.30bn in January from USD6.42bn in December, versus an NFL position of USD17.6bn a year earlier, the data showed. (CBE)
Our comment: The m-o-m widening in the total NFA position was due to an increase in the CBE's NFA and the narrowing in the banking sector's NFL position. We attribute this improvement to Egypt issuing USD2bn in Eurobonds in January and receiving the first tranche worth EUR1.0bn of the European Union (EU) 's EUR7.4bn (USD8bn) financing package.
Eastern Company (EAST EY): The company’s 2Q24/25 net income hiked c2x y-o-y to EGP3.56bn, according to its audited financials. (Company release)
Our comment: The company’s net income came only c4% below our estimate of EGP3.71bn, in line with our margin expectations, despite booking some FX losses, lower-than-expected net interest income, and ceasing to book leasing income from its 24%-owned subsidiary United Tobacco Company (UTC). Revenue grew c2x y-o-y to EGP10.3bn, in line with our estimate (with a minor deviation of only 0.11%), mainly on a c33% y-o-y increase in volume to 15,472m local cigarettes (only c2% above our estimate) and a c69% y-o-y increase in local cigarettes ex-factory price to EGP12.7/pack (in line with our estimate of EGP12.8/pack). The company’s gross profit increased c85% y-o-y to EGP3.30bn (only c1% below our estimate), yet implying a c5 pp y-o-y drop in gross profit margin (GPM) to 32.0% (in line with our estimate of 32.5%), mainly due to higher costs. On a quarterly basis, EAST’s volume showed signs of recovery, increasing c16% q-o-q, and the ex-factory price increased c10% q-o-q, leading to a c2 pp q-o-q improvement in GPM, offsetting the increase in costs. SG&A expenses were flat y-o-y at EGP242m and came c22% lower than our estimate, representing 2.35% of revenue, down from 4.98% a year earlier and lower from our estimate of 3.01%. EBIT also increased by c98% y-o-y to EGP3.06bn (in line with our estimate of EGP3.04bn), yet resulting in c2 pp y-o-y drop in EBIT margin to c30% (just 0.17 pp above our estimate). Despite booking some FX losses of EGP126m versus EGP3.51m a year earlier (which we had not anticipated), lower-than-expected net interest income of EGP731m versus our estimate of EGP1.06bn (yet up c36% y-o-y), and reporting no leasing income from UTC for the first time since 1Q22/23, while we had accounted for some EGP50m in leasing income, given that its leasing contract with UTC is valid until April 2025, the company's bottom-line came only c4% below our estimate on lower-than-expected effective tax rate and some net other income of EGP257m. EAST reported EGP855m in provisions for the Early retirement program (ERP) in line with our estimate of EGP850m, signaling the potential resumption of its ERP. EAST also reported EGP1.46bn in capital gains from the sale of Factory Nine to its 24%-owned subsidiary United Tobacco Company (UTC), in line with our estimate of EGP1.48bn. The company's net profit margin (NPM) dropped c2 pp y-o-y to 34.4%, only c1 pp below our estimate. EAST ended 2Q24/25 with a net cash position of EGP4.06bn, lower than EGP16.4bn in 1Q24/25.
Egypt's passenger car (PC) sales increased c7% y-o-y to 8,507 cars in November compared to a c7% y-o-y increase to 7,428 cars in the previous month, according to a report by the Automotive Marketing Information Council (AMIC). Bus sales, however, decreased by c20% y-o-y to 746 buses in November, compared to a c25% y-o-y decrease to 760 buses in the previous month, according to the report. (AMIC)
Our Comment: Local PCs sales saw a slight y-o-y increase, following a modest rise in the previous month, with the local market likely shifting focus toward CKD (completely knocked down) units. Meanwhile, bus sales dropped for the second consecutive month, after three months of growth (July–September). Initial numbers from the AMIC report suggest that total GB Corp (GBCO EY) car sales in November surged c56% y-o-y, marking its eighth consecutive month of growth and implying that GB Corp's total market share increased by 11.7 pp y-o-y to 37.4% in November, with the company starting to localize more components and import more CBU (completely built-up) units, as banks are easing USD restrictions. Hyundai sales rose c62% y-o-y and c2% m-o-m to 1,463 cars in November, marking its seventeenth consecutive y-o-y increase. Chery sales also increased by c68% y-o-y and c4% m-o-m to 1,540 cars in November. The company sold 88 cars of its Haval brand in November, slightly down from 90 cars in the previous month and 89 cars a year earlier. As for its Changan brand, it sold 87 cars in November, down from 129 cars in October and 126 cars in November 2023. Additionally, GB Corp sold only one Mazda car in November, after a prolonged period without sales, compared to three cars in October.
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Commercial International Bank (COMI EY): The bank’s 4Q23 consolidated net income hiked c83% y-o-y, yet dropped c13% q-o-q to EGP7.23bn, according to its audited financials. The bank is proposing a DPS of EGP0.55 for FY23, pending shareholder approval at an upcoming AGM. (Bank data)
Our Comment: The bank’s net income came lower than our estimate of EGP8.63bn by c16% yet higher than the Bloomberg consensus of EGP6.83bn by c6%. We attribute this deviation to charging a higher-than-forecasted loan loss provisions of EGP3.05bn, an increase of c2.4x y-o-y and c89x q-o-q, exceeding our estimate of EGP223m by c14x. Net interest income grew c65% y-o-y and c10% q-o-q to EGP15.2bn, in line with our estimates of EGP14.9bn (+1.8%), with c32% of it generated from interest income from treasuries. Non-interest income surged c2.6x y-o-y and c38x q-o-q to EGP1.55bn, exceeding our estimate by 5.06x on a hike in services fees, FX gains, dividend income, financial investments, and lower-than-forecasted losses from other operating items. Loan loss provisions hiked c2.4x y-o-y and c89x q-o-q to EGP3.05bn, coming c14x higher than our estimate of EGP223m, as the bank’s management tended to be conservative given the challenges persistent since FY22 on the macroeconomic outlook. The effective tax rate retreated by 8.7 pp y-o-y to 27.8%, given the lower allocation to treasuries. The bank’s ROE increased 13.5 pp y-o-y to 36.4%, yet came 10.4 pp lower than our estimate and 9.47 pp lower q-o-q due to the sizeable balance sheet growth and higher-than-expected loan loss provisions. Regarding the bank’s balance sheet, its net loans grew c21% y-o-y to EGP235bn, in line with our estimates (-0.9%), customer deposits increased by c27% y-o-y to EGP675bn, c5% lower than our estimate of EGP709bn, and financial investments increased c13% y-o-y to EGP270bn, beating our estimate of EGP231bn by c17%. CIB demonstrated resilient CAR of 26.2%, up from 22.7% a year earlier, and improved asset quality with NPLs dropping to 3.59% from 4.86% a year earlier and coverage ratio increasing to 309% from 229% a year earlier. The proposed DPS of EGP0.55/share for FY23 offers a net-of-tax dividend yield of 0.66%, over yesterday’s last price of EGP79.43/share.
The Egyptian government's committee in charge of the indexation of gasoline and diesel prices raised gasoline prices in the local market by c11–13%, EGP1.50–2.00/liter, and diesel prices by c17% to EGP13.5/liter from EGP11.5/liter, effective 18 October, according to the Official Gazette. The committee raised the price of 80-octane gasoline by c12% to EGP13.75/liter from EGP12.25/liter, of 92-octane gasoline by c11% to EGP15.25/liter from EGP13.75/liter, and of 95-octane gasoline by c13% to EGP17.0/liter from EGP15.0/liter. The committee raised the heavy fuel oil (mazut) price by c12% to EGP9,500/ton from EGP8,500/ton for all industries except for the food sector, which is charged EGP1,500/ton, and the electricity generating sector, which is charged EGP6,500/ton. The committee also raised the price of compressed natural gas (CNG) for cars by c8% to EGP7.00/cubic meter from EGP6.50/cubic meter. The committee said that the price revision was due to higher production and import costs of petroleum products and that it would not convene to review prices for six months. In related news, the Egyptian government will not increase petroleum products' prices for six months; however, it plans to gradually increase them until the end of 2025, the prime minister said. If oil prices stabilize at USD73-74/bbl, we would have a chance not to increase prices until the end of 2025 as planned, he added. In other news, the fuel price hikes will save the state treasury EGP27.2bn in FY24/25, according to unidentified official sources. The government has spent from 1 July to date EGP42.3bn in petroleum subsidies (after it saved EGP9.2bn due to the July price revision) and expects to spend EGP80bn in petroleum subsidies from mid-October until 30 June 2025, including EGP69bn of diesel subsidies, the sources added. The recent increase in diesel prices will raise railway operating costs by EGP500m in FY24/25, following an EGP1bn increase in their operations costs due to the fuel price hikes in March and July, according to unidentified official sources. (Official Gazette, Hapi Journal, Al Masry Al Youm, Al Borsa, Asharq Business)
Our comment: This price revision is more aggressive than the previous one in late July, which entailed a gasoline price increase of c10–11% and a diesel price increase of c15%. We expect the October price revision to lead to higher-than-expected inflation over the coming few months, and hence the Monetary Policy Committee's (MPC) decision to maintain rates at its Thursday meeting is well justified, in our view. Also, Egypt's prime minister had said during the second week of October that Egypt's inflation rate may not ease as quickly as hoped. The diesel price increase would lead to higher food transportation costs and hence higher food and beverage prices, and the price revision of heavy fuel oil (mazut) would increase the production cost for the industrial sector, especially after the recent increase in electricity prices to the industrial sector in August of c21-31%. The budgeted petroleum products' subsidy bill for FY24/25 is EGP155bn, and hence, the total savings as a result of the July and October price revisions of EGP36.4bn suggests that the FY24/25 petroleum products' subsidy bill will decrease by c23% to EGP119bn.
Egypt's net international reserves (NIR) increased by USD108m m-o-m in August to USD46.597bn from USD46.489bn in July, according to Central Bank of Egypt (CBE)'s data. Deposits not included in official reserves decreased by USD660m m-o-m in August to USD9.20bn, the data showed. (CBE)
Our Comment: Egypt received USD820m from the IMF in August, representing the third tranche of its USD8.00bn Extended Fund Facility (EFF). NIR increased slightly by 0.23% m-o-m in August, mainly from gold, while foreign currencies remained unchanged.
Eastern Company (EAST EY): A UAE investment firm, Global Investment Holding, owned by Mohamed Alabbar and another UAE investor, acquired 30% of the company for USD625m and pledged to provide an additional USD150m for raw tobacco importation, according to a cabinet statement, company release, and unidentified people familiar with the transaction. According to the agreement, the Holding Company for Chemical Industries (CIHC) will retain a 20.9% stake in the capital of EAST, down from 50.9%, and there will be no impact on the 24% share of Eastern Company in the United Tobacco Company (UTC), the company added. Global Investment Holding is c99%-owned by UTC, according to the CEO of the CIHC. The CIHC has informed the Egyptian Competition Authority (ECA) of the deal to secure its approval, he added. The USD150m will be settled with EAST in the future, according to an unidentified official source. (Company release, Bloomberg, Al Mal, Al Borsa, Hapi Journal)
Our comment: Excluding the USD150m for raw tobacco importation, the USD625m that Global will pay implies a value for EAST of EGP28.9/share, c9% higher than our TP of EGP26.6/share, and c34% higher than yesterday’s closing price of EGP21.5/share. The deal valuation implies a PER of 9.09x for FY22/23e. Based on the shareholder agreement of UTC signed by EAST and UTC shareholders, if a foreign company acquires 10% of EAST, the shareholders of UTC will have the right to acquire EAST’s 24% stake in UTC at the stake nominal value in addition to USD108m. Given that Global Investment Holding is c99%-owned by the shareholders of UTC, EAST will not lose its share in UTC, which we value at EGP2.51/share. Accordingly, we favorably view the development since the valuation is good, an experienced tobacco manufacturer will join EAST’s board, which could enhance shareholder value, and the USD150m that Global pledged to provide will help EAST overcome its current supply bottlenecks.
Egypt’s annual headline inflation decelerated to 25.7% y-o-y in July from 27.5% y-o-y in the previous month, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices rose 0.4% m-o-m compared to a 1.6% m-o-m increase in June, the data showed. Food and beverage prices increased 0.3% m-o-m in July, compared to a 2.6% m-o-m increase in the previous month. (CAPMAS)
Our comment: Inflation decelerated for a fifth consecutive month, helped by a decline in oil, cereals, and poultry prices. July’s inflation came lower than our estimate of 27.5% y-o-y and 1.9% m-o-m as we factored in our estimates an increase in electricity and tobacco prices.
Egypt’s banking sector net foreign assets (NFA) narrowed by USD1.27bn m-o-m to USD13.0bn in June from USD14.3bn in May and reversing a net foreign liability (NFL) position of USD27.0bn a year earlier, according to the Central Bank of Egypt (CBE)’s data. Excluding the CBE, the banking sector NFA position narrowed by USD1.86bn m-o-m in June to USD2.75bn from USD4.61bn in May, the data showed. (CBE)
Our comment: Egypt’s banking sector NFA position narrowed by USD1.86bn m-o-m on lower foreign assets, probably due to normalized foreign currency inflows, in our view. Meanwhile, the CBE’s NFA position widened by USD590m m-o-m on lower foreign liabilities.
By Heba Monir/ Sunday, June 2, 2023
Egypt’s banking sector’s net foreign liabilities (NFL) narrowed by c85% y-o-y and c13% m-o-m to USD3.64bn in April from USD4.21bn in March, according to the Central Bank of Egypt (CBE)’s data. Excluding the CBE, the banking sector’s NFL widened slightly by c2% m-o-m to USD2.89bn in April from USD2.83bn in March. (CBE)
Our comment: The c13% m-o-m narrowing in the NFL came mainly from a narrowing of the CBE’s NFL by c45% m-o-m to USD753m. Meanwhile, banks’ NFL widened slightly on lower interbank inflows, returning probably to normal levels prior to the liquidity shortage before the 6 March EGP devaluation..
Egypt expects the European Parliament to approve the EUR4bn tranche of the EUR7.4bn financial package within weeks, the minister of foreign affairs said. Around EUR1.80bn of the amount should be allocated to assisting SMEs, he added. (Al Borsa)