MARKET WATCH: Cheaper and Cheaper
MARKET WATCH: Cheaper and Cheaper
STOCK ANALYSIS: Beltone Financial Holding (BTFH)
Written for Business Monthly - August 2022 Issue
MARKET WATCH
Cheaper and Cheaper
For the third month in a row, the EGX 30 stayed deep in the red, with EGX 70 EWI following suit. By mid-July, the EGX 30 was down 26.7% and the EGX 70 EWI 23.1%. The period from June 15 to July 15 was shortened by nine days due to the Eid AlAdha vacation and left only 15 trading days. In hindsight, investors may have dodged falling knives as the primary market index fell to a level that goes back to the days before the Egyptian pound devaluation in November 2016. During the reporting period, the EGX 30 and EGX 70 EWI fell 12.1% and 9.4% to 8,764.3 and 1,693.8, respectively. At such levels, the EGX 30 was trading at five times its forward earnings, implying a 20% earnings yield, which is quite attractive. Still, foreign investors continue to dampen demand in the market, which is only brought to life whenever there is news or rumors about an imminent acquisition of listed stock. Two acquisitions in the market involved Madinet Nasr Housing & Development (MNHD) and Beltone Financial Holding (BTFH). Each had a different story. Madinet Nasr's principal shareholders objected to an offer by SODIC (OCDI), 85.5% owned by Aldar Properties and ADQ Holding. Meanwhile, Beltone Financial Holding's primary shareholder accepted an offer by Chimera Investments, opening the door for its execution. During the period, MNHD rose 4%, still 21% below the midpoint of the offer price range, while BTFH rose 17.3%, topping the performers' list and closing 3% above the offer price. That implies investors are betting the MNHD offer (with SODIC wanting to own up to 100%) will not come to fruition and that the BTFH offer (with its suitor targeting a 90% maximum stake) may create added value down the road. Elsewhere, rumors of other acquisitions are spreading in the market despite denials. For instance, ADQ Holding said it was considering making an offer for Obour Land Industries (OLFI), which denied being contacted. OLFI ended the period down 11%, after rising as high as 23%, given the purported offer. While this re ects how the Egyptian stock market has become more sensitive to events, especially acquisitions, it does indicate how cheap stocks have become. Meanwhile, members of the Central Bank of Egypt (CBE) Monetary Policy Committee have their work cut out. After the European Central Bank raised interest rates by 50 basis points and the Fed by 75 basis points, the CBE resuming rate increases seems more likely.
STOCK ANALYSIS
Beltone Financial Holding (BTFH)
Chimera Investments seems to be the white knight Beltone Financial Holding (BTFH) shareholders have been waiting for. Chimera's EGP 1.485-per-share offer was higher than WM Consultancy's EGP 1.35 offer. That meant investors would have to wait for BTFH's main shareholder to give the nod. Orascom Financial Holding (OFH), with a 56% stake in BTFH, accepted the offer after regulator approval. Up 17% for the period at EGP 1.54, BTFH rose in 12 of the 15 trading sessions, with 76 million shares (a third of its free oat) changing hands.
