MARKET WATCH — Let the Festivities Begin
STOCK ANALYSIS: GB Corporation (GBCO)
Written end of June 2024 for Business Monthly - July 2024 Issue
MARKET WATCH
It looked as if the market came back to its senses and changed course to the north. By Jun. 9, the EGX 30 has fallen to a low of 25,659 before rising to end the period from May 15 to Jun. 15 up 4.4% at 26,418. Still, this is 21% below its all-time high of 33,383 recorded on Mar. 11 but up only 8% since it hit a year-low of 24,449 by the end of April. Similarly, the EGX 70 EWI ended the same period up 8.3%, almost double the EGX 30 performance. Nonetheless, both market indices are still down some 30% in U.S. dollar terms on a year-to-date basis, thanks to the EGP devaluation in March.
As the saying goes, sell in May and go away, which suggests that the following 6 months are usually dull and the market barely moves. But so far the month of May was positive with the EGX 30 rising 10%, and so was the month of June—albeit up in the low single digits. Likewise, the EGX 70 EWI painted the same picture. Both indices were down in March and April, so this represented a breather ahead of Eid Al-Adha’s 9-day-long vacation.
The market’s positive performance was led by certain names, like Lecico Egypt (LCSW, up 63%) which reported its highest-ever quarterly revenue and earnings driven by significant foreign exchange gains and investment income. Also, phosphate fertilizer producer Egyptian Financial & Industrial Co. (EFIC, up 78%) saw its first-quarter earnings almost double year-on-year, benefiting from a stronger U.S. dollar which helped prop its selling prices higher while booking a foreign exchange gain. EFIC was not impacted by the country’s shortage of natural gas which it does not use as feedstock.
On the negative side, Qalaa Holdings (CCAP, down 22%) fell after its stock began to trade without the right to participate in its debt purchase. Meanwhile, shares of nitrogen fertilizer producer Abu Qir Fertilizers (ABUK, down 8%) were negatively impacted by the shortage of natural gas supplies, a key input in manufacturing nitrogen fertilizers, but MOPCO’s (MFPC, up 12%) weren’t. Similarly, Sidi Kerir Petrochemicals (SKPC, up 10%) escaped the natural gas shortage unscathed.
That aside, investors will be scrutinizing the second-quarter results for signs confirming strong first-quarter results which were driven in a good part by foreign exchange gains. Meanwhile, the market will await two major events. On the one hand, Elsewedy Electric’s (SWDY, up 40% including dividends) acquisition offer could free up liquidity of as much as EGP26.5 billion if successful. On the other hand, investors accepting SWDY’s offer would have a chance to take part in ACT Financial’s initial public offering, Egypt’s first in 2024.
STOCK ANALYSIS
GB Corporation (GBCO)
GB Corporation (GBCO), an auto manufacturer with a non-banking financial service (NBFS) arm, grew its first-quarter earnings almost six-fold driven by both its segments. On the one hand, the automotive segment revenues almost doubled year-on-year to EGP7.7 billion with EGP380 million in profits as opposed to losses a year before. On the other hand, the NBFS segment revenues jumped 43% year-on-year to EGP1.5 billion with EGP248 million in profits (up 31% year-on-year). The stock rose 15.9% during the period, with more than 12.5 million shares changing hands worth some EGP145 million. However, the stock trading was wild with the range between its period’s intraday high and low registering 22%.

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