MARKET WATCH: One In, One Out
STOCK ANALYSIS: TAQA Arabia (TAQA)
Written for Business Monthly - August 2023 Issue
MARKET WATCH
June 15 through July 15 was the third period in a row that small-cap stocks took the lead. On a year-to-date basis, the EGX 70 EWI was up 22.3% and the EGX 30 only 18.8%. However, both indices fell during the period, with the former losing 1.1% and the latter 3% as declines outnumbered advances 5 to 2. But the period saw two opposite moves. One stock stepped in, while another stepped out, or is about to soon.
Interestingly, the market witnessed some bizarre performance, led by TAQA Arabia (TAQA), which began trading on the EGX on July 9. All of the stock’s trades that day were canceled by the EGX. The stock ended the period down 37% off its July 10 closing price, and CCAP (given its 55.3% effective stake) saw its stock slip 15%.
Some investors rejoiced, seeing their thinly traded stock jump 42.5% in four days! Al-Ezz Dekheila (IRAX) jumped from EGP 815.73 to EGP 1,162.57 because the company’s board decided to de-list voluntarily by buying back its freely-traded shares for a hefty 53% premium or EGP 1,250 a share. In fact, this was more a matter of state-owned shareholders exiting the company at a premium paid in U.S. dollars. With IRAX taking on a U.S. dollar-denominated loan to finance just that, it sounded like a leveraged buyout in disguise, all to the benefit of Ezz Steel (ESRS), its majority owner with a 64% stake whose stock rose 11% during the period. Eventually, IRAX will become almost wholly owned by ESRS.
Circling back to last month’s main story, Beltone Financial Holding (BTFH) managed to go through with the second-largest capital increase in EGX history, raising about EGP 10 billion in cash and changing its logo once again. What Beltone will do with the cash is anyone’s guess, but management says it will be the cornerstone of its transformation strategy. Beltone denied submitting any written or verbal offer to acquire Orascom Financial Holding (OFH). OFH was approached recently by B Investments Holding (BINV) with an acquisition offer of a 51%-90% stake via a share swap that valued the stock at EGP 0.36 a share. It closed at EGP 0.27 on July 13 or a 19% discount to BINV’s offer at its market price.
Meanwhile, investors will be looking forward to second-quarter earnings results and weighing the odds of the Central Bank of Egypt’s next move in early August.
STOCK ANALYSIS
TAQA Arabia (TAQA)
Almost everyone was excited about TAQA. After all, it is that long-awaited direct listing (a de facto IPO, for what it’s worth) that Qalaa Holdings (CCAP) was set to cash in on somehow. However, citing wrong trades by brokerages, the EGX canceled all trades on TAQA’s first day. The stock still hit a high of EGP 24 and a low of EGP 10.30 during the period before closing at EGP 10.54 on July 25, down 47% from July 10. From July 10-25, the stock traded at a total of EGP 62 million.
