Market Updates



Stories In Focus


MPC leaves rates unchanged at its October 16 meeting, as we expected


As we expected, the Monetary Policy Committee (MPC) at its meeting on October 16, 2014 decided to keep the overnight deposit rate unchanged at 9.25%, the overnight lending rate at 10.25%, and the rate of the Central Bank of Egypt’s (CBE) main operation at 9.75%. The discount rate was also kept at 9.75%. The CBE believes that while higher-than-anticipated indirect and second-round effects from the July 2014 regulated price adjustments pose an upside risk to the inflation outlook, they continue to be contained on the back of lower international food price forecasts in light of global developments. The CBE believes that while investments in domestic mega-projects such as the Suez Canal are expected to contribute to economic growth, the downside risks that surround the global recovery on the back of challenges facing the Euro Area and the softening gr owth in emerging markets could pose downside risks to domestic GDP. Therefore, at this juncture, the MPC judges that the key CBE rates are currently appropriate to anchor inflation expectations and limit a generalized price increase given the balance of risks surrounding the inflation and GDP outlooks. The MPC will continue to closely monitor all economic developments and will not hesitate to adjust key CBE rates to ensure price stability over the medium term.


Egypt signs contracts with six international firms to dredge new Suez Canal


Egypt signed contracts with six international firms on Saturday to dredge the new Suez Canal, Reuters reported. The companies are National Marine Dredging Company of the UAE, Royal Boskalis Westminster and Van Oord, both based in the Netherlands, Jan de Nul Group and Deme Group, both from Belgium, and US-based Great Lakes Dredge and Dock Company. Lieutenant General Mohab Memish, head of the Suez Canal Authority, announced the consortium at a news conference in Cairo alongside Prime Minister Ibrahim Mehleb. Memish did not provide financial details of the contracts but said the companies would begin working this week. Engineers from the army began digging in the area in August when the project was unveiled. Memish said they would conduct dredging in one of the new canal's six work zones, with the international companies operating in the re maining areas. He said the entire project would require up to 36 dredgers to remove about 250 million cubic meters worth of material. Pierre Catteau, an official from Deme Group, said there would be a massive mobilization of equipment from around the world to meet the project's ambitious deadline. "I think we were all surprised at how fast this came on the market, how fast it was tendered, and how fast it will be executed," he told Reuters on the sidelines of the news conference. "But it's possible, and we will put [in] all efforts to make it happen."


NCMP 3Q2014 indicators: Sales drop annually and quarterly


NCMP (NCMP EY, Price: EGP21.61, Consensus FV: EGP24.25, Add, Consensus P/E 15e: 5.7x) released 3Q2014 financial indicators, with revenue reaching EGP221 million, down 10% y-o-y and 15% q-o-q. Gross profit stood at EGP33 million, translating to a GPM of 15% — narrowing from 18% in 3Q2013 and 23% in 2Q2014. Net profit came in at EGP32 million, surging 37% y-o-y and 84% q-o-q. This translated to NPM improving to 15% versus 10% in 3Q2013 and 7% in 2Q2014.


Other Headlines


Central bank governor says the impact of returning Qatari deposits is temporary, and Egypt has alternative financing; confirms that the IMF praises Egypt’s economic policy and believes the imminent article IV consultation by the IMF will increase the success of Egypt’s Economic Summit (Al Mal)


Details and steps of constructing the largest solar power plant with an investment of USD6.5 billion will be announced today (Al Mal)


Sources confirm that the government will not revert its decision to increase fertilizer prices (Al Masry Al Youm)


Fitch affirms NBE and CIB ratings at B- with a Stable outlook, CAE support rating also affirmed at 4 (Reuters)


Banque Du Caire targets an 18% increase in its deposits by the end of 2014, currently standing at EGP52 billion, says general manager of retail banking Mohamed Mashhour (Al Shorouk)

Eastern Tobacco chairman says company is currently evaluating unutilized land plots and buildings to be managed by a new asset management firm under the National Company for Construction and Development, in accordance with directions from the minister of investment; AGM approves dividend distribution of EGP8.00/share over FY2013/14 earnings, implying a dividend yield of 5% and payout ratio of 44% (Al Mal)


Bisco Misr 9M2014 results: Net profit reaches EGP37.3 million, down 16% y-o-y compared to EGP44.4 million the previous year (EGX)


Alexandria Containers is awarded 12,600 sqm to utilize in Alexandria Port for three years at a monthly rent of EGP75.01/sqm and a total value of EGP34 million (Al Borsa)


SIDPEC aims to produce monoethylene glycol in Port Said with United Gas Derivatives Company, positioning them as the first local producers of monoethylene glycol, which is currently imported from abroad (Al Mal)


Aquah Group seeks USD100 million Islamic financing to establish a petrochemical plant to produce polyethylene terephthalate in Ain El Sokhna (Al Shorouk)


Egypt bourse’s listing committee approves increasing Egypt Kuwait Holding’s capital to USD243.91 million from USD209.82 million through a rights issue effective October 23, 2014, an increase of USD34.09 million distributed over 136,363,636 shares at a par value of USD0.25/share (EGX)


SODIC hires US-based SWA to prepare the master-plan for its 301-acre project in New Cairo, says CEO; investment cost of phase one is estimated at EGP3.0 billion of the total EGP7.1 billion investment cost of the project (Al Mal)


Saudi Arabia


Stories In Focus


SABB 3Q2014: Earnings ahead of estimates on strong non-interest income growth, lower provisions; balance-sheet growth picks up, NIM softening continues


Saudi British Bank (SABB) (SABB AB, Price: SAR56.31, FV: SAR57.00, Hold, P/E FY2015f: 12.1x) released its 3Q2014 highlights on Thursday, with net income coming in 14.5% ahead of estimates, up 25% y-o-y but down 8.5% q-o-q to SAR1,059 million on lower provisioning and strong non-interest income growth (+14.1% y-o-y). We estimate provisions were down 45% y-o-y but up 46% from last quarter using the bank’s trailing CTI ratio. Operating income recorded SAR1,655 million, up 10.5% y-o-y and down 0.5% q-o-q, which is broadly in line with our estimate (2.8% ahead). Net interest income also saw adequate annual growth of 8.4% (+2.1% q-o-q), reaching SAR1,029 million in 3Q2014, yet NIM witnessed a contraction on an annual and sequential basis, falling to 2.64% in 3Q2014. In terms of balance-sheet performance, both loan and deposit growth picked up: net loans grew 8.2% y-o-y and 3.5% q-o-q while deposits grew 10.6% y-o-y and 3.9% q-o-q.


Other Headlines


Saudi Marketing Company (FARM Superstores) EGM approves increasing capital to SAR350 million by distributing two shares for every five held, increasing the total number of shares by 10 million to 35 million shares (Tadawul)


Abdullah A. M. Al-Khodari sons 3Q2014 results: Bottom line at SAR15 million, up 90% q-o-q on 13.9% increase in gross profit, SAR1.5 million increase in other income due to gain on sale of assets and miscellaneous rental income, and 5.8% decrease in SG&A costs; up 23% y-o-y mainly on 5.6% increase in revenues, 22.1% decrease in G&A expenses, and 42% decrease in selling and marketing costs (Tadawul)


Arabian Cement 3Q2014 results: Bottom line down 33% q-o-q on lower sales revenues in Ramadan, up 697% y-o-y on 33% increase in sales revenue to SAR386 million, improved subsidiary company performance due to increasing selling prices and recording an impairment loss of SAR79 million at Qatrana Company in the same quarter last year (Tadawul)






Dana Gas to finalize within the next days the sale of all its oil assets in Egypt's Komombo to Canadian firm Mediterra Energy, estimated at between EGP42 million and EGP45 million (Al Mal)


Arabtec is about to conclude the final agreement with the Egyptian authorities on the 1 million affordable housing units in cooperation with the Egyptian army; company wants to finalize phase one (120,000 units in cities of Obour, Badr, and New Minia) before year-end; Arabtec to provide NUCA with the in-kind housing units and public service buildings in return for the project’s land and facilities (Company release)



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