MARKET WATCH — Small caps still lead the way
STOCK ANALYSIS: Al-Tawfeek Leasing Co. (ATLC)
Written end of April 2025 for Business Monthly - May 2025 Issue
MARKET WATCH
Both main market indices diverged during the period from Mar. 15 to Apr. 15., with EGX 70 EWI adding another 2.2% and EGX 30 pulling back 0.3%. Year-to-date, EGX 70 EWI is still ahead with a positive 10.2% return versus only 4.9% for EGX 30. Still, the former is flirting with the 9,000 level, while the latter is holding on to its 30,000 psychological level.
Similar to the previous month, small caps continued to lead the top performers’ list for the period. For instance, Obour Real Estate Investment (OBRI, up 84%) and Premium Healthcare Group (PHCG, up 78%), featured as the top gainers with 75%-plus performance.
OBRI only announced in late April that its Dubai branch obtained an official license from the relevant authorities to undertake contracting activities in the UAE, which represents a regional expansion potentially adding value in the future. PHGC, on the other hand, pressed ahead with its capital increase with its shareholders paving the way to finalize several acquisitions through cash and debt-equity swaps. PHGC's issued and paid-in capital will rise from EGP81.5 million to EGP2.4 billion at a 28-for-1 ratio.
Elsewhere, large caps made it to the gainers’ list, albeit lagging a bit. For instance, GB Corp (GBCO, up 24%) despite Saudi Olayan Group reducing its stake in the company from 5.1% to 4.96%. Egypt’s leading local car manufacturer recently said it was selected by Hyundai Motor as its official distributor of the commercial brand of Genesis. Other gainers included stocks like Orascom Investment Holding (OIH, up 23%) and Egytrans (ETRS, up 23%). Meanwhile, Ibnsina Pharma (ISPH, up 17.5%) has been benefiting from higher drug prices and more recently from declining interest rates, which would eventually reduce its borrowing costs, further driving earnings growth.
On the other side of the fence, the losers’ list for the period included household and defensive names that have just begun to cool down somewhat. The list includes Domty (DOMT, down 16%), Juhayna Food Industries (JUFO, down 9%), and Cleopatra Hospitals Group (CLHO, down 10%). Interestingly, DOMT approved an EGP0.85-a-share cash dividend before it was revealed that Danish Arla Foods will put off investing in DOMT following news that DOMT will be split into two different entities.
As for the macro picture, urban inflation rose marginally in March to 13.6%, which was expected by the market. This left the door open for the Central Bank of Egypt (CBE) to start easing interest rates in its Apr. 17 Monetary Policy Committee meeting. Lower interest rates mean a lower opportunity cost and thus a lower required rate of return which would drive stock valuation higher across the board. Whether or not a company is well positioned for this new direction in interest rates, its stock performance will eventually follow, so investors need to keep a close eye on second-quarter results.
STOCK ANALYSIS
Al-Tawfeek Leasing Co. (ATLC)
Al-Tawfeek Leasing Co. (ATLC) is one of several companies listed on the EGX going through capital increases. Subscription to ATLC’s EGP441-million capital increase ran until Apr. 30, which will be distributed over 176.53 million shares at a par value of EGP2.5 a share. The increase was paid through Al Baraka Bank Egypt (SAUD), while creditors were permitted to subscribe with their balances. ATLC had reported net profits of EGP216 million in 2024, up 26% year-on-year on 49% higher revenues of EGP1.7 billion. ATLC, well known for its high dividend yield, distributed a cash dividend of EGP0.47 a share (a 10% yield) to shareholders as of Apr. 15.
