Elalfy in The IPO Talks
Recorded for EGVEST
Amr Hussein Elalfy, Head of Research at Prime Securities, sums up his views with EGVEST on the Egyptian government's IPO program, addressing the following four topics:
Sector Selection: Preferred stocks to invest in
For Egypt’s IPO program, we have so many sectors involved. If I were to select a couple of sectors in that program, I would look for banks (because of the higher interest rates) and export-oriented companies (like fertilizers producers for the stronger U.S. dollar that are seeing in Egypt).
Choose Three Stocks: Preferred three stocks to invest in
If I were to select three stocks in the IPO program that are offered in the market, I would select stocks like:
Misr Life Insurance, because they could be benefiting from higher interest rates.
Helwan Fertilizers, because it’s export-oriented.
Port Said Containers Handling, because it’s a U.S. dollar-generating business.
Investment Duration
When it comes to investing in the Egyptian market, deciding on your investment horizon depends on who you are. If you are an investor, by definition you have a long-term investment horizon. But this does not mean that you should not trade the stock. You could be trading the stocks if the market price deviates from the fundamental value. So, as an investor, you have a long-term investment horizon by nature.
Investment Triggers
To buy a stock, we do not just look at the companies’ financials, but we also look at the catalysts. So, for any stock that we look to invest in, we should be considering short-term as well as long-term catalysts, provided that the companies’ financials are strong and solid. So, I would look at:
In terms of valuation, the valuation upside should be at least 50% because we need to have a huge upside to safeguard our returns.
In terms of fundamentals, the return on invested capital (ROIC) should be much higher than the weighted average cost of capital (WACC), so that the company would be creating value.
All of the above should be against the backdrop of seeing what the macro outlook is like to benefit from key trends in the macroeconomic environment in Egypt.