MARKET WATCH: All Pain, No Gain
MARKET WATCH: All Pain, No Gain
STOCK ANALYSIS: Macro Group Pharmaceuticals (MCRO)
Written for Business Monthly - March 2022 Issue
MARKET WATCH
All Pain, No Gain
So far, 2022 has not been treating Egyptian stock market investors well. Both major market indices continued to hemorrhage their value; the EGX 70 EWI to a more severe extent. While the EGX 30 pulled back 3.7% from Jan. 15 to Feb. 15, its counterpart EGX 70 EWI fell an alarming 11.1%. The EGX 30 is down 3.2% on a year-to-date basis, and the EGX 70 EWI is 9.8%. Declines have outnumbered advances by nearly five to one. Ironically, month-to-month trading values have gone down almost 30% to an average of EGP 825 million during the period. Egyptian and Arab individuals and institutions were net buyers, while foreigners (mainly institutions) ended as net sellers.
The Central Bank of Egypt left its policy rates unchanged, as expected, at its February meeting, despite rising inflation that is still within its 5-9% target. Yet, the market has become a bit dull, except for surprising interest by First Abu Dhabi Bank, the UAE's largest bank, in acquiring Egypt-based EFG Hermes Holding (HRHO), the MENA region's largest investment bank, at a 21% premium. HRHO stock jumped 23% during the period, having started its rally nearly one week before the news was made public.
As for the 2021 earnings season, results so far have been mixed, even within the same sectors. In the consumer sector, Obour Land Food Industries (OLFI) reported 13% higher earnings in 2021 of EGP 351 million on 10% higher revenues of EGP billion. In industrials, Elsewedy Electric (SWDY) reported 17% higher net earnings of EGP 3.5 billion in 2021, but fourth-quarter earnings came in 4% lower year-on-year. In the banking sector, provisions played a crucial role in shaping each bank's year. QNB Alahli's (QNBA) earnings rose only 2% to EGP 7.6 billion, and Al Baraka Bank Egypt’s (SAUD) earnings slipped 9% to EGP 1.1 billion, both on higher provisions. On the other hand, Abu Dhabi Islamic Bank - Egypt (ADIB) revenues grew 20% to EGP 1.4 billion, Credit Agricole Egypt (CIEB) earnings jumped 17% to EGP 1.6 billion, and CIB (COMI) profits rose 30% to EGP 13.4 billion. Those results were all primarily due to lower provisions.
Meanwhile, the market's dismal performance was due to ongoing geopolitical tensions between the West and Russia over the invasion of Ukraine. The faintest signal of military action by Russia reverberated across global markets from oil to stocks. Brent crude already rose more than 25% year-to-date on fears of disrupting oil shipments.
STOCK ANALYSIS
Macro Group Pharmaceuticals (MCRO)
After calling off its IPO a year ago, Macro Group Pharmaceuticals (MCRO) changed its mind and its investment banker to EFG Hermes Holding (HRHO). MCRO went public on Feb. 10, valuing the 17-year-old company at EGP 2.8 billion, with MCRO's shareholders selling 45.8% for EGP 1.3 billion. The private placement (95% of the size) was covered 1.8 times, while investors covered the public offering (the remaining 5%) a whopping 102 times. Nonetheless, MCRO's stock sank 7% the day of its IPO. After eight more trading sessions, the stock had fallen 19.4%.
