MARKET WATCH — A multi-year winning streak
STOCK ANALYSIS: Sharkia National Co. for Food Security (SNFC)
Written end of December 2024 for Business Monthly - January 2025 Issue
MARKET WATCH
The period from Nov. 15 to Dec. 15 showed mixed performance of both market’s main indices, where EGX 30 fell 2.2% while EGX 70 EWI rose 2.5%. Regardless of the direction during the period, the Egyptian stock market was on its way to deliver yet another year of strong performance across its major indices. By ending the year 2024 in the black, EGX 30, EGX 70 EWI, and EGX 100 EWI would be marking their fourth, fifth, and sixth positive years in a row, respectively.
But there are two versions of the same story when considering that the Egyptian pound has fallen by some 38% since the start of 2024. On the one hand, the market indices have so far reported positive double-digit returns in 2024 but in EGP terms. EGX 30 rose 24%, EGX 70 EWI rose 57%, while EGX 100 EWI rose 49.5%. On the other hand, this performance in USD terms is all in the red to different degrees (-23%, -2%, and -7%, respectively). Over the last 4 years, the cumulative performance of EGX 70 EWI (up 302%) has dwarfed that of EGX 30 (up only 184%). To put the numbers into perspective, this implies a 4-year compound annual rate of return of 42% for EGX 70 EWI versus 30% for EGX 30.
As for stock performance during the period, it was mostly led by small caps, with a focus on certain themes, such as pharma, exporters, and banks. Within pharma, as companies start to benefit from higher medicine prices, stocks such as Arab Drugs (ADCI, up 32%), Minapharm (MIPHm up 21%), and Cairo Pharma (CPCI, up 17%) registered double-digit rates of return. Meanwhile, exporters like KABO (KABO, up 33%), Dice Sport & Casual Wear (DSCW, up 18%), and Arab Dairy Products (ADPC, up 17%) may have been buoyed by a stronger U.S. dollar versus the Egyptian pound, rising 2.5% since the start of December.
Other gainers included banks, such as Suez Canal Bank (CANA, up 19.5%) that may have been brought back into the limelight in view of the latest initial public offering (IPO) of The United Bank (UBEE). Marking the EGX’s second and last major IPO in 2024, the Central Bank of Egypt (CBE) sold 30% of its stake in UBEE for EGP13.85 a share. By the end of the period the stock was up 3.7% at EGP14.36, having hit an intraday high of EGP15.23 (10% above IPO price) on its first day of trading on Dec. 10.
This leaves investors looking forward to new IPOs coming their way in 2025, especially after the Egyptian government slated at least 10 companies to be floated in the new year. Elsewhere, the CBE continued to stay put and held on to interest rates through the end of 2024, leaving room for a more dovish monetary policy in 2025 as inflation pressures ease.
STOCK ANALYSIS
Sharkia National Co. for Food Security (SNFC)
Shares of Sharkia National Co. for Food Security (SNFC) delivered a stellar performance during the period (up 64%) and so far, year-to-date (up 705%). SNFC manufactures and sells poultry and animal feed and rents its refrigerators for preservation and cooling and operates a Petromin gas station. More recently, it added several lines of business, namely a center of protein powder production from poultry slaughterhouse waste, a dry port for storing containers, and a frozen fruits and vegetables production line. Nasser Social Bank is still its major shareholder with a combined 10.8% stake, but an individual shareholder has been accumulating in the stock, raising his stake from 7.6% to 9.5% recently. The company reported a 76% lower net loss in its 9-month period of EGP1.5 million. And as usual, when asked by the Egyptian Exchange about the driver behind its stock's strong performance of late, the company denied the existence of any material events.
