MARKET WATCH — Small caps continue to lead
STOCK ANALYSIS: Nile Pharmaceuticals (NIPH)
Written end of November 2024 for Business Monthly - December 2024 Issue
MARKET WATCH
The period from October 15 to November 15 marked another episode when small caps beat large caps and by a large margin. The EGX 70 EWI outperformed its counterpart the EGX 30—again—by a large margin, marking the third period in a row. During the period, the former rose 11.1%, while the latter only rose 2.9%. On a year-to-date basis, the EGX 70 EWI is up 54%, more than double the EGX 30’s 26%.
The top performers list for the period included names that are not your usual cup of tea. For instance, Arab Valves (ARVA) rose almost 107% to EGP3.74, even after the company denied any knowledge of material events. The list also included names that are part of the poultry sector, led by Mansoura Poultry (MPCO, up 45%) and Cairo Poultry (POUL, up 36%).
The period coincided with the third-quarter earnings season with companies generally reporting strong results. This was led by banks, most of which are witnessing the highest-ever earnings. This is why the top performers list also included the banking sector which has recently come under focus. The banking sector saw almost all its components rise, led by Suez Canal Bank (CANA, up 25.9%).
Investors have been bidding the prices of bank stocks generally higher following the Central Bank of Egypt’s (CBE) decision to float The United Bank (UBEE) at a price range higher than its book value. This is why banks that were trading below or close to their book value began to move higher. Indeed, other bank stocks rose by more than 20%, namely Export Development Bank of Egypt (EXPA, up 21.5%), Housing & Development Bank (HDBK, up 21.1%), Faisal Islamic Bank of Egypt (FAIT, up 20%).
Meanwhile, Domty (DOMT) rose 52%, but most of that price surge was at the start of the period before. The stock then settled through the remainder of the period. This is following the acquisition offer submitted for DOMT’s shares at a steep premium to the market. Also, another acquisition-related stock performance was seen in Orascom Financial Holding (OFH, up 18.1%) after the company announced the full divestiture of its electric payment subsidiary for EGP658 million. This is expected to leave OFH with a huge cash balance. Hence, the stock reacted positively on the news before pulling back later.
Elsewhere, the macroeconomic picture has not changed much. The CBE kept interest rates unchanged in its November 21 meeting, as expected. This was against the backdrop of urban inflation rising for the third month in a row. Also, a delegation from the International Monetary Fund (IMF) was in discussions with the Egyptian government to ensure delivery against previously-approved measures.
STOCK ANALYSIS
Nile Pharmaceuticals (NIPH)
It was like a déjà vu. Like Memphis Pharmaceuticals (MPCI), Nile Pharmaceuticals (NIPH) is another pharmaceutical company majority owned by HoldiPharma, the state-owned drug holding company. NIPH is raising its capital by EGP198.75 million, almost tripling its capital. HoldiPharma’s stake in NIPH is 67%, thus allowing it to swap the debt it owes to HoldiPharma into shares. Although looking to raise capital, NIPH distributed an annual cash dividend of EGP3.71 a share, which is odd. More recently, NIPH reported a surprise net loss in its first-quarter ending Sep. 30, 2024, as its revenues plummeted by some 68%. Still, NIPH's stock rose 54% during the period, while its rights were trading separately.
