Pre-Trading Thoughts

Pitch| End of 1Q23 Results Season; TMGH Reconfirmed as Our Sector Top Pick. Highest y/y growth in 1Q23 sales (up 127.2% y/y to EGP12.2 billion). Our FV of EGP19.67/share implies a valuation gap of 109.3% which is the widest valuation gap in the sector. Our FV of EGP19.67/share is mainly supported by residential projects contributing EGP8.36/share and non-residential projects contributing EGP10.02/share. EV/sqm of EGP432 which is the second lowest EV/sqm in the sector. Ample residual land bank of around 42.7 million sqm, the largest across the sector. Strong net cash position of EGP2.0 billion. Ability to hedge against increase in construction costs. Strong recurring income supported by hotel revenue (35.4% of 1Q23 revenue). Beneficiary of increase in tourism. Beneficiary of increased demand for real estate from foreigners in light of new citizenship laws. 

Saudi company Alameriah has submitted a request to acquire 70.0% of HELI (FV: EGP12.44, OW) for USD400.0 million. This implies EGP13.18/share. (Not confirmed)

ARAB (FV: EGP0.65, EW) is considering investment opportunities in Egypt and Saudi Arabia, is targeting FY23 sales of EGP5.0 billion.

EFIC issued 1Q23 results where net profit after taxes amounted to EGP222 million, lower by 6% YoY, reflecting the company’s performance in gross margins. EFIC is trading at FY23 P/E of 5.8x and EV/EBITDA of 4.5x.

CICH (FV: EGP8.00, OW) 1Q23 net attributable profit recorded EGP 320 million (+3% q/q, +107% y/y). Healthy annual performance was driven by strong leasing revenues, followed by FX gains (EGP290 mn), microfinance and brokerage revenues despite growing expenses driven by direct financing and credit-related provisions.  CICH is currently trading at P/B23 of 1.1x, P/E23 of 6.2x with a ROAE23 of 20%.

We upgraded our fair value for ORAS to EGP181.70/share (USD5.19/share), despite the challenges still mounting on contractors. ORAS is currently trading at FY23 P/E of 4.4x and EV/EBITDA of 3.2x. 

ORAS subsidiary Weitz is set to build six warehouses for medicines and medical supplies across the country.

ORAS has purchased 6.5 million treasury shares for USD 3.0 per share. The Company will cancel these shares after three months.

The Nuclear Energy Authority is awaiting delivery of the second key component of the nuclear reactor equipment from Russia for the Dabaa plant project during 1Q24. 

RACC has opened a new customer service center in Riyadh as it looks to strengthen its operations in the region. 

An Emirati entity is interested in acquiring 25-30% of EAST, according to local media. No offers have been made to the company yet.

The Ministries of Industry and Finance, in cooperation with the General Authority for Investment, are studying increasing the percentage of export support for projects operating under the free zone system to a maximum of 12% instead of 5%. ORWE is a beneficiary for some of its factories. 

The Sovereign Fund of Egypt will conduct a valuation for the Zaafarana and Jabal Al-Zayt wind stations, after receiving requests from a number of Arab and foreign companies to acquire stakes in those projects.