MARKET WATCH — Back to life
STOCK ANALYSIS: Egyptian Iron & Steel Co. (IRON)
Written end of July 2024 for Business Monthly - August 2024 Issue
MARKET WATCH
The period from June 15 to July 15 saw the market's two significant indices recover, with the EGX 30 and the EGX 70 EWI rising 5.8% and 5.9%, respectively. Investors also focused on a few events that may set the scene for the coming period.
First, Elsewedy Electric's (SWDY) tender offer went through after 19.98% of its shares were tendered to U.A.E-based Electra Investment Holding in a deal worth $449 million (EGP 21.2 billion). That meant abundant liquidity could potentially be reinjected into the market.
Secondly, Act Financial's (ACTF) initial public offering (IPO) was open during the period. It marked the first Egyptian IPO in the primary market in over two years, hence the high interest in its private placement (oversubscribed 22 times) and public offering (oversubscribed 55 times). However, its EGP 1.04 billion size would absorb only a fraction of the cash proceeds from SWDY's tender offer.
Third, the Central Bank of Egypt (CBE) was due to meet on July 18 to decide on interest rates. While the CBE was widely expected to keep rates unchanged, investors were keen to read between the lines of the statement accompanying the decision for any clues on its direction in the coming months.
Undoubtedly, the SWDY deal attracted investor interest in specific names driven by comparison within the same industry, other potential acquisition targets, inclusion in the market's main index, and ideas where some of SWDY deal's dollar liquidity can be parked.
For example, Electro Cables Egypt (ELEC, up 25%) rose as investors continued to re-rate the stock given SWDY's deal. Also, investors may have been looking for the next SWDY-like deal, which could explain the pop-up we saw in Al-Ahly for Development & Investment (AFDI, up 34%) and EFG Holding (HRHO, up 21%). Emaar Misr for Development (EMFD, up 16%) came back in favor as investors were betting it would replace SWDY on the EGX 30 index, which was due for its semi-annual rebalance by the end of July. Another indirect beneficiary of the SWDY deal was Maridive & Oil Services (MOIL, up 17%), whose stock trades in dollars and hence attracted some of that SWDY deal liquidity. Meanwhile, Egypt Kuwait Holding (EKHO, down 7%) fell despite being one of Egypt's few stocks with global depository receipts (GDRs) listed overseas.
Going forward, investors will be on the lookout for companies' second-quarter results. Companies will likely continue to report strong double-digit growth, underlying the foreign exchange gain for the quarter. However, since the second quarter will have the full impact of the EGP devaluation, exporters' revenues and those linked to commodities will likely see sustained top-line growth in the coming period.
STOCK ANALYSIS
Egyptian Iron & Steel Co. (IRON)
Egyptian Iron & Steel Co. (IRON), which has been under liquidation since 2021, has come back to life, or at least its stock did. The company recently denied rumors it is studying a mega project on its 2,000 feddans of land. Later on, the Financial Regulatory Authority asked the company to disclose details of its land plots and ownership. IRON’s stock has been on a roll, hitting the daily limit for 15 trading sessions during the period. The stock more than doubled to EGP 36.80, extending its year-to-date gain to 137%.
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