Egypt Economic 122008

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    Egypt Economic 122008 - Presentation Transcript

    1. Global Research Economy Egypt Egypt Economic Review December 2008 Surviving the World Financial Turmoil ...
    2. Global Research Global Egypt Tel: 20 (2) 37609526 Fax: 20 (2) 37609506 Address: 7 Abdel Hadi Saleh St., El-Nasr Tower, Giza, Postal code: 12311 Omar M. El-Quqa, CFA Egypt Executive Vice President omar@global.com.kw Phone No:(965) 2295 1110 Faisal Hasan, CFA Head of Research fhasan@global.com.kw Phone No:(965) 2295 1270 Mahmoud Soheim Manager-Egypt Research msoheim@globalinv.com.eg Phone No: (202) 37609526 Ahmed Abu Hussein, CFA Financial Analyst aabuhussein@globalinv.com.eg Phone No: (202) 37609526 Cherine Fayez Farkouh, CFA Financial Analyst cfarkouh@globalinv.com.eg Phone No: (202) 37609526 Radwa Weshahy Financial Analyst rweshahy@globalinv.com.eg Phone No: (202) 37609526
    3. Table of Contents Economy ...................................................................................................................................................... 2 The Banking Sector....................................................................................................................................... 8 Real Estate Sector ....................................................................................................................................... 2 Steel Sector ................................................................................................................................................. 24 Cement Sector ............................................................................................................................................. 28 Fertilizers Sector ......................................................................................................................................... 33 Telecom Sector ........................................................................................................................................... 38 Stock Market ............................................................................................................................................... 44 Global Investment House  Egypt Economic Review - December 2008
    4. Economy
    5. Egypt - Economy Economic Performance 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 * Real GDP ^ (LE bn) 390.7 407.0 425.2 454.3 486.5 798. Real GDP Growth Rate (%) 3.2% 4.% 4.5% 6.8% 7.% 7.2% Per capita GDP (US$) ,6 ,7 ,247 ,460 ,65 2,42 Inflation (%) 3.2% 0.3% .4% 4.2% .0% .7% Unemployment (%) .0% 0.3% .2% 0.6% 8.9% 8.4% Population (mn) 69.2 70.5 7.9 73.6 77.5 77.5 Government Finance Total Revenues and Grants (LE mn) 89,46 0,88 0,865 5,266 80,25 28,500 Total Expenditures (LE mn) 27,320 45,987 6,60 207,8 222,029 277,432 Cash Surplus/(Deficit) (LE mn) -38,74 -44,07 -50,747 -56,545 -4,85 -58,932 Overall Fiscal Surplus/(Deficit) (LE mn) -43,559 -45,877 -5,643 -50,386 -54,698 -59,234 Government Debt Gross Domestic Public Debt (LE mn) 323,97 388,377 469,039 470,264 493,879 537,68 Gross External Debt (LE mn) 77,438 85,385 67,474 69,868 70,865 77,336 Balance of Payment Trade Balance (US$ mn) -6,65 -7,834 -0,359 -,986 -5,87 -23,45 Total Exports (US$ mn) 8,205 0,453 3,833 8,455 22,08 29,356 Total Imports (US$ mn) -4,820 -8,286 -24,93 -30,44 -37,834 -52,77 Current Account (US$ mn) ,943 3,48 2,9 ,752 2,696 888 Current Account/Nominal GDP (US$ mn) 2.4% 4.3% 3.3% .6% 2.% 0.5% Capital & Financial Account (US$ mn) -2,734 -5,06 3,378 3,5 ,34 7,37 Overall balance (US$ mn) 546 -58 4,478 3,253 5,282 5,420 Money Supply Money Supply - M (LE mn) 67,22 77,606 89,685 09,274 3,290 70,579 Quasi Money (LE mn) 37,050 357,305 404,99 45,082 53,398 596,085 Total Domestic Liquidity (M2) (LE mn) 384,262 434,9 493,884 560,356 662,688 766,664 ^ Using 2001/02 prices for the period 2002/03 to 2006/07 and prices of 2006/07 for 2007/08 * Preliminary Source: Central Bank of Egypt, Ministry of Finance, The Egyptian Exchange (EGX) and Global Research Global Investment House 3 Egypt Economic Review - December 2008
    6. Egypt - Economy GDP Composition by Economic Activity in FY 2007/08 » The Egyptian economy maintained its robust GDP Others Agriculture, 6.2% General Forstry & Fishing growth during the previous three years, at around 7% Government 13.2% 8.4% Real Estate annually. Oil 2.7% 6.9% Tourism 3.7% Insurance Natural Gas » GDP is expected to grow by 6%, double the world 3.6% 9.1% Financial average growth. Services Oil & Other 3.7% Manufacturing Wholesale & Ind. Retail Trade 16.3% » This strong growth enabled Egypt to be an attractive 11.2% Suez Canal Const. & FDI destination, rising by 9.4% in FY 2007/08, Transport & Building 3.4% Warehousing 4.3% Communications 4.1% reaching US$3.2bn. 3.2% LE bn Real GDP Growth 900 8% » The challenge facing the Egyptian economy was the 7.2% 7.1% 6.8% 800 7% rising inflation rate, reaching 2.5% in September 700 6% 2008. 600 4.5% 5% 4.1% 500 4% 3.2% 400 3% » Inflationary pressures generated from surging food 300 2% and fuel prices worldwide. With the ease of these 200 1% 100 prices internationally, the inflation is believed to be - 0% 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 brought down. Real GDP (LE bn) Real GDP Growth Rate (%) Source: Central Bank of Egypt (CBE) and Global Research 4 Egypt Economic Review - December 2008 Global Investment House
    7. Egypt - Economy Economic Outlook Global financial crisis will not affect Egypt financially » The exposure of the Egyptian financial institutions in the world’s financial credit market is minimal. » Local banks have abundant liquidity, with an average loan to deposits ratio of 54% compared to approximately 80% as an international norm. What will be the economic threats? » Lower exports proceeds, on the back of expected drop in prices, which is anticipated to be more severely affected than quantities. Negatively affecting the Balance of Payment. » Lower return from Suez Canal, due to reduced global trade activity. » Lower proceeds generated from tourism, due to slower expected economic performance in Europe. Global Investment House 5 Egypt Economic Review - December 2008
    8. Egypt - Economy Economic Snapshot Could any benefit emerge from this situation? » Reduction in international oil, food and metal prices will : • Make imports cheaper, relieving some pressure from the Balance of Payment. • Save huge expenditures for the government budget, especially on subsidies, which have surged by 56% between 2006/07 and 2007/08. • Lower the inflation rate, which was 20.2% in October 2008 down from 23.6% in August 2008. » More attention should be directed to SMEs because 80% of employment in Egypt work in SMEs and their products are directed to the local market , therefore they are protected from global recession. » Currently, SMEs are targeted by Banks, as they are believed to drive economic growth in the coming period. 6 Egypt Economic Review - December 2008 Global Investment House
    9. Egypt - Economy Economic Snapshot How Egypt economy is expected to perform against % 8 the world economy? 7.2 7.1 6.9 6.8 6.8 7 6.5 6.0 6.0 » IMF projected that Egypt GDP will grow by 6% 6 in 2009, which is double the world expected GDP 5 4.5 5.1 5.0 3.6 4.9 growth. 4.8 4.8 4.7 4.5 4 4.2 3.9 4.1 3 » And almost in line with the emerging and developing 3.0 3.2 countries forecasted average GDP growth. 2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Egypt World » This should attract more FDIs from around the % 9 world. 8.0 7.9 7.5 8 7.2 7.1 6.9 6.9 6.9 7 » Future FDI inflows are expected in more 6.3 6.7 7.1 6.1 6.9 6.9 6.8 6.8 6.5 6 manufacturing sectors benefiting from low labor 6.0 6.0 5 cost, abundance of several raw materials, as well 4.5 as Egypt’s geographical location. 4 4.1 3 3.2 » Transportation, education and health care are 2 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 projected to attract FDIs too. Egypt Emerging & developing countries Source: IMF Global Investment House 7 Egypt Economic Review - December 2008
    10. The Banking Sector
    11. The Banking Sector » Significant banking reforms since 2004. » Attractive sector dynamics led to international and regional acquisitions over Egyptian banks. » Domestic Liquidity (M2) growing by a CAGR of 4.8% over the 5-year period starting 2002/03 to 2007/08. » Potential lending opportunities to fund future projects, stemmed by accelerated GDP growth, even with slight deviation than expected, as a result of the current global conditions. Loans to Deposits Development LEbn 800 80% LE bn 70.6% Domestic Liquidity Growth 700 70% 900 64.2% 59.3% 57.0% 800 600 60% 54.4% 53.7% 700 500 50% 600 400 40% 500 300 30% 400 300 200 20% 200 100 10% 100 0 0% - 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08* M1 Quasi Money Loans and Discount Balances Deposits Loans to Deposits *provisional Source: Central Bank of Egypt Source: Central Bank of Egypt Global Investment House 9 Egypt Economic Review - December 2008
    12. The Banking Sector » Extremely low loans/deposits ratio of around 54%, compared to a rough estimate of 80% worldwide, providing enough room for extending loans. » Pressure exerted on banks by the CBE to extend loans to SMEs, as prospective stimulant for economic growth. » Banks with international parent lenders are not likely to be negatively affected by global turmoil due to independent operations. » Investments by Egyptian banks, not covering risky instruments like derivatives and securitized bonds, have saved them from the world’s financial turmoil. » Still a lot of unexploited segments in the banking sector, i.e. mortgage and SMEs lending . » Huge unfulfilled demand from the retail sector, with a low penetration rate of approximately 30%. » Ample liquidity characterizing the banking sector in contrast to the credit crunch prevailing in USA. 0 Egypt Economic Review - December 2008 Global Investment House
    13. Market Players Sector/ Company RIC FYE # Shares Free Float CMP MC FC PE PBV DY% 000s as of 20/11/08 LE 000s LE 000s Trailing Forward 30/06/08 LE 2007 2008 Banks Egyptian Gulf Bank ($) EGBE Dec. 50,92 5.3% .95 292,875 49,747 22.7 8.8 2.0 7.69% CIB COMI Dec. 292,500 9.35% 29.94 8,757,450 7,999,93 7.68 6.4 .64 3.34% Credit Agricole Bank CIEB Dec. 287,000 20.98% 8.60 2,468,200 57,828 4.7 4.92 .30 .63% Housing and Development Bank HDBK Dec. 67,000 2.47% 22.50 ,507,500 323,660 7.99 6.42 .70 6.67% NSGB NSGB Dec. 302,94 22.83% 5.60 4,725,879 ,078,98 7.0 5.6 0.93 .60% Export Development Bank of Egypt EXPA June 00,000 23.29% 8.02 802,000 86,786 2.58 6.0 0.63 2.47% Sector Average 7.60 6.22 1.54 Source: EGX and Global Research Global Investment House  Egypt Economic Review - December 2008
    14. Real Estate Sector
    15. Real Estate » Robust economic growth in Egypt reaching 7.2% stimulated the growth in the real estate sector. » Increasing FDI injected in the real estate sector, reaching US$400mn in 2007/08, compared to US$39mn in the previous year. » The recent decline in raw materials prices could fuel more growth in the sector. » The real estate market is characterized by a chronic gap because: • Over-supply in the high-end residential segment. • Low supply of middle and economic properties, where the majority of demand exists. 8.0% 7.2% 7.1% 6.9% 7.0% 6.0% 4.6% 4.2% 5.0% 4.0% 3.1% 4.3% 3.9% 3.0% 3.8% 3.7% 3.0% 2.0% 1.0% 0.0% 0.8% 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 GDP growth Real Estate growth Source: CBE Global Investment House 3 Egypt Economic Review - December 2008
    16. Real Estate Residential Segments Estimated% of population Supply/Demand Outlook Ú High-End 0% High supply/saturated demand Ò Upper-Middle 5% Good supply/high demand Ò Middle 35% Moderate supply/very high demand Ò Economy 40% Low supply/great demand » Favorable demographic composition with 44% and 36% of population falling in the age-groups of 0-20 and 20-45, respectively. 4 Egypt Economic Review - December 2008 Global Investment House
    17. Real Estate Residential » Activation of the mortgage law no.48, which was issued in 200, mainly through : • Establishing the Egyptian Mortgage Refinance Company (EMRC) to be the mortgage market maker. • Reduction of property registration fees from 2% to 3% with a cap of LE2,000. • Slash property tax rate from 46% to 0%. • Establishing credit bureau to better assess borrowers credit worthiness. • Establishing “Iskan”, to be the first insurance company concerned with mortgage finance risks. Global Investment House 5 Egypt Economic Review - December 2008
    18. Real Estate Residential » Very low Mortgage lending standing below % of GDP, compared to 65% in USA, 45% in Europe and 4% in UAE. 3,500 3,109 3,000 2,500 2,097 2,000 1,369 1,500 1,014 1,012 1,000 714 500 355 500 214 14 16 2 - June 2005 June 2006 June 2007 June 2008 Mortgage Co. Banks Total Source: Ministry of Investment 6 Egypt Economic Review - December 2008 Global Investment House
    19. Real Estate Residential » Egypt compares favorable to other countries in the region, in terms of residential sqm prices. 500 14.0% 7,000 Abu Dhabi 450 12.0% 6,000 400 Dubai Avg. sqm price US$ 10.0% 5,000 350 Avg. sqm price US$ Doha 300 8.0% 4,000 250 Damascus 6.0% 3,000 200 Khartoum 150 4.0% 2,000 Muscat 100 Tripoli Cairo 2.0% 1,000 50 Riyadh Amman 0 0.0% - Cairo Khartoum Doha Amman Tripoli Riyadh Damascus Dubai Abu Dhabi Muscat 0 20,000 40,000 60,000 80,000 100,000 120,000 GDP per Capita US$ Annual avg. rent/sqm (US$) Rentail yield Source: Colliers International Global Investment House 7 Egypt Economic Review - December 2008
    20. Real Estate Commercial Segment (Retail) » Higher GDP per capita, on the back of economic growth, leading to growing upper-middle class. » Reduction in import duties on various items, reaching an average of 6.9%, leading to lower prices in the local market. » Entrance of international brand names to Egypt. » Shortage of supply in class “A” retail spaces. Annual avg. rent/sqm (US$) 1,400 1,200 1,200 950 1,000 867 850 765 800 660 528 600 486 470 440 400 200 - ro an i t a h s ai bi um ol ca cu oh ad ub ha i m ip Ca us rto as D y m D D Tr Ri M am ha A bu K D A Source: Colliers International 8 Egypt Economic Review - December 2008 Global Investment House
    21. Real Estate Commercial Segment (Office) » Economic growth encouraged inflows of foreign and private sector investments. » Supply shortage in grade “A” office spaces. Avg. selling price/sqm (US$) 14,000 1,200 14% 12,000 12% 1,000 10,000 10% 800 8,000 8% 600 6,000 6% 400 4,000 4% 200 2,000 2% - 0% - Cairo Amman Tripoli* Muscat* Doha Riyadh Damascus Dubai Abu Dhabi Khartoum Cairo Amman Tripoli* Muscat* Doha Riyadh Damascus Dubai Abu Dhabi Khartoum Annual avg. rent/sqm (US$) Rental yield *Countries with non-freehold model Source: Colliers International Global Investment House 9 Egypt Economic Review - December 2008
    22. Real Estate Tourism » The tourism sector witnessed a strong growth at a CAGR of 6.6% over the past 6 years. » No. of tourists arrivals reached mn in 2007, compared to 9mn in 2006. » Investment in hotels reached LE5.5bn, against LE3.8bn in 2006/07, growing by 45%. » The government targets to increase the no. of tourists arrivals to 4mn by the end of 202. » Airports expansions and renovations to accommodate for the increasing no. of arrivals. » Diversity of touristic activities (historical, recreational, religious). » Egypt possesses one third of the world’s ancient monuments. 20 Egypt Economic Review - December 2008 Global Investment House
    23. Real Estate » Great potential for growth as Egypt is a relatively cheap touristic destination with one of the highest occupancy rate in the region. US$ 100% 350 90% 300 80% 250 70% 60% 200 50% 150 40% 30% 100 20% 50 10% 0% - Dubai Cairo Heliopolis Hurghada Abu Dhadi Damascus Manama Sharm El-Sheikh Average Jeddah Doha Riyadh Aman Kuwait city Beirut Cairo-City Center Cairo Pyramids Occupancy Avg. Daily room rate 2007 Source: HVS Global Investment House 2 Egypt Economic Review - December 2008
    24. Real Estate Outlook » Generally, positive outlook but at a lower magnitude because of weak expected global economic growth, resulting from the global financial crisis. Segment Outlook Explanation Residential Ò • Good potential for growth, especially in the middle and lower income classes. • Mortgage lending is still in its infancy stage • Expected reduction in inflation will relief upward pressure on interest rates, lowering mortgage rate Retail Ò • The existing supply shortage will out-weight reduced activity following the global economic expected slowdown. Office Ò • Under-served segment • Egypt above average expected economic growth at 6%, compared to the average global economic growth rate of 3%. Tourism Ò • Low cost destination to European tourists • Proximity to Europe, reducing travel cost • Expected average annual growth of 5.8%, according to World Travel and Tourism Council (WTTC). 22 Egypt Economic Review - December 2008 Global Investment House
    25. Market Players Sector/ Company RIC FYE # Shares Free Float CMP MC FC PE PBV DY% 000s as of 20/11/08 LE 000s LE 000s Trailing Forward 30/06/08 LE 2007 2008 Housing & Real Estate Cairo Housing ELKA Dec. 93,750 95.08% 4.50 42,875 40,9 67.32 55.94 0.86 4.44% Egyptian Resorts Company EGTS Dec. ,050,000 39.72% .74 ,827,000 725,684 6.40 6.56 .72 .49% Nasr City Housing MNHD June 00,000 42.66% 25.84 2,584,000 ,02,334 29.8 24.62 9.72 3.0% Orascom Hotels & Development ORHD Dec. 22,962 2.00% 20.00 4,439,246 88,785 .09 48.49 .49 0.00% SODIC OCDI Dec. 28,43 62.28% 4.0 ,67,79 727,300 3.52 7.75 0.67 0.00% United Housing UNIT Dec. 42,207 64.2% 5.6 27,789 39,647 4.32 2.59 4.46 0.00% Heliopolis Housing HELI June 74,7 22.29% 24.00 ,780,4 396,787 5.79 3.36 5.09 5.2% Development & Engineering Consultants DAPH Dec. 8,57 46.82% 3.40 4,857 53,776 2.28 5.25 0.83 0.00% Remco for Touristic Villages Construction RTVC Dec. 04,024 26.40% 5.47 569,00 50,29 3.99 2.74 0.58 0.00% Upper Egypt General Contracting UEGC June 50,000 96.69% 2.7 08,500 04,909 50.97 7.43 0.34 0.00% Egyptians Housing Development & EHDR Dec. 75,000 48.26% 3.6 270,750 30,664 236.82 27.2 .68 0.00% Reconstruction Talaat Mostafa Group Holding TMGH Dec. 2,030,204 4.90% 3.6 6,45,443 2,688,07 24.2 4. 0.30 0.00% Sector Average 26.59 13.03 2.50 Source: EGX and Global Research Global Investment House 23 Egypt Economic Review - December 2008
    26. Steel Sector
    27. Steel Sector » Construction and building activities in Egypt have been growing at a 9.9% CAGR from 2004/05 to 2007/08. » Sales by main Egyptian companies have grown at a CAGR of 2.5% between 2004/05 and 2007/08. Steel Sales Volume By Main Egyptian Companies 3,500 Construction and Building Activities 3,000 40 4.6% 4.5% 35 4.6% 2,500 4.4% 30 4.3% 2,000 000 tons 25 4.2% LE bn 4.2% 20 4.1% 1,500 4.0% 4.1% 15 3.9% 1,000 4.0% 10 3.8% 5 500 3.7% - 3.6% - 2004/05 2005/06 2006/07 2007/08 2001 2002 2003 2004 2005 2006 2007 Jun-08 Construction and Building Construction and Building % of GDP Source: CBE, Global Research Global Investment House 25 Egypt Economic Review - December 2008
    28. Steel Sector » Forecasts for world steel production indicate a growth of 5.3% in 2008 and 5.4% in 2009, driven by developing economies. » Even though steel prices decreased from highs of LE7,000/ton to LE5,000/ton in mid-September, profit margins will remain strong as billet prices declined from LE6,000/ton to LE4,000/ton. » Sustainable growth in construction and mainly infrastructural spending, especially in Upper Egypt. Egypt Steel Prices 7,000 6,000 5,000 LE/ton 4,000 3,000 2,000 1,000 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Scraps Billets Steel Rebars Source: IDA and Global Research 26 Egypt Economic Review - December 2008 Global Investment House
    29. Market Players Sector/ Company RIC FYE # Shares Free Float CMP MC FC PE PBV DY% 000s as of 20/11/08 LE 000s LE 000s Trailing Forward 30/06/08 LE 2007 2008 Iron & Steel Ezz Steel ESRS Dec. 543,265 34.75% 9.64 5,237,075 ,89,884 4.67 2.80 .22 0.37% Ezz - Dekhila Steel - Alex IRAX Dec. 3,364 7.4% 723.00 9,662,47 75,603 4.28 2.68 2.55 20.06% Sector Average 4.56 2.77 1.59 Source: EGX and Global Research Global Investment House 27 Egypt Economic Review - December 2008
    30. Cement Sector
    31. Cement Sector » Egypt has a comparative advantage in the production and exportation of cement due to the availability of raw materials, relatively cheap energy and Egypt’s strategic location enabling it to be a major exporter in the region. » These promising features of the industry has always made Egypt an attractive investment destination for foreign suppliers. » The majority of cement companies in Egypt are dominated by international companies represented by Holcim, Ciment Francais, Cemex, Vicat, Cimpor and Lafarge. Global Investment House 29 Egypt Economic Review - December 2008
    32. Cement Sector » Strong performance in line with GDP growth. » The growth in local construction activities ensures demand on cement. 45,000 8% 6.8% 40,000 7.1% 7% 35,000 6% 4.5% 30,000 5% 4.1% 25,000 4% 000 tons 3.2% 20,000 3% 15,000 2% 5,838 5,173 10,000 4,661 4,132 3,299 25,704 28,763 23,550 33,565 28,527 30,225 38,469 34,462 29,104 36,215 1% 5,000 - 0% 2003 2004 2005 2006 2007 Supply Demand Exports Egypt GDP Growth Rate Source: Global Research 30 Egypt Economic Review - December 2008 Global Investment House
    33. Cement Sector » On November 2007, new cement licenses worth LE,38mn were granted to meet the expected demand from the infrastructure projects, especially in Upper Egypt, where the government announced a mega project worth LE3,2bn over the period between 2007 to 202. » The new licenses will bring Egypt’s total cement capacities to 55.2mn tons by 200, from the current 4.7mn tons, which reflects the inherent growth in the sector. » Still the cost per ton is considered low compared to regional and international peers, despite the recent local increases in energy costs. » The continuous need for housing in Egypt ensures considerable demand on cement, especially as the prices will ease, to benefit from low materials costs. Global Investment House 3 Egypt Economic Review - December 2008
    34. Market Players Free Sector/ Company RIC FYE # Shares CMP MC FC PE PBV DY% Float 000s as of 20/11/08 LE 000s LE 000s Trailing Forward 30/06/08 LE 2007 2008 Cement South Valley Cement SVCE Dec. 44,055 20.06% 5.2 2,9,960 425,264 3.64 3.52 0.90 0.00% Misr Beni Suef Cement MBSC Dec. 20,000 50.53% 45.60 92,000 460,834 4.72 4.59 .6 6.58% Misr Cement - Qena MCQE Dec. 30,000 2.80% 80.00 2,400,000 307,52 8.68 7.67 3.0 6.25% National Cement Company NCEM June 03,200 .73% 8.55 ,94,360 33,22 7.57 2.4 2.76 9.97% Sinai Cement SCEM Dec. 35,000 25.5% 3.40 ,099,000 280,345 3.22 3.02 0.82 3.98% Suez Cement SUCE Dec. 8,857 4.00% 20.40 3,709,873 59,399 3.78 3.7 0.64 9.80% Sector Average 4.69 4.38 1.23 Source: EGX and Global Research 32 Egypt Economic Review - December 2008 Global Investment House
    35. Fertilizers Sector
    36. Fertilizers Sectors Fertilizers demand is secured by robust growth in the agriculture sector in Egypt. » The agriculture sector is considered one of the significant sectors in Egypt, where it has accounted for 4% of the country’s GDP in FY 2007/08. » The local demand on fertilizers is highly strengthened by the continuous growth in the agriculture sector, which is supported by the following pillars: • Rapidly growing population. • Scarcity of arable land. • Enhanced irrigation systems. • Providing subsidized fertilizers. • Adding around 50,000 acres annually to Egypt’s arable land. • Government awareness campaigns for using the appropriate types and quantities of fertilizers in order to raise crop yields. 34 Egypt Economic Review - December 2008 Global Investment House
    37. Fertilizers Sectors 16 Urea Prices Vs. Natural Gas Prices 900 14 » Though the world’s financial crisis has 800 700 12 US$/MMBtu significantly forced fertilizers prices US$/M.Ton 600 10 downward, squeezing producers margins, 500 8 400 the low cash cost of the fertilizers production 6 300 200 4 in Egypt ensures strong and sustainable Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 profit margins. Granular Urea Basket Price (RHS) Middle East Granular Urea (RHS) Natural Gas Henry Hub Spot Price (LHS) Source: Fertilizerworks and Global Research » Catering to the availability of relatively 13.00 14 World Natural Gas Cost (2008 Estimates) 11.00 12 cheap raw materials, natural gas and 9.95 10 US$/MMBtu phosphate rock, more investments are 8.25 8 injected in the fertilizers sector, where local 6 3.75 3.50 producers are raising their capacities, and 4 2.30 2.00 1.00 2 0.80 new joint ventures between local and foreign 0.60 0 fertilizers producers are being established. USA China Russia Canada Ukraine Indonesia Argentina Venezuela Middle East North Africa West Europe Source: PotashCorp and Global Research Global Investment House 35 Egypt Economic Review - December 2008
    38. Ammonia/Urea Average Cash Cost Urea Ammonia 800 900 800 700 700 600 600 500 US$/mt US$/mt 500 400 400 300 300 200 200 100 100 - - USA West Europe Canada Ukraine China Argentina Russia Indonesia Venezuela North Africa Egypt Middle East West Europe USA Canada Ukraine Russia China Argentina Indonesia Venezuela North Africa Egypt Middle East Ammonia Cash Cost Urea Cash Cost Average Ammonia Cash Cost Average Urea Cash Cost Ammonia Current Price (October 2008) Urea Current Price (October 2008) Ammonia Peak Price (August 2008) Urea Peak Price (August 2008) Source: PotashCorp, Yara Fertilizers and Global Research 36 Egypt Economic Review - December 2008 Global Investment House
    39. Market Players Free Sector/ Company RIC FYE # Shares CMP MC FC PE PBV DY% Float 000s as of 20/11/08 LE 000s LE 000sTrailing Forward 30/06/08 LE 2007 2008 Fertilizers Abu Kir Fertilizers ABUK June 45,886 3.00% 66.89 7,657,980 995,537 7.73 8.34 4.3 6.74% Egyptian Financial & Industrial Co. EFIC Dec. 69,302 5.47% 24.7 ,675,020 862,33 4.38 5.93 2.66 4.37% Sector Average 10.82 7.22 3.45 Source: EGX and Global Research Global Investment House 37 Egypt Economic Review - December 2008
    40. Telecom Sector
    41. Telecom Sector LE bn Communications Sector 14.2% 14.1% 30 16% 14% » The Communications sector achieved a 25 10.3% 12% 9.4% growth rate of 4.2% in FY2007/08, on the 20 10% 15 8% back of improved economic conditions. 6% 10 4% 5 2% » Egypt’s expected economic growth of 6% 0 0% will ensure the growth of the sector. 2004/05 2005/06 2006/07 2007/08 Communications (LEbn) Growth % » The world financial crisis will have no Communicatons Sector Contribution to GDP 4.5% effect on the Telecom Sector, due to its 3.46% 3.25% 4.0% unique nature. 3.5% 2.23% 3.0% 2.16% 2.5% » The low penetration rate in the Egyptian 2.0% market will act as a catalyst for the growth 1.5% in the sector over the coming years. 1.0% 0.0% 2004/05 2005/06 2006/07 2007/08 Source: CBE and Global Research Global Investment House 39 Egypt Economic Review - December 2008
    42. Telecom Sector Fixed Line Fixed Line Subscribers and Penetration Rate Mn 14 18% 12 15.1% 15.0% 16% 14.7% » Telecom Egypt is currently the sole fixed line 14.5% 13.5% 10 14% 12.6% provider in Egypt. 11.4% 8 12% 6 10% 4 » Fixed line subscribers grew at a CAGR of 7.7% 8% 2 - 6% over the past five years, reaching .23mn in 2002 2003 2004 2005 2006 2007 Sep-08 2007. Fixed Line Subscribers (mn) Fixed Line Penetration % » Fixed line penetration rate stood at 5.0% Teleocm Egypt ARPU 70 in 2007 and 5.% by the end of September 58.9 55.3 60 54.2 53.5 52.7 51.1 2008. 50 40 LE » The ARPU of Telecom Egypt reached LE5. 30 in September 2008. 20 10 » The government postponed a second fixed line - 2003 2004 2005 2006 2007 Sep-08 license auction to 2009, due to unfavorable market conditions. Source: Telecom Egypt and Global Research 40 Egypt Economic Review - December 2008 Global Investment House
    43. Telecom Sector Mobile » Total mobile subscribers reached 38mn in September 2008, up by 40% compared to September 2007. » The mobile market has been gradually de-regulated, but NTRA continues to have a major role in controlling competition. Mobile Operators Market Share (September 2008) Mobile Subscribers and Penetration Rate Mn Etisalat 40 60% 50.7% Misr 35 7.5% 50% 40.7% 30 40% 25 24.8% 20 30% 19.1% Mobinil 15 20% 49.6% 10.8% 8.3% 10 3.4% 10% 5 - 0% 2002 2003 2004 2005 2006 2007 Sep-08 Vodafone 43.0% Mobile Subscribers (mn) Mobile Penetration % Source: Mobinil, Vodafone and Global Research Source: NTRA and Global Research Global Investment House 4 Egypt Economic Review - December 2008
    44. Telecom Sector Mobile » The increased competition among the current 3 mobile operators is expected to squeeze their profit margin. » The pre-paid market is the prominent one, with over 97% of mobile subscribers preferring pre-payment plans. Mobile Cellular subscribers per 100 inhabitants 13.8 Yemen 21.3 Sudan 30.7 Lebanon 31.3 Syria 39.8 Egypt Morocco 64.2 Libya 73.1 Tunisia 75.9 80.5 Jordan 81.4 Algeria 96.3 Oman 97.3 Kuwait Saudi Arabia 114.7 Bahrain 148.3 Qatar 150.4 United Arab Emirates 176.5 0 20 40 60 80 100 120 140 160 180 200 Source: ITU 42 Egypt Economic Review - December 2008 Global Investment House
    45. Market Players Sector/ Company RIC FYE # Shares Free Float CMP Market Free PE PBV DY% 000s as of 20/11/08 Cap Cap Trailing Forward 30/06/08 LE LE 000s LE 000s 2007 2008 Communication Mobinil EMOB Dec. 00,000 28.58% 7.00 ,700,000 3,343,860 6.42 6.9 5.30 4.26% Orascom Telecom Holding ORTE Dec. ,028,00 37.46% 2.05 2,64,505 8,06,908 3.22 8.28 2.97 4.75% Telecom Egypt ETEL Dec. ,707,072 8.27% 3.20 22,533,345 4,6,842 8.89 7.70 0.90 7.58% RAYA RAYA Dec. 56,985 68.76% 4.80 273,527 88,077 6.75 4.99 0.60 25.63% Sector Average 5.42 7.64 2.90 Source: EGX and Global Research Global Investment House 43 Egypt Economic Review - December 2008
    46. Stock Market
    47. 11,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 12,000 2-Jan-06 2-Feb-06 2-Mar-06 2-Apr-06 2-May-06 2-Jun-06 Global Investment House 2-Jul-06 Source: EGX and Global Research 2-Aug-06 2-Sep-06 2-Oct-06 2-Nov-06 2-Dec-06 2-Jan-07 2-Feb-07 2-Mar-07 2-Apr-07 2-May-07 45 2-Jun-07 2-Jul-07 2-Aug-07 2-Sep-07 2-Oct-07 2-Nov-07 2-Dec-07 2-Jan-08 2-Feb-08 2-Mar-08 2-Apr-08 2-May-08 2-Jun-08 2-Jul-08 2-Aug-08 » CASE 30 Index still has a positive trend on the long run even after its recent significant losses. 2-Sep-08 2-Oct-08 2-Nov-08 Trend line Egypt Economic Review - December 2008 Stock Market
    48. Stock Market Indicators 2008 Indicators 2003 2004 2005 2006 2007 (Jan -Oct) Volume of listed securities ,20.6 ,786.3 4,98.9 7,757. ,377.6 8,686.5 Volume of unlisted securities 220.7 648.4 ,.6 ,323.4 3,72.5 2,52.8 Total volume (million) 1,422.3 2,434.7 5,310.4 9,080.5 15,090.0 21,208.3 Value traded (listed securities) 23,000.0 36,4.7 50,924.0 27,07.8 32,524.5 447,54.2 Value traded (unlisted securities) 4,764.0 6,232.6 9,70.7 5,63.9 4,95.9 46,775.9 Total value traded (LE million) 27,764.0 42,374.3 160,634.7 286,739.7 362,720.4 493,930.1 Average monthly value traded (listed securities) ,97.0 3,0.8 2,577.0 22,592.3 26,793.7 44,75.4 Average monthly value traded (unlisted securities) 397.0 59.4 809.2 ,302.7 3,433.0 4,677.6 Total (LE million) 2,314.0 3,531.2 13,386.2 23,895.0 30,226.7 49,393.0 Number of transactions (Listed securities) ,205,775 ,675,277 3,922,30 6,590,96 8,72,584 0,936,543 Number of transactions (unlisted securities) 23,602 68,287 27,79 23,244 30,282 593,376 Total number of transactions 1,229,377 1,743,564 4,210,092 6,821,440 9,013,866 11,529,919 Number of listed companies 978 795 744 595 435 377 Number of traded companies 540 503 44 407 337 306 Average monthly traded companies 206 200 86 83 99 22 Market capitalization end of year (LE bn) 7.9 233.9 456.3 534.0 768.3 475.4 Turnover Ratio (%) .5 4.2 3. 48.7 38.7 90. Price Earning (P/E) Ratio * 8.8 5.6 22.0 2.0 9. 2.3 Price to Book (P/B) Ratio * 2. 4.4 9. 5.9 8.6 4.8 Securities include stocks, bonds and mutual funds * P/E and P/B ratios are based on the most active companies only (Liquid Market) Source: EGX 46 Egypt Economic Review - December 2008 Global Investment House
    49. Stock Market » Market cap. vs. number of listed and traded companies 1,000 1,000 800 800 LE Bn Companies 600 600 400 400 200 200 - - 2003 2004 2005 2006 2007 2008 (Jan to Oct 2008) Market capitalization end of year (LE bn) Number of listed companies Number of traded companies Source: EGX Global Investment House 47 Egypt Economic Review - December 2008
    50. Stock Market » Total volume vs. value traded development 25 600 500 20 400 LE Bn Billion Shares 15 300 10 200 5 100 - - 2003 2004 2005 2006 2007 2008 (Jan to Oct 2008) Total value traded (LE Bn) Total volume (Bn) Source: EGX 48 Egypt Economic Review - December 2008 Global Investment House
    51. Stock Currently Traded Below Par Value CMP Traded at a Company RIC Par Value As of 20/11/08 discount to par Talaat Mostafa Group Holding TMGH 0.00 3.6 -68% Media Production City MPRC 0.00 3.85 -62% NAEEM Holding ($) NAHO .00 0.42 -58% Arab Polvara Spining & Weaving APSW 5.00 2.67 -47% Remco for Touristic Villages Construction RTVC 0.00 5.47 -45% Arab Cotton Ginning ACGC 5.00 3.23 -35% SPINALEX SPIN 2.00 .39 -3% Export Development Bank of Egypt EXPA 0.00 8.02 -20% El Ezz Porcelain (Gemma) ECAP 5.00 4.24 -5% Cairo Housing ELKA 5.00 4.50 -0% Development & Engineering Consultants DAPH 4.00 3.40 -4% RAYA RAYA 5.00 4.80 -4% Source: EGX and Global Research Global Investment House 49 Egypt Economic Review - December 2008
    52. Stocks Currently Traded Below Book Value CMP Traded at a Sector/ Company RIC BV/share As of 20/11/08 discount to BV Talaat Mostafa Group Holding TMGH 0.60 3.6 -70% Upper Egypt General Contracting UEGC 6.35 2.7 -66% Arab Polvara Spining & Weaving APSW 7.65 2.67 -65% Media Production City MPRC 0.97 3.85 -65% NAEEM Holding ($) NAHO .9 0.42 -65% Arab Cotton Ginning ACGC 8.02 3.23 -60% EFG-Hermes Holding HRHO 23.89 3.56 -43% Remco for Touristic Villages Construction RTVC 9.35 5.47 -42% RAYA RAYA 8.03 4.80 -40% Oriental Weavers Carpets ORWE 33.3 9.90 -40% Export Development Bank of Egypt EXPA 2.75 8.02 -37% Suez Cement SUCE 3.69 20.40 -36% SPINALEX SPIN 2. .39 -34% El Ezz Porcelain (Gemma) ECAP 6.37 4.24 -33% SODIC OCDI 6.09 4.0 -33% East Delta Flour Mills EDFM 30.4 2.0 -30% KABO KABO .53 .20 -2% Sinai Cement SCEM 38.20 3.40 -8% Alexandria Flour Mills AFMC 4.6 .66 -8% Development & Engineering Consultants DAPH 6.09 3.40 -7% Cairo Housing ELKA 5.23 4.50 -4% Telecom Egypt ETEL 4.69 3.20 -0% South Valley Cement SVCE 5.69 5.2 -0% NSGB NSGB 6.82 5.60 -7% Source: EGX and Global Research 50 Egypt Economic Review - December 2008 Global Investment House
    53. Stock with a DY above 0% Free Float Company RIC FYE DY% As of 30/06/08 RAYA RAYA Dec. 68.76% 25.63% Ezz - Dekhila Steel - Alex IRAX Dec. 7.4% 20.06% Sidi Kerir Petrochemicals SKPC Dec. 22.45% 9.40% Alexandria Mineral Oils Co. AMOC June 9.62% 8.60% East Delta Flour Mills EDFM June 64.50% 5.94% General Silos & Storage GSSC June 39.00% 4.3% Mobinil EMOB Dec. 28.58% 4.26% Middle & West Delta Flour Mills WCDF June 63.00% 2.54% Export Development Bank of Egypt EXPA June 23.29% 2.47% PACHIN PACH June 5.9% 2.36% Credit Agricole Bank CIEB Dec. 20.98% .63% Egyptian Resorts Company EGTS Dec. 39.72% .49% North Cairo Flour Mills MILS June 43.68% .36% Ezz Steel ESRS Dec. 34.75% 0.37% Source: EGX and Global Research Global Investment House 5 Egypt Economic Review - December 2008
    54. To Sum Up » Egypt is a safe investment destination in the coming period. » The buoyant expected GDP growth of 6% in 2009 ensures considerable FDI inflows to Egypt mostly in manufacturing sectors, as well as transportation, education and health care. » Drops in International food and energy prices will save the country’s budget a considerable amount of the subsidy bill, as well as push inflation rate downward. » Being mostly on the low cash cost of production per ton of various industries will guarantee relatively high profit margins for the companies on the Egyptian stock market. » The strong fundamentals of many traded stocks on the Egyptian stock market and the current low price levels will be the catalyst for these stocks to rebound to their historical average prices, once the 2009 Q results are announced. 52 Egypt Economic Review - December 2008 Global Investment House
    55. This material was produced by Global Investment House KSCC (‘Global’),a firm regulated by the Central Bank of Kuwait. This document is not to be used or considered as an offer to sell or a solicitation of an offer to buy any securities. Global may, from time to time,to the extent permitted by law, participate or invest in other financing transactions with the issuers of the securities (‘securities’), perform services for or solicit business from such issuer, and/or have a position or effect transactions in the securities or options thereof. Global may, to the extent permitted by applicable Kuwaiti law or other applicable laws or regulations, effect transactions in the securities before this material is published to recipients. Information and opinions contained herein have been compiled or arrived by Global from sources believed to be reliable, but Global has not independently verified the contents of this document. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document. Global accepts no liability for any loss arising from the use of this document or its contents or otherwise arising in connection therewith. This document is not to be relied upon or used in substitution for the exercise of independent judgement. Global shall have no responsibility or liability whatsoever in respect of any inac curacy in or ommission from this or any other document prepared by Global for, or sent by Global to any person and any such person shall be responsible for conducting his own investigation and analysis of the information contained or referred to in this document and of evaluating the merits and risks involved in the securities forming the subject matter of this or other such document. Opinions and estimates constitute our judgment and are subject to change without prior notice.Past performance is not indicative of future results. This document does not constitute an offer or invitation to subscribe for or purchase any securities, and neither this document nor anything contained herein shall form the basis of any contract or commitment what so ever. It is being furnished to you solely for your information and may not be reproduced or redistributed to any other person. Neither this report nor any copy hereof may be distributed in any jurisdiction outside Kuwait where its distribution may be restricted by law. Persons who receive this report should make themselves aware of and adhere to any such restrictions. By accepting this report you agree to be bound by the foregoing limitations.
    56. Global Research Global Investment House Tel: (965) 2295 1000 - Fax: (965) 2295 1299 research@global.com.kw www.globalinv.net
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