EGYPT INVESTMENT RESEARCH REPORT HIGHLIGHTS KEY SECTORS

PRIME INVESTMENT RESEARCH
INVESTORS’ CONFIDENCE…
THE MISSING PIECE OF THE PUZZLE
EGYPT BOOK
JUNE 2016

Contents
Executive Summary …………………………………………………………………………………………..……...3
Global Snapshot ………………………………………………………….........................................…….5
Macro Economy ……………………………………………......................................…………..…...…..8
Stock Market Focus ……………………………………………......................................………….....21
Real Estate Sector ……………………………....................................……………………..........…..25
Sixth of October for Development and Investment (SODIC)…………….….……………………………………...28
Palm Hills Development Company ……………………………………………………………………………………………..31
Emaar Misr for Development ……………………………………………………………………………………………………..34
Banking & Financial Sector …………………………………………………………………………………..….38
Commercial International Bank (CIB)……………….………………………………………………………………………….44
Housing And Development Bank (HDBK) …………………………………………………………………………………….46
Credit Agricole Egypt ………………………………………………………………………………………………………………….48
Export Development Bank of Egypt …………………………………………………………………………………………….50
Abu Dhabi Islamic Bank (ADIB) …………………………………………………………………………………………….……..52
EFG Hermes ………………………………………………………………………………………………………………………………..54
Power & Contracting Sector …………………………………………………………………………………….58
El Sewedy Electric ……………………………………………………………………………………………………………………….60
Orascom Construction ………………………………………………………………………………………………………………..62
Building Materials …………………………………………………………………………………………………..66
Cement ……………………………………………………………………..……………………………………………………………66
Suez Cement ………………………………………………………………………………………………………………………………70
Misr Cement Qena ……………………………………………………………………………………………………………………..72
Arabian Cement ………………………………………………………………………………………………………………………….74
Sinai Cement ………………………………………………………………………………………………………………………………76
South Valley Cement ………………………………………………………………………………………………………………….78
Steel ………………………………………………………………………………………………..……………………………………..80
Ezz Steel ……………………………………………………………………………………………………………………………………..84
Petrochemicals ………………………………………………………………………………………………………..88
Sidi Kreir Petrochemicals …………………………………………………………………………………………………………….90
Food and Beverages Sector ……………………………………………………………………………………..94
Sugar ……………………………………………………………………………………………………………………………………..94
Delta Sugar Co. …………………………………………………………………………………………………………………………..98
Dairy …………………………………………………………………………………………………………………………………….100
Juhayna Food Industries …………………………………………………………………………………………………………..102
Telecommunications …………………………………………………………………………………….……….107
Telecom Egypt ………………………………………………………………………………………………………………………….109
Personal & Household Products – Textiles ……………………………………………………………..112
Oriental Weavers ……………………………………………………………………………………………………………………..114
Industrial Goods – Automotive …………………………………………..…………………………….…..117
GB Auto …………………………………………………………………………………………………………………………………….118
EGYPT BOOK
CONTENTS
2

EGYPT BOOK
EXECUTIVE SUMMARY
3
Global activity is still subdued…
While advanced economies showed a mild economic growth in 2015, emerging and developing economies,
from the other hand, witnessed a decline for the fifth year in a row taking the global economic growth down
to 3.1% in 2015 from 3.4% in 2014. global economic outlook is yet still affected by the slowdown in the Chi-
nese economy that could rather be described as a naturalization stage rather than a recession indicating a
sustained decrease in commodity prices accompanied with the still falling oil and energy prices. Moreover,
monetary policies in emerging economies are to be further affected by the tightening trend in the USA con-
tractionary policy.
What after the devaluation?
After taking the long awaited decision of devaluing the Egyptian local currency by the monetary authority in
mid-March 2016, the corner stone of boosting the economy - now - is regaining the investors’ confidence
back, as consumption is expected to get exhausted in accordance with the ascetic procedures planned by the
government as well as climbing up inflation rates; the government from the other side, is to slowdown its
expenditures and investments on the back of escalating budget deficit and ballooning public debt. The deci-
sion of the devaluation is - supposed - to increase the government’s inflows of foreign currency in term of
increasing exports proceeds, tourism revenues and FDIs; however, as the international trade is affected by the
global economic slowdown and as tourism is affected by the recent insecurity incidents, the remaining playing
card to ease the foreign currency crunch is to attract the inflows of FDIs. The decision of the devaluation is
considered a necessary step but not sufficient, other procedures must be considered in terms of applying the
delayed reforms, the most important of which is amending the investment law and putting a definite frame-
work for the repatriation process; other wise, the overoptimistic targets set by the government for the up-
coming fiscal year in terms of achieving 5.2% real GDP growth rate and 9.8% fiscal deficit will not materialize.
Moreover, no further devaluation is expected to take place, at least in the short run, in our view that, if the
one big devaluation, that took place two months ago, did not help in eliminating the FX risk, attracting FDIs
and boosting exports, then no other further devaluation will do, as devaluing the local currency now will incur
costs outweighing its benefits in terms of escalating inflation rates by the time of the holy month of Ramadan
and paying the country’s pending dues; in addition, this will push the market and speculators back into the
stage of “wait & see”, a feature that was highly criticized in the preceding CBE management that used to de-
value the local currency gradually.
EGX is Undervalued…
The slowdown in China’s economy growth rate weighed negatively on global markets during 2015. Therefore,
2015 was a tough year for the majority of global markets. After a strong performance during 2014, Egypt’s
stock market witnessed very weak performance in 2015, where EGX30 recorded a sharp drop of 22%. How-
ever, 2015 was a record year for EGX in terms of trading value, new listed companies, value of IPOs, and ac-
quisition deals. Under these challenges, there were stocks outperformed EGX30. Out of the stocks covered in
this paper, Credit Agricole recorded the best performance during 2015 with an annual return of 33%, followed
by Misr Cement Qena with an annual return of 22%. We see the current levels of EGX30 represent cheap
prices, as the index is currently traded at P/E ratio of 12.78x, while MSCI for Emerging Markets is traded at P/E
ratio of 13.84x. In addition, estimated forward P/E2016 for EGX30 stands at 9.5x compared to 12.15x for MSCI
EM, according to Bloomberg estimates. All of forward multiples and ratios, that are depicted in the next sec-
tions, come in favor of EGX30 over Morgan Stanley Index for Emerging Markets.
What do we need to recover…?
However, the current FX squeeze in Egypt, coupled with the delayed reforms, as mentioned earlier, offset the
attractiveness of the Egyptian stock market. In our point of view, investors’ confidence is the corner stone for
recovery during the next period. This confidence will be regained through, creating repatriation mechanism
for foreign investors, accelerating the implementation of fiscal reforms, issuance of previously announced
laws, and more transparency.

What do we prefer…?
We are bullish on the real estate sector, putting the sector on the top of our preferred sectors. In light of the
economic challenges that Egypt faces, in combination with restrictions, real estate is the best tool to hedge
inflation. However, the soaring land prices and accordingly units selling prices represent a major threat for the
demand and developers’ margins. Banking and financial services sector comes in the second rank on our list.
Financial services industry is used to head the economy recovery. Meanwhile, Egypt’s banking system enjoys
high liquidity, due to the slowdown in economic activity, putting the sector on a “stand by” mode to capitalize
on promising opportunity with the economic recovery. However, the increasing interest rates, as a result of
increasing inflation rates, may discourage private investments. Power and contracting sector to benefit from
Egypt’s energy shortage and severe need for infrastructure projects, but the government’s ability to secure
required financing remains to be the main issue. Although, building materials sector, as a result, will benefit
from the boom in real estate sector and power and contracting sector, energy is the dominant in this sector.
Due to its strong defensive nature, Food and Beverage sector is one of the essential sectors that must be rep-
resented in the investors’ portfolio. However, producers who rely on imported raw material are exposed to
significant FX risk. Worth mentioning that, we believe Discounted Cash Flow (DCF) valuation method may
show F&B stocks overvalued, but the defensive nature of the sector justifies trading of these stocks at high
multiples. Automotive sector is expected to witness a tough year (2016), due to the FX shortage. At the time
that textiles sector benefiting from the domestic strong demand and the ability to pass increase in cost of
production to end consumers, EGP devaluation may not be enough to boost exports on the back of more cur-
rency devaluation of strong competitors.
It is worth mentioning that, security selection is not less important than sector allocation. In some cases, like
the Egyptian case, security selection may come before the sector allocation, in terms of importance. Addition-
ally, although there are stocks seem to be not good investment opportunity backed by Top-Down analysis, the
Bottom-Up analysis showed them as good opportunities. Therefore, we applied both approaches, seeking for
the best available opportunities in the Egyptian market as depicted in the next sections.
EGYPT BOOK
EXECUTIVE SUMMARY
4

2015 witnessed a subdued global economic activity with real growth rate of around 3.1% y-o-y compared to 3.4%
the year before. Growth in emerging and developing economies (accounting for over 70% of global growth) - de-
clined for the fifth consecutive year reaching 3.9% down from 4.6% in 2014 , while growth in advanced economies
showed a mild recovery up from 1.83% in 2014 reaching 1.88% in 2015.
Global outlook is mainly influenced by:
The gradual slowdown and rebalancing of economic activity in China away from investment and manufacturing
toward consumption and services…
Given China’s important role in global trade and capital
flow as it represents 15% of the world’s GDP, any bumps
along the way could have worldwide substantial spillover
effects, especially on emerging and developing econo-
mies. Overall growth in China is evolving; estimates for
2015 are recording growth rate of around 6.9% down
from 7.3% and 7.7% in 2014 and 2013, respectively;
though the Chinese economy is growing, yet, the faster
slowdown in imports and exports, in part reflecting
weaker investment and manufacturing activity. These
developments, together with market concerns about the
future performance of the Chinese economy, are having
spillovers to other economies through trade channels
and weaker commodity prices, as well as through dimin-
ishing confidence and increasing volatility in financial
markets.
Lower prices for energy and other commodities...
Price of barrel of oil has recently hit USD 50, the highest
level since November 2015. Previous year has witnessed
a drop in Brent crude prices by 35% compared to a drop
of 48% the year before.
Although the slight pick up in oil prices, increases in pro-
duction by Organization of the Petroleum Exporting
Countries (OPEC) members is seemed to be sustained,
moreover oil production is exposed to extra increase
when Iran is to reproduce it; accordingly, bringing its
prices down again - or at least leaving it around the
range of USD 50s for the medium run. Futures markets
are already suggesting only modest increases in prices in
2016 and 2017. Prices of other commodities, have fallen
as well. The previously mentioned transition in the Chi-
nese economy indicates a normalization stage rather than a slowdown, which further support the continuity of low
levels of commodity prices.
Lower oil prices are exhausting the fiscal positions of fuel exporters and weigh on their growth prospects (i.e. KSA
has registered USD 95bn as budget deficit in 2015, as oil represents around 88% of its budget revenues). Though a
decline in oil prices driven by higher oil supply should support global demand in consumption and manufacturing , in
current circumstances several factors have offset the positive impact of lower oil prices. First, in order to smooth
the shock, oil exporters followed aggressive procedures entailing a sizable reduction in their domestic demand. Sec-
ond, pledging oil prices has had a notable impact on investment in oil and gas extraction, also subtracting from
global aggregate demand. Finally, the pickup in consumption in oil importers has so far been somewhat weaker than
what would have been suggested, possibly reflecting continued deleveraging in some of these economies. Limited
pass-through of price declines to consumers may also have been a factor in several emerging market and developing
economies (The case of the Egyptian economy).
EGYPT BOOK
GLOBAL SNAP SHOT
5
ANNUAL OUTPUT GROWTH RATE
SOURCE: IMF
-6
-4
-2
0
2
4
6
8
10
12
14
16
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
%
World Advanced Economies EmergingEconomies China
50
100
150
200
250
300
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
2005=100
Food and Beverage Price Index
AgriculturalRaw Materials Index
Metals Price Index, includes Copper, Aluminum, Iron Ore, Tin, Nickel, Zinc, Lead, and Uranium Price Indices
Fuel(Energy) Index, includes Crude oil (petroleum),Natural Gas, and Coal Price Indices
COMMODITY PRICE INDICES (2005 IS THE BASE YEAR)
SOURCE: IMF

EGYPT BOOK
GLOBAL SNAP SHOT
6
While major advanced economies central banks continue to ease monetary policy, United States, from the other
side, is gradually tightening its monetary policy...
Monetary easing in the euro area and Japan is proceeding broadly, while in December 2015 the U.S. Federal Reserve
lifted the federal funds rate from the zero lower bound. Prospects of a gradual increase in policy interest rates in the
United States as well as bouts of financial volatility amid concerns about emerging market growth prospects have
contributed to tighter external financial conditions, declining capital flows, and further currency depreciations in
many emerging market economies.
US. 1 YEAR T-BILL RATES
SOURCE: BLOOMBERG
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
5/29/2014
6/29/2014
7/29/2014
8/29/2014
9/29/2014
10/29/2014
11/29/2014
12/29/2014
1/29/2015
2/28/2015
3/31/2015
4/30/2015
5/31/2015
6/30/2015
7/31/2015
8/31/2015
9/30/2015
10/31/2015
11/30/2015
12/31/2015
1/31/2016
2/29/2016
3/31/2016
4/30/2016
%

EGYPT BOOK
7
This Page has been left Intentionally Blank

EGYPT’S MACRO OVERVIEW
The Egyptian economy has seen four years of sluggish economic growth revolving around 2% with inching up unem-
ployment rate reaching a peak of 13.4% in FY14 compared to average of 9% before the 25th of January revolution.
Fiscal deficit is sustaining a record of two-digits figure reaching its highest of 13.5% in FY13 compared to an average
of 7% before 2011 revolution, pushing public debt to balloon towards almost 88% of the country’s GDP. The coun-
try’s external position is still suffering chronic difficulties on the back of domestic turmoil and unfavorable global
economic environment, draining the country’s foreign international reserves after reaching a level of USD 36bn by
the end of FY10 to an average of USD 16bn - barely covering three months of imports.
ECONOMIC GROWTH DOUBLED TO 4.2% IN FY15 AFTER FOUR YEARS OF SLUGGISH GROWTH...
Political and economic environments have changed by the beginning of FY15 following the victory of the elected
president Abdel Fattah El Sisi in May 2014 who approved the adoption of economic consolidating reforms. More-
over, the political transition process came to an end with the election of the House of Representatives in December
2015.
The economy started to recover in FY15, as investments started to inch up recording 8.6% y-o-y real growth rate
(compared to 1.7% and –4.7% in FY14 and FY13, respectively) with 23% y-o-y increase in private investments and
30% y-o-y increase in government investments, accompanied by increasing the foreign component by 55% y-o-y and
composing around 20% of total investments.
On the other hand, FY15 witnessed a scaled up spending by the government that increased by 7% in FY15 com-
pared to 6.6% in FY14 driven mainly by its aggressive spending in infrastructure and mega projects (which explains a
huge part of the increase in investments) as well as undertaking important measures to restore macroeconomic
stability by rationalizing its subsidies program and public wages in addition to amendments in the taxing system.
Such measures have squeezed consumption in FY15 that showed the slowest real growth rate since 2011 amount-
ing to 2.8% compared to an average of 6% in the preceding three years that witnessed both expansionary fiscal and
monetary policies favoring consumption in terms of increasing wages as well as cutting interest rates. The slow
down in consumption growth in FY15 came on the back of the first round of partial lifting up of subsidies and in-
creasing energy prices by around 30% in addition to the successive devaluations of the Egyptian pound by around
12% throughout the year that led to increasing the costs of importation that did not manage to be offset by the fall
in international food and oil prices, as well as increasing sales taxes on some goods (namely alcohol and cigarettes),
pushing inflation rate for FY15 to hit 11% compared to 10.1% and 6.9% in FY14 and FY13 respectively.
EGYPT BOOK
MACRO ECONOMY
8
PRIVATE VS. PUBLIC IMPLEMENTED INVESTMENTS WITH FY15 WITNESSING A PICK-UP IN TOTAL INVESTMENTS AS % OF GDP
SOURCE: MINISTRY OF PLANNING
127
142 154 146 155
191
105 87
93
96
110
143
19.50%
17.10%
16.37%
14.34%
13.83%
14.37%
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
17.00%
18.00%
19.00%
20.00%
0
50
100
150
200
250
300
350
400
FY10 FY11 FY12a FY13a FY14a FY15a
EGPbillion
Private sector implemented investments Public sector implemented investments
Total investments as % of GDP (right axis)

In addition, interest rates were hiked by 100 bps at the
beginning of the previous fiscal year. At the same time
employment rates, though recovered, it did with a slow
pace; unemployment rate reached 12.7% at the end of
FY15 compared to 13.3% in the same period a year be-
fore.
Net exports deteriorated at a slower rate in FY15
(1.88%) when compared to FY14 that witnessed a mas-
sive deterioration rate of 29.4%. The slow down in wors-
ening the net exports figure was triggered mainly by the
fall in international food and oil prices.
As such, growth rebounded to 4.2% in FY15, double the
growth during the preceding four years and compared
to an average of 6% in the five years pre-January 2011
revolution.
YET, CHALLENGES REMAIN; ATTRIBUTED MAINLY TO FOR-
EIGN EXCHANGE CRUNCH...
Preliminary figures for the first half of FY16 indicate
that the economic uptick has faded somewhat, mainly
due to the foreign exchange shortages that stifled pro-
duction, and undermined Egypt’s competitiveness,
adding to the delay in legislative and investment re-
forms which explains country’s inability to transfer USD
100bn of signed MOUs in March 2015 Egypt Economic
Development Conference (EEDC) into executed invest-
ment contracts.
The shortfall in foreign currency came due to the dete-
rioration in its main sources such as tourism revenues
that mainly got negatively affected by the recent inse-
curity incidents after the Russian metro jet crash in
Sinai in October 2015 after reaching USD 7.3bn by the
end of FY15 up from USD 5bn the year before, yet
such revenues did not manage to reach the pre-January
revolution levels of above USD 10bn a year, the de-
crease in international trade passing through Suez
Canal on the back of pledging international oil prices
and the global slowdown, stepping back remittances
(after registering USD 19.3bn in FY 15) as they started
leaking from the banking system to the parallel market,
cautious approach of FDIs especially in the oil and gas
sector due to their pending backlogs that reached USD
3.4bn by now down from a peak of over USD 6bn in
FY13, which further plunged the industrial sector into
energy supply shortages, as well as slowing down in
GCCs aid after reaching a peak of USD 12.5bn in FY14,
in addition to switching its form from cash and in-kind
grants to liabilities at the CBE and FDIs. As a result re-
serves got exhausted revolving around USD 16bn down
from its pre-2011 level of USD 36bn.
EGYPT BOOK
MACRO ECONOMY
9
81%
12%
15%
-9%
Household Consumption
Government
Consumption
Investments
Net Exports
GDP COMPONENTS BREAKDOWN (AS OF FY15)
EGYPT’S MAIN FOREIGN CURRENCY RESOURCES (AS OF FY15)
SOURCE: CBE
Petroleum Exports
8.7
Non-Petroleum
Exports
13.4
Suez CanalDues,5.4
Tourism Revenues,
7.4
Remittancesof
EgyptiansWorking
Abroad
19.3
FDIs,6.4
Started to decline in
Q1FY16 due to
deteriorating
economic conditions
in GCCs
suffering from FX &
energy shortages as
well as deteriorating
securityconditions in
their importing
markets.
Decreasing on the back of
aging fields and pledging int'l
oil prices
Negativelyaffectedby global recession
& declining oil prices
Approaching cautiously due to
delayed reforms & overvalued
EGP
Falling on the back of
travelling bans after
the Russian Metro jet
crash
Figures are inUSD billion
7.1%
7.2%
4.7%
5.1%
1.8%
2.2% 2.1%
2.2%
4.2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
-
2
4
6
8
10
12
14
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
USDbillion
TourismRevenues NetFDIs GDP growth rate(right axis)
FDIS, TOURISM REVENUES GDP GROWTH RATE
SOURCE: CBE & MINISTRY OF PLANNING

ACCORDINGLY, THE CENTRAL BANK OF EGYPT (CBE) HAS MOVED TOWARDS ADOPTING A MORE FLEXIBLE EXCHANGE
RATE MANAGEMENT REGIME IN MID-MARCH 2016...
After defending the domestic currency through a gradual devaluation ranging between 5-20 piaster, accompanied
with the issuance of 3 years CDs with 12.5% interest rates by the three main public banks in November 2015 and
a 50bps hike in lending and depositing CBE rates in December 2015; the new CBE board decided on March 14,
2016 to devalue the local currency by 14% reaching EGP 8.95/USD up from EGP 7.83/USD, a step that came after
(and followed as well by) a series of procedures aiming at alleviating pressures on the external accounts and par-
tially resolving a binding constraint on economic activity; such procedures that took the form of:
 On March 8th, the CBE canceled the caps on deposits and withdrawals for individuals and companies that
import essential goods, while keeping the caps imposed on corporate that import other goods and in an
attempt to curb the dollar rates in the black market.
 At the same month, the three big public banks NBE, Banque Misr and Banque du Caire issued Belady USD-
denominated CDs, granting yields of 5.75%, 5.25% and 4.25% for the 7, 5 and 3 years maturities; such certifi-
cates were said to attract around USD 150mn.
 In addition, and by the time of the big devaluation, that took place in the mid of March, the National Bank of
Egypt and Banque Misr issued two-month only available certificate of deposit granting 15% annually that is
to be sold in US dollars and then converted to Egyptian pounds, NBE has further extended selling these cer-
tificates by now. The two banks have also issued treasuries call option to foreign investors that hedge them
against weakness in EGP.
 The CBE has further hiked rates by another 150bps in March 2016 targeting fighting the jumps in inflation
rates on the back of the devaluation.
EGYPT BOOK
MACRO ECONOMY
10
7.25
7.75
8.25
8.75
9.25
9.75
10.25
10.75
11.25
11.75
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
Jan-16
Feb-16
Mar-16
Apr-16
%
overnightdeposit rate overnightlending rate rateof the CBE’s main operation
CBE RATES
SOURCE: CBE AND PRIME ESTIMATES
CONFIDENCE IN THE ECONOMY IS IN A CRITICAL POSITION ONCE AGAIN…
Based on the previously mentioned incidents, risks are being alerted and confidence in the Egyptian economy is
relatively fading out again; credit default swaps (CDS) are continuously rising since the Russian metro jet crash in
Sinai crossing 480bps. On the other hand, though Fitch maintained its credit rating for Egypt at ‘B’ and the coun-
try’s outlook at ‘stable’, recent report published by S&P has downgraded Egypt outlook to ’negative’ from 'stable',
indicating that rating downgrade is possible within the next six months to two years. Such outlook downgrading
came on the back of pledging the country’s foreign reserves, slow down in GCC foreign aid, fiscal difficulties and
rising political risk.

EGYPT BOOK
MACRO ECONOMY
11
2011 2012 2013 2014 2015 2016
Rating Outlook Rating Outlook Rating Outlook Rating Outlook Rating Outlook Rating Outlook
S&P
1-Feb BB+ Negative 10-Feb B Negative 9-May CCC+ Stable 15-May B- Positive 15-May B- Negative
10-Mar BB- Negative 25-Jun B Negative 15-Nov B- Stable 13-Nov B- Stable
18-Oct B+ Negative 23-Aug B Negative
24-Nov B Negative 24-Dec B- Negative
Fitch
28-Jan BB+ Negative 15-Jun B+ Negative 30-Jan B Negative 3-Jan B- Stable 30-May B Stable
3-Feb BB Negative 5-Jul B- Negative 19-Dec B Stable
30-Dec BB- Negative
Moody's
31-Jan Ba2 Negative 12-Jan B3 Negative 20-Oct Caa1 Stable 7-Apr B3 Stable
16-Mar Ba3 Negative 18-Jan B2 Negative
27-Oct B1 Negative 21-Mar Caa1 Negative
21-Dec B2 Negative
EGYPT’S CDS
SOURCE: REUTERS
EGYPT’S RATING HISTORY
SOURCE: VARIOUS NEWS
0
100
200
300
400
500
600
700
800
900
10/1/2010
11/1/2010
12/1/2010
1/1/2011
2/1/2011
3/1/2011
4/1/2011
5/1/2011
6/1/2011
7/1/2011
8/1/2011
9/1/2011
10/1/2011
11/1/2011
12/1/2011
1/1/2012
2/1/2012
3/1/2012
4/1/2012
5/1/2012
6/1/2012
7/1/2012
8/1/2012
9/1/2012
10/1/2012
11/1/2012
12/1/2012
1/1/2013
2/1/2013
3/1/2013
4/1/2013
5/1/2013
6/1/2013
7/1/2013
8/1/2013
9/1/2013
10/1/2013
11/1/2013
12/1/2013
1/1/2014
2/1/2014
3/1/2014
4/1/2014
5/1/2014
6/1/2014
7/1/2014
8/1/2014
9/1/2014
10/1/2014
11/1/2014
12/1/2014
1/1/2015
2/1/2015
3/1/2015
4/1/2015
5/1/2015
6/1/2015
7/1/2015
8/1/2015
9/1/2015
10/1/2015
11/1/2015
12/1/2015
1/1/2016
2/1/2016
3/1/2016
4/1/2016
5/1/2016
bps
25thof January
Revolution
MohamedMorsi
was electedas
the country's
President
30thof June
Revolution
Abdel FattahAl
Sisi was elected
as the country's
President
The Russian
Metrojet crash

EGYPT BOOK
MACRO ECONOMY
12
A RED ZONED BUDGET DEFICIT FIGURE...
Before January 2011 revolution, the government has managed to take steady steps in reducing fiscal deficits, keep-
ing it in the safe range of one digit unit. The political instability and the sluggish economic performance after then
led to shooting fiscal deficit figures that reached 13.7% and 12.8% in FY13 and FY14 respectively on the back of ag-
gressive spending by the government in investment projects to compensate the slowdown in private investments,
the stimulus packages that were invested to develop infrastructure, apply minimum wage rates, and achieve sus-
tainable development and the high bill of subsidies and social benefits. While budget revenues kept its steady pace
due to the cash and in-kind grants received by GCCs (amounting to EGP95 billion in FY14), this couldn’t contain the
increase in expenditures.
By the beginning of FY15, the Egyptian government has designed a five-year macroeconomic policy framework, one
of its targets was achieving greater efficiency in government spending in parallel with a planned reduction of fiscal
deficit to near 8-9% of GDP and the government debt to range within 80-85% of GDP. Accordingly, several fiscal
reforms were announced to be implemented in the medium run on both the revenues and the expenditures
schemes (some of which have been already implemented, while the others are in the process of implementation):
Revenues reforms are supposed to focus on increasing the tax base rather than increasing it through enhancing the
methods of tax collection as well as creating incentives for the informal sector to join the formal one, the most im-
portant revenues reforms included 1) Slashing Income Tax: through the decision of unifying Egypt’s income tax on
both individuals and corporate to a maximum of 22.5% starting from January 2015 and lasting for 10 years instead
25% tax rate for those earning above EGP 250,000 till EGP 1mn and instead of 30% tax rate for those earning above
EGP 1mn (25% for the highest bracket and the additional temporary 5% on corporate and individuals earning more
than EGP 1mn per year). 2) Increasing corporate taxes on companies operating in the new free and economic
zones from 10% to the recently applied unified tax of 22.5%. 3) Increasing Sales tax on some goods: namely, alcohol
and cigarettes. 4) Real Estate Tax: been negotiated since 2008 and was applied in January 2015 on residential units
whose value is higher than EGP 2mn. 5) Value added tax (VAT): is supposed to replace the current sales tax regime
and is expected to be fairer to taxpayers, allowing an immediate refund on capital goods, applying a unified tax rate
and extending to a wider range of goods and services, however, such tax is suffering from a continuing delay of ap-
plication.
Expenditures reforms from the other side, focused on spending cuts and government savings as well as more effi-
cient allocation of the government’s resources, the most important of which are 1) Lifting Up Energy Subsidies: the
corner stone of expenditures reforms, already took place at the beginning of FY15 when energy and fuel prices in-
creased by around 30%, a complete lifting up of energy subsidies is planned to take place within the upcoming 3-5
years. 2) Food Subsidies Card System: through using the card system for distributing bread and subsidized goods. 3)
BOT and PPP investment projects: to expand participation of the private sector in infrastructure projects to reduce
the pressure on the government’s budget. 4) Wage Bill Controls: after being doubled within three years between
FY11 and FY14 from EGP 96.2bn to EGP 178.5bn leading to a further increase in the government’s budget deficit,
further steps are taken to control such increase.
However, cash deficit for FY15 has been
pulled away from its targeted level re-
cording EGP 268bn and representing 11.5%
as percentage of GDP opposed to its target
of EGP 240bn and 10% of GDP, on the back
of achieving EGP 465bn as total revenues -
down 15% from its targeted level - triggered
mainly by achieving a level of tax revenues
below its targeted level by more than 16%,
on the other hand, EGP 733bn were re-
corded as total expenditures (down 7%
from its targeted level) mainly on the back
of the decrease in international oil and food
prices.
6.90%
8.10%
9.80%
10.6%
13.7%
12.1%
11.5%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-400
-200
0
200
400
600
800
1000
1200
1400
FY09a FY10a FY11a FY12a FY13a FY14a FY15
EGPbillion
Total Revenues (EGP bn) Total Expenditures (EGP bn)
Cash Deficit (EGP bn) OverallDeficit/ GDP (%)
GOVERNMENT’S BUDGET DEFICIT
SOURCE: MINISTRY OF FINANCE

EGYPT’S MACRO OUTLOOK
GDP GROWTH RATE IS TO RECORD A DISAPPOINTING FIGURE FOR FY15/16 WITH CAUTIOUS OPTIMISTIC OUTLOOK
FOR THE SHORT AND MEDIUM RUN
Squeezed Consumption on the Back of Economic Stress… As inflation rates are climbing up on the back of the
jumps in import prices, monetary policy is getting tighter and unemployment is still remaining high while real
wages are turning into negatives, we cannot expect a major pick up in consumption real growth rate, we see it to
be around 3.15% in FY16 (worth mentioning that consumption grew by 3.4% y-o-y in 1H FY16 compared to 4.3%
when compared to the same period a year before). Consumption is to further slow down in the medium run with
real growth rate barely exceeding 3% due to the price hikes that are expected to take place by the beginning of the
new fiscal year after applying the planned second phase of lifting up energy subsides as well as applying the VAT,
on the other hand the y-o-y growth rate of wages and salaries targeted in the new budget of FY17 is only 4.5%
opposed to 10% and 12% in FY15 and FY14, respectively.
Government Consumption is Still Compensating the Slowdown in Investments… We see government consump-
tion real growth rate for the current fiscal year is to remain high around 6.1% to compensate the still slowly recov-
ering private investments (worth mentioning that government consumption grew by 4.3% y-o-y in 1H FY16 com-
pared to 10.9% when compared to the same period a year before). We assume that government spending growth
rate is to slow down in the medium run to tackle down its public debt and narrow its budget deficit on the condi-
tion that private investments are to take the lead back again starting form FY17/18 in our view, with increased
foreign component.
Investments are Still Growing Slowly, Crowded
Out by the Government Investments... Though
investments grew by 8.6% in FY15, it showed a
declining trend throughout the year due to the
increasing difficulties faced by the private sector
mainly in terms of foreign currency shortages,
energy supply problems, monetary tightening and
delayed reforms. Because obstacles faced by inves-
tors are still persisting, we see investment to grow
at a slower rate for the current fiscal year when
compared with the previous one at 3.8%. Though
we expect a soon pick up in the short and medium
run on the back of a relatively flexible monetary
policy, the newly gas discoveries expected to con-
tain the escalating demand on energy, as well as
setting up the Egyptian Parliament that we hope
to enforce the already delayed legislative reforms
aiming at boosting investments.
Net Exports are Deteriorating Despite EGP Devaluation and Pledging Commodity Prices… Despite gradual depre-
ciation during last fiscal year (of about 12%) as well as the big one witnessed in the second half of the current fiscal
year, we believe exports of goods and services would slightly decline by 3% during this year for the following
reasons: 1) Petroleum exports, especially natural gas, will decline as domestic consumption grows aggressively,
while production stagnates as foreign oil companies approach Egypt cautiously in the current period, despite the
new gas discoveries that are not expected to add to the country’s exports before FY18. On the other hand the fall
in international oil prices are to further decrease the proceeds of its exports; 2) Non Petroleum goods exports face
several supply constraints in the short term that would hinder it from responding elastically to the depreciation of
the pound. The main constrains are energy and foreign currency availability as well as deteriorating security condi-
tions in the most important markets importing Egyptian exports; 3) Exports of services would fall due to the plunge
in tourism after the Russian plane crash witnessed in October 2015, as many countries issued travel restrictions on
flights heading Egypt.
EGYPT BOOK
MACRO ECONOMY
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2013/14 2014/15 2015/2016
RealGDP growth rate (Y-o-Y) Realprivate investments growth rate (Y-o-Y)
Realpublic investments growth rate (Y-o-Y)
PRIVATE VS. PUBLIC IMPLEMENTED INVESTMENTS REAL GROWTH RATE
13

Imports will also decline, in our view, albeit
with a smaller magnitude, by 0.5% during the
current fiscal year on the back of the fall in oil
and food prices, though expected to inch up in
EGP terms in Q4 of the current fiscal year on the
back of the recent local currency devaluation. All
in all, we see net exports at EGP –167bn wors-
ening by 6% when compared with the year be-
fore.
At the sector level, few sectors exceeding GDP growth rate in FY15 subsided in 1HFY16, we mainly refer to tour-
ism activities, Suez canal and manufacturing; while building and constructions and real estate kept on growing;
mining, from the other hand, is still suffering.
 Suez Canal: after growing by 6.7% y-o-y in FY15, Suez Canal growth rate for 1HFY16 slowed down to reach 1.8%
compared to 7.2% in the same period a year before, however we must notice that such positive growth was
recorded in EGP terms but looking at it in USD terms will show a decline by 7.4% for the same half, such differ-
ential is attributed to the devaluation of the EGP. We further expect an increase in y-o-y growth rate for the
current fiscal year in terms of EGP by 2.2% on the back of the devaluation of the local currency that took place
at the second half of the current fiscal year, however we expect a decline in Suez Canal revenues in terms of
USD by 8.5%.
 Manufacturing (excluding oil refining): showed a growth of 5% y-o-y in FY15, however due to the previously
mentioned difficulties faced by the industrial sector its growth declined by 1.1% in the first half of the current
fiscal year compared to a growth of 12.1% when compared with the same half a year before. We expect its
annual growth for the current year not to exceed 1.5%. However, worth mentioning that oil refining has shown
a positive growth of 2% in 1HFY16 compared to negative rates in the same period in the previous four years.
 Building and Construction: is considered now a growth leading sector due to the aggressive government
spending in infrastructure projects, we expect it to grow by more than 10% for the current fiscal year compared
to 9.7% in FY15, the sector’s figures for the first half of FY16 have already shown a growth of 10.7% compared
to 9.5% in 1HFY15.
 Real Estate: showed a growth of 4.5% in 1HFY16 compared to 2.7% in the same period a year before, real es-
tate sector is expected to grow by 4.6% in FY16 compared to 2.7% in FY15, the growth in such sector is attrib-
uted mainly to the increase in its demand “the real as well as the unreal ones”, as people are increasingly
switching their funds to this sector to keep their purchasing power and hedge it against escalating inflation
rates.
 Communication: maintained the 1HFY15 growth rate of around 5.8% in 1HFY16, we expect this growth rate to
be sustained in the medium run.
 Electricity: has shown a noticeable jump in 1HFY16 of 8.6% compared to 3.9% in the same half of FY15 on the
back of the new projects (especially FDIs) in the sector. We see growth rate for the sector in FY16 to be 8.5%
compared to 4% in FY15.
 Mining: though we expected a slight pick up in the mining sector to be felt this year on the back of the new
discoveries in Zohr field, its recent records for 1HFY16 shown a decline of 4.1% compared to a decline of 5.7%
in the same half a year before, we revised down our expectations concerning the mining sector’s growth rate
to be –3.1% compared to our previous expectations of 4.5%.
We expect GDP to show 3.7% growth in FY16 and 3.9% in FY17 due to the expected slow down in consumption,
exhausting trade balance deficit, slowly growing investments with cautious approach of FDIs, with government
consumption showing resilience.
EGYPT BOOK
MACRO ECONOMY
14
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
FY12a FY13a FY14a FY15a FY16f FY17f FY18f
RealGDP growth rate PrivateConsumption Government Consumption
Investment NetExports Exports
Imports
GDP COMPONENTS GROWTH RATE
SOURCE: MINISTRY OF PLANNING & PRIME ESTIMATES

A DEEP DETERIORATION IN CURRENT ACCOUNT IS TO BE CAUTIONED BY BUFFERED FINANCIAL AND CAPITAL ACCOUNTS
ON THE BACK OF RECEIVED EXTERNAL FINANCIAL SUPPORT AND SLIGHTLY INCHING UP FDIS….
Pledging international oil prices, insecurity incidents, foreign currency shortages, devaluation of the local currency,
deteriorating economic conditions and energy supply problems have all sunk their effects on Egypt’s foreign balance.
Trade balance for FY15 showed a deficit of USD 38.8bn attributed to USD 60.8bn imports payments (of which USD
12.4bn are oil imports) while exports proceeds have registered only USD 22bn (of which USD 8.7bn are oil exports),
as oil imports represent only 20% of the country’s imports, the decrease in international oil prices together with the
recent imposed tariffs and import restrictions will not manage to offset the increase in importation costs attributed
to the devaluation of the Egyptian Pound, the negative effect of the devaluation in terms of increasing importation
costs will not be aggressively felt before the next fiscal year as the current fiscal year has almost come at end wit-
nessing around 43% decrease in oil prices, our estimates concerning imports payments for FY17 are revised up
from USD 63bn to USD 68.37bn post the one big devaluation that took place in March 2016. On the other hand,
we expect a tiny increase in exports proceeds that are supposed to, theoretically , increase in terms of quantity as
they are now cheaper, however, the global recession as well as the still deteriorating security conditions in some of
the most important exports markets for Egyptian product such as Yemen, Iraq and Libya will hinder Egyptian exports
to respond elastically to the devaluation. All in all our expectations for trade deficit for FY16 is still around USD
39bn but is revised up from USD 40.6bn to USD 45.96bn for FY17. However, as devaluing the local currency is ex-
pected to attract more FDIs, especially in the oil sector and in accordance with the production of Zohr natural gas
field, we expect trade deficit to noticeably narrow by FY19 and further turning the country back again into a net oil
exporter starting from FY20.
1HFY16 figures for the services balance showed a decline by 45.5% to register USD 2.2bn compared to USD 4.1bn in
the same half a year before on the back of deteriorating tourism and Suez Canal revenues by 32.5% and 7.3% respec-
tively. A further decline in these revenues is expected to continue for the rest of the current fiscal year on the back
of the current insecurity incidents witnessed in the country especially after the Russian plane crash that occurred
last October as well as the global recession and the fall in international oil prices that are to affect the flow of trade
passing through the Suez Canal. We see tourism revenues and Suez Canal revenues for FY16 to be around USD
4.9bn and USD 5.1bn respectively compared to USD 7.37bn and USD 5.36bn for FY15.
On the other hand, transfers fell by 30.7% from USD 11.9bn in 1HFY15 to USD 8.3bn in 1HFY16. While official trans-
fers decreased - at no surprise - by 98.7%, private transfers is continuously falling due to the widening spread be-
tween the official and the black market exchange rate that hit around 14% that half pushing Egyptians working
abroad to transfer their funds in channels other than the banking system; private transfers fell by around 11.73% to
register USD 8.28bn compared to USD 9.38bn in the same half of the previous year, a continuing decline in private
remittances is expected as the spread between the official and the parallel exchange rates widened to almost
25%, we see it at USD 17.1bn in FY16 compared to USD 21.9bn in FY15.
EGYPT BOOK
MACRO ECONOMY
15
Agricultural, Irrigation
& Fishing
11%
Extractions
13%
Manufacturing
(Excluding Oil
Refining)
12%
Oil Refining
4%
Construction &
Building
5%
Wholesale & Retail
Trade
13%
Financial
Intermediaries&
Supporting Services
4%
Toursim
2%
Real Estate
9%
General Government
11%
Others
14%
Suez Canal
2%
GDP BREAKDOWN BY SECTOR (AS OF FY15)
-3.2%
2.2% 4.9%
1.3%
-42.3%
4.2% 4.5% 4.9%
-5.7%
12.2%
3.9%
7.2%
43.7%
9.5%
5.5% 2.7%
-4.1% -1.1%
8.6%
1.8%
-15.0%
10.7%
5.8% 4.5%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Mining Manufacturing
(excludingoil
refining)
Electricity SuezCanal TourismActivities Building&
Construction
Communication RealEstate
1HFY14 1HFY15 1HFY16
MAIN SECTORS’ SEMI ANNUAL REAL GROWTH RATE

EGYPT BOOK
MACRO ECONOMY
Official transfers are expected to slightly pick up after the recently announced USD 2.5bn that are to be received
from KSA in the form of grant. Accordingly, we expect official transfers to record USD 3bn for the current fiscal
year, opposed to USD 2.7bn and USD 12bn in FY15 and FY14 respectively.
Accordingly, we expect current account deficit to deepen reaching USD 15.9bn in FY16 compared to USD 12.1bn in
FY15, such deterioration is to be partially offset by around USD 16bn inflows to the capital and financial account,
attributed mainly to inching up FDIs, though the increase is considered tiny after last year’s March Investment Sum-
mit at Sharm El Sheikh that witnessed USD 100bn of MOUs, we see FDIs in FY16 to reach USD 7bn up from USD
6.34bn in FY15. From the other hand, financial account is expected to buffer on the back of the acquired - as well as
the still pending and negotiable - external financial aid in the form of liabilities at the central bank that registered
around USD 1.48bn in 1HFY16 compared to an outflow of USD 525mn in the same half a year before after receiving
around USD 1bn form the African Development Bank and the Afiexim Bank in December 2015, a figure that we ex-
pect to further increase for FY16 to reach USD 4.3bn after recording the USD 900mn received in February 2016 from
China development bank, USD 2bn from UAE to be received by the end of the current month, USD 1bn as pending
loan from the World Bank as well as USD 500mn from Afrexim Bank (are expected to be received soon after the
parliament has approved the government’s economic program).
In sum, We expect Egypt’s Balance of Payments (BOP) to register an overall deficit of USD 907mn in FY16 com-
pared to a surplus of USD 3.7bn in FY15.
NO FURTHER EXCHANGE RATE-EGP DEPRECIATION ANTICIPATED - AT LEAST IN THE SHORT RUN…
The inflows of the previously mentioned external financial support are to boost Egypt’s international reserves reach-
ing around USD 22bn by the end of FY16, covering around four month of imports and cushioning the expected for-
eign currency outflows taking place by the beginning of the next fiscal year in terms of repaying USD 1bn Qatari
deposit and USD 800mn to Paris Club, in addition to USD 3.3bn in the form of pending backlogs to foreign oil com-
panies are to be paid by end-2016.
Devaluing the local currency now will incur costs outweighing its benefits in terms of escalating inflation rates by the
time of the holy month of Ramadan and paying the country’s pending dues; in addition, this will push the market
and speculators back into the stage of “wait & see”, a feature that was highly criticized in the preceding CBE man-
agement that used to devalue the local currency gradually. If the one big devaluation, that took place two months
ago, did not help in eliminating the FX risk, attracting FDIs and boosting exports, then no other further devalua-
tion will do, in our view.
-50
-40
-30
-20
-10
0
10
20
FY13 FY14 FY15 FY16f FY17f FY18f
USDbillion
Trade Balance Services(Net)
Suez Canal dues Travel (Tourism Revenues)
Remittancesof Egyptians Working abroad Direct Investment in Egypt (net) (FDI)
Liabilities at the CBE Balance of Current Account
Balance of Capital & Financial Account Overall BoP
EGYPT’S EXTERNAL SECTOR
SOURCE: CBE AND PRIME ESTIMATES
16

EGYPT BOOK
MACRO ECONOMY
ESCALATING INFLATION RATES
Inflation rates are expected to climb on the back of increas-
ing importation costs after devaluing the local currency com-
bined with the austerity procedures expected to take place
starting from the next fiscal year aiming at curbing the gov-
ernment budget deficit through lifting up energy subsidies,
raising taxes and electricity prices, as well as the application
of the VAT. Our expectations for CPI inflation for FY16 is
10.2% and 11.5% for FY17.
INFLATION TARGETING THROUGH MONETARY POLICY CAN ONLY LAST FOR A SHORT TIME, IN OUR VIEW…
The CBE has been adopting a tight monetary policy aiming at curbing increasing inflation rates from one side, and
from the other side, rates are keeping on increasing, crowded out by the government borrowing that reached a
“never seen” rates before, i.e. rates on 1-year T-bills, 5-years T-bonds and 10-years T-bonds have crossed the 14%,
15.5% and 17% levels recently, respectively. In addition the newly introduced products by the public banks have
lead a wave of increasing rates. Corridor rates have already increased by 200 bps since the beginning of the current
fiscal year, 50 bps of which have been raised in December and 150 bps have been raised in March.
However, such contractionary policy is to further deepen the government’s debt services (composing alone more
than 25% of the government's expenditures), widen its budget deficit and acts as an investment averse hindering
the main objectives of the recent decision taken by the monetary authority in terms of devaluing the Egyptian
Pound to attract FDIs and boost the level of local investments and to widen the tax base aiming at curbing the gov-
ernment’s budget deficit.
We expect monetary policy to stabilize its rates in the first half of the new fiscal year and to get loose in the sec-
ond half on condition that inflationary pressures arising from the second round effects of the devaluation and
ascetic procedures taking place on the 1st of July 2016 are contained.
NEW BOARD, YET SAME OVER OPTIMISTIC, UNACHIEVABLE BUDGET IN OUR VIEW …
The targeted level for budget deficit for FY16 set by the government amounting to EGP 242bn and representing
around 8.9% as percentage of GDP has proved to be unrealistic as preliminary estimates announced by the govern-
ment are prevailing around 11.5% as percentage of budget deficit from GDP in accordance with the slowdown in
domestic and global business activities negatively affecting tax revenues and property income especially, those com-
ing from companies and authorities working in the oil sector as well as the fall in Suez Canal revenues; in addition to
the delay in budget’s consolidation reforms, namely the value added tax (VAT).
Accordingly, we see budget revenues for FY16 at only EGP 502bn compared to EGP 622bn targeted by the govern-
ment for the current fiscal year (34% higher than its record a year before).
We further, expect a fall in budget expenditures for FY16 below its projected level of EGP 865bn by around 6.3%,
triggered mainly to pledging international oil and commodity prices. We see it at EGP 814bn.
In sum, we see budget deficit at EGP 312bn accounting for 11.5% of GDP and is not to record a one-digit figure
before FY18.
The new targeted budget levels for FY17 set by the new board of the ministry of finance are yet still over optimistic
and unachievable, in our view, budgeted overall deficit as percentage of GDP is 9.8% assuming 5.2% as real GDP
growth rate, opposed to our estimates of 10.8% and 3.9%, respectively, for FY17; as the still pending investment
and legislative reforms as well as the foreign currency crunch are deepening the downside risk of slowing produc-
tion.
11.0%
8.7%
6.9%
10.1%
11.0%
10.2%
11.5%
10.8%
0%
2%
4%
6%
8%
10%
12%
14%
FY11a FY12a FY13a FY14a FY15a FY16f FY17f FY18f
CPIInflation, Annual Average %
AVERAGE CPI INFLATION
SOURCE: CAPMAS AND PRIME ESTIMATES
17

EGYPT BOOK
MACRO ECONOMY
Revenues are budgeted to reach EGP 631bn in FY17 compared to a budgeted figure of EGP 622bn for FY16 (recent
figures for revenues in the first 8 months of FY16 have shown only EGP 253bn), 64% of budgeted revenues are in
the form of tax revenues amounting EGP 433.3bn (EGP 40bn of which are assumed to be raised from the applica-
tion of the VAT) while 20% are in the form of property income amounting to EGP 99bn. We see such figures are
somehow overestimated, we see total budget revenues to revolve around EGP 555bn, EGP 396bn of which are
tax revenues and EGP 87.3bn are property income as the global recession and the fall in international oil prices
are to affect Suez Canal and oil sector revenues (representing around 7% and 12% of the government’s revenues,
respectively, either in the form of tax revenues or property income). Moreover, the decrease in business activity
due to the previously mentioned obstacles are to reduce taxes on corporate profits on companies by around EGP
8bn from its projected figure. In addition, the government has postponed the collection of taxes from tourism
companies due to the difficulties faced by the sector which will affect tax revenues negatively.
On the other hand, expenditures are budgeted to record a figure of EGP 936bn in FY17 compared to a budgeted
figure of EGP 864.5bn in FY16 (recent figures for expenditures in the first 8 months of FY16 have registered EGP
466bn). A blatant remark concerning the projected expenditures in the upcoming fiscal year is the increase of
interest payments by 20% y-o-y to reach EGP 292bn up from EGP 244bn in FY16 to increase its portion from total
expenditures from 26% to 31% indicating how critical the situation is concerning the government’s public debt,
which is expected to exceed 90% as percentage of GDP in FY17 by its turn, moreover, debt service of external
debt is expected to come higher in EGP terms than last year on the back of a weaker pound. Another remark is
the projected slowdown in compensation to employees annual growth rate that is planned to increase by only
4.5% in FY17 compared to 10% and 12% in FY15 and FY14, respectively. Subsidies from the other side are planned
to decrease by around 9% down from EGP 231bn in FY16 (EGP 61bn of which are oil subsidies) to EGP 210bn in
FY17 (EGP 35bn of which are oil subsidies) on the back of the expected second round of lifting up of energy subsi-
dies as well as the decrease in international oil and food prices (i.e. USD 40 is the assumed price for the barrel of oil
for FY17 compared to USD 70 assumed in FY16 budget). In addition, EGP 107bn are projected as government’s
investments for FY17 up from EGP 74bn budgeted in FY16 with an increase of 45% that we see unachievable in
accordance with the government’s escalating public debt. We see government expenditures for FY17 at EGP
903bn.
All in all we expect government’s budget deficit for FY17 to be EGP 348bn accounting for 10.8% of GDP opposed
to the government target of EGP 305bn and 9.8% of GDP.
Fiscal sector (Year End June) FY14a FY15a FY16b FY16e FY17f FY18fFY17b
Total Revenues (EGP bn) 456.79 465.24 622.3 501.9 555.4 624.2631.1
Tax Revenues 260.3 305.96 422.4 348.7 396.6 452.4433.3
Grants 95.86 25.44 2.2 6.2 5.6 2.22.2
Property Income 57 81.46 126.4 85.5 87.3 98.399.3
Other Revenues 43.63 52.39 71.3 61.5 66.2 71.496.2
Total Expenditures (EGP bn) 701.5 733.35 864.56 814.3 903.9 974.5936.09
Compensation of Employees 178.59 198.47 218.1 218.3 228.1 250.9228.1
Purchases of Goods and Services 27.25 31.28 41.4 40.2 46.2 50.840.0
Interest 173.15 193.01 244.04 239.16 294.8 330.1292.52
Subsidies and Social Benefits 228.58 198.57 231.22 194.2 197.8 185.2210.32
Purchases of Non-Financial Assets 52.88 61.75 74.96 66.10 69.41 76.35107.01
Other Expenditures 41.4 50.28 54.80 56.31 67.57 81.0958.10
Cash Deficit (EGP bn) (244.7) (268.1) (242.3) (312.4) (348.57) (350.34)(305.0)
Overall Deficit/ GDP (%) 12.1% 11.5% 8.9% 11.5% 10.8% 9.4%9.4%
b: Government Budget
f: Prime Forecasts
18
SOURCE: MOF AND PRIME ESTIMATES

EGYPT BOOK
MACRO ECONOMY
19
Compensation
ofEmployees
23%
Purchases
ofGoods
and
Services
8%Interest
Payment
20%
Subsidies
28%
Purchases of
Non-Financial
Assets
13%
Other
Expenditurs
8%
Compensation
ofEmployees
27%
Purchases of
Goods and
Services
4%
Interest
Payment
26%
Subsidies
27%
Purchases of
Non-Financial
Assets
9%
Other
Expenditurs
7%
Compensation
ofEmployees
24% Purchases
ofGoods
and
Services
4%Interest
Payment
31%
Subsidies
23%
Purchases of
Non-Financial
Assets
12%
Other
Expenditurs
6%
FY10 FY17BFY15
TaxRevenues
66%
Grants
5%
Property Income
18%
OtherRevenues
11%
TaxRevenues
64%
Grants
2%
Property
Income
20%
Other
Revenues
14%
TaxRevenues
69%
Grants
0%
Property
Income
16%
Other
Revenues
15%
FY10 FY17BFY15
BUDGET EXPENDITURES BREAKDOWN
SOURCE: MINISTRY OF FINANCE
BUDGET REVENUES BREAKDOWN

EGYPT BOOK
20

EGYPT BOOK
STOCK MARKET FOCUS
21
The Egyptian stock market was not away of the challenges that the Egyptian economy faced, either domestically
or globally, after recording a strong performance during 2014, year of 2015 witnessed a sharp drop of 22% in
EGX30. Morgan Stanley Index for Emerging Markets dropped by 17% during 2015, while MSC index for Egypt
dropped by 25%. Meanwhile, other emerging markets witnessed more aggressive declines like; Greece, Brazil,
Columbia, Peru, Turkey and South Africa, that dropped by 64%, 44%, 44%, 32%, 32% and 27%, respectively.
However, backed by the 94% rally in the Egyptian stock market performance over 2012-2014, despite the political
instability over that period, Egyptian stock market came in the third position among emerging market with an
increase of 45% over 2012-2015. Also, 2015 witnessed the second highest trading value of EGP 117bn, post 2011
revolution, following 2014. In addition, 2015 witnessed a considerable number of 15 new listed companies, with a
total capital of EGP 6bn, which is the highest since 2008. In addition, during 2015 EGX came in the first position
among regional peers, in terms of value of IPOs of EGP 6.2bn. Furthermore, the highest number of acquisition
deals of 11 since 2009 was implemented in 2015, with a total value of EGP 16bn.
Accordingly, we believe the weak performance during 2015 was stemmed mainly from the investors’ negative
sentiment, which witnessed a dramatic change during 2014-2015. As it moved from very positive during 2H2014,
to moderate in 1Q2015, until it was significantly deteriorated with the beginning of April 2015. After the presiden-
tial elections mid 2014, a state of extreme optimism dominated the Egyptian market, especially with the prepara-
tion for Economic Summit in Sharm El-Shiekh. In 1Q2015, the new income taxes in capital market eased the posi-
tive sentiment. After the summit, the continuity of lack of liquidity in the Egyptian market, which was a result of
shortage of foreign currency and along waited queue of repatriations, and the delay in implementing summit’s
projects and MOUs, due to the bureaucracy and inefficiency of laws and administrative body of the government,
converted the sentiment into negative, leading the market to ignore any positive news.
SOURCE: BLOOMBERG
MSC INDEX FOR EMERGING MARKETS IN USD - 2015

EGYPT BOOK
STOCK MARKET FOCUS
22
EGX30 is currently traded at P/E ratio of 12.78x, while MSCI for emerging markets is traded at P/E ratio of 13.84x.
This indicates that, EGX represents a good opportunity among its emerging peers at current levels. In addition, esti-
mated P/E2016 for EGX30 stands at 9.5x compared to 12.15x for MSCI EM, according to Bloomberg estimates.
0.00
1,000.00
2,000.00
3,000.00
4,000.00
5,000.00
6,000.00
7,000.00
8,000.00
9,000.00
10,000.00
11,000.00
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15
EGX30
Economic Reforms
through Subsidy
Phase out & New
taxesfor Capital
Market
SuezCanal
Certificates
6.8%real
GDP
growth in
1Q14/15
Fitch
upgraded
Egypt’s
rating from
B-to B
Terrorism
Actionin
Karam El
Qawdes
Economic
Conference
YemenWar
Russian
Plane Crash
inSinai
EGP
Devaluation
byEGP 0.2
MPCcut
ratesby 50
bps
Moody’s
upgraded
Egypt’s
rating from
Caa1 to B3
Cancellation
of
Parliamentary
Elections
Capital gain
Taxeswere
puton hold
S&P
RevisedUp
Egypt’s
outlookto
Positive
Fitch
affirmed
Egypt’s
rating at B
Egypt
inaugurated
Suez Canal
Project
Ismail is
newPM
S&P Revised
Down Egypt’s
outlookto
Stable
TarekAmer
News
about loans
fromWB &
AfDB
SISI
President
Announcementof amendments to
Investment law and Income Tax law
SOURCE: BLOOMBERG, PRIME RESEARCH
Major Events & EGX30 Performance
SOURCE: BLOOMBERG, PRIME RESEARCH

Stock
Annual
Change
Correla-
tion
1 Year
Beta
Excess Re-
turn
Required Re-
turn
AlphaR-Squared
CIEB 33% 0.28 0.27 55% 1% 32%8%
COMI -1% 0.88 1.00 20% -21% 20%77%
MCQE 22% 0.15 0.13 44% 5% 17%2%
EMFD 0% 0.59 0.86 22% -17% 17%35%
ORAS 0% 0.62 0.83 22% -16% 16%39%
EXPA 2% 0.45 0.46 24% -5% 7%20%
SWDY -10% 0.65 0.81 12% -16% 6%43%
PHDC -27% 0.85 1.36 -6% -32% 5%72%
AUTO -24% 0.52 1.08 -2% -24% 0%27%
HDBK -9% 0.41 0.49 13% -6% -3%16%
OCDI -34% 0.87 1.30 -13% -31% -3%75%
HRHO -35% 0.88 1.32 -14% -31% -4%77%
ESRS -36% 0.76 1.30 -14% -31% -5%58%
JUFO -15% 0.44 0.56 6% -8% -7%20%
SKPC -16% 0.56 0.54 6% -8% -8%31%
ORWE -32% 0.60 0.91 -10% -19% -13%36%
SVCE -43% 0.77 1.23 -21% -29% -14%60%
SCEM -23% 0.38 0.54 -1% -8% -15%14%
ADIB -32% 0.57 0.79 -10% -15% -17%33%
ETEL -45% 0.70 0.82 -24% -16% -29%48%
ARCC -39% 0.41 0.48 -18% -6% -34%17%
SUGR -28% 0.05 0.07 -6% 7% -35%0%
SUCE -41% 0.05 0.07 -20% 7% -48%0%
EGYPT BOOK
STOCK MARKET FOCUS
23
As we mentioned earlier, EGX30 dropped by 22% during 2015. In order to test the performance of the sectors
covered in this paper, but in a different way, we followed hypothetical scenario, where we used 2015 Average
yield on 1-Year T-bill (RF), 1-Year Statistical Beta (ß), and actual market return of –22% (RM), as inputs in Capi-
tal Asset Pricing Model (CAPM) to reach the required return, or in other words, what should the return of
each stock stand at in light of these actual variables. Using EGX30 as our bench mark, Credit Agricole Egypt
(CIEB) recorded the highest Alpha of 32% during 2015, followed by COMI with Alpha of 20%.
SOURCE: PRIME RESEARCH

EGYPT BOOK
24

EGYPT BOOK
REAL ESTATE SECTOR
25
... AND LOW MORTGAGE PENETRATION
SOURCE: BMI
LOW URBANIZATION RATE IN EGYPT
SOURCE: BMI
POPULATION AND GROWTH RATE
SOURCE: WORLD BANK
Historically, a number of investments showed a natural hedge against inflation. Real estate is one of those invest-
ments. Viewing real estate as one of the best alternative to hedge inflation can be attributed mainly to two factors; 1)
prices of real estate properties increase over time, leading to increase the resale value of the property. 2) Real estate
can also be used to generate rental income. With the value of the property being on the rising trend with inflation over
time, also the rental value tenants pay can also grow over time. These features of investment property lead either the
income generated or the value of property to keep pace with the general rise in prices across the country.
The advantage of selecting real estate investment as a tool for
inflation hedging is manifested in the current circumstances
that Egypt’s economic environment faces. Egypt is facing a
significant inflationary pressure, due to mainly the FX crisis in
the country, which enforced the CBE to devaluate the Egyptian
pound to unprecedented levels, led recent interest rates hikes
to be unfeasible from the investors’ perspective. The unavail-
ability of foreign currency, coupled with restrictions imposed
on transferring funds outside the country, made real estate
and stock market the best tools to hedge inflation. Further-
more, current high volatility of Egypt’s stock market over the
recent years pushed real estate investment to be the best
available tool to hedge against inflation.
In addition, Egypt’s real estate sector enjoys additional advan-
tage besides the aforementioned one. Demand for real estate
in Egypt is characterized to be a real demand. This real demand
is based on the fact that; Egypt has the largest population in
MENA region, which also grows annually by 2%. As a result, the
Egyptian real estate market witnesses a shortage of supply,
especially in low and middle income categories. With around
one million marriage per annum, about 67.7% of the popula-
tion below 34 years. This guarantees the continuity of a strong
demand for real estate.
With the largest population in the region, Egypt recorded one
of the lowest urbanization rates in MENA region. As urbaniza-
tion rate in Egypt came in at 43%, compared to 87% and 82% in
Lebanon and KSA, respectively. This low rate with expectation
of increasing disposal income supports demand for real estate.
Recently, Egypt’s president announced a plan for allocating
new homes in new cities for the residents of slums. This will
help in developing residential communities outside Cairo, cre-
ating strong demand in these areas.
Mortgage market is one of the industry’s growth drivers in
Egypt, as the contribution of Mortgage market to the Egyptian
real estate sector is very tiny. Mortgage penetration rate in
Egypt of 0.23%, is one of the lowest rates in the region, as
depicted in the chart. CBE issued a decree to further increase
mortgage penetration, easing requirements and raising the cap
for funding. And hence, this will create a positive effect on
demand, especially from middle and low income classes. As the
CBE’s initiatives target mainly low and middle income classes,
where they will be provided with loans at low interest rates.

In sum, the continuous devaluation of the Egyptian pound will continue fuelling Real Estate demand in Cairo for
the coming years. While devaluation is expected to impact the residential and hospitality segment positively, it is
expected to put strain on the tenants in the retail and office segment as many of them pay the rent in dollar while
their revenues are earned in EGP.
While the residential segment of the New Cairo saw completion of 600 units, there were no major completion in 6th
of October city during the 1Q2016, according to JLL Quarterly review. Total existing units stood at 114 thousand
units not showing much growth since FY2015. The trend of declining prices continued in 1Q2016 across all segments
except apartments in New Cairo, whose prices increased by 7% y-o-y. Prices of Villas in New Cairo declined by 12%
over the same period. Apartments in 6th of October showed a 3% decrease and standalone units also showed 10%
decrease y-o-y. However, q-o-q basis, apartments in New Cairo increased by 4% and apartments in sixth of October
city declined by 1%. Over the same period, Villas in New Cairo and 6th of October declined by 9% and 12%, respec-
tively.
1Q2016 did not witness the completion of any additional retail space, due to which the current supply stood at
1.3mn sqm. Completion of the Capital Mall in Heliopolis is expected to add 45,000 sqm of GLA by the end of
FY2016. Further delays are expected to the opening of Mall of Egypt (150K sqm), hence the project has been pushed
out to 2017. Rental rates have increased 10% YoY but remained unchanged at USD 1600 per sqm q-o-q little down-
ward pressure as rentals appear to peak. Vacancy rates declined to 14% from 17% a year earlier but are largely un-
changed on a q-o-q basis.
EGYPT BOOK
REAL ESTATE SECTOR
26
85
105
113 114
0
20
40
60
80
100
120
2013 2014 2015 Q12016
Current Supply
Units(000)
28
4 3
0
5
10
15
20
25
30
2016 2017 2018
Future Supply
Units(000)
SUPPLY OF RESIDENTIAL UNITS CONSTANT FUTURE SUPPLY TO SLOW DOWN IN 2017
SOURCE: JIL SOURCE: JIL
LIMITED SUPPLY GROWTH HISTORICALLY STRONG EXPECTED GLA SUPPLY TO MEET STRONG DEMAND

EGYPT BOOK
REAL ESTATE SECTOR
Cairo’s office supply reached approximately 941k sqm GLA, with an addition of approximately 20k sqm with the
completion of Citadel Plaza in the Mokattam Area. Average rents per sqm increased by 11% y-o-y in West Cairo but
decreased by 4% in New Cairo Sector 1 over the same period. While in Central Cairo and New Cairo Sector 2, aver-
age rents remained unchanged on y-o-y basis. Vacancy rate dropped from 33% to 29% y-o-y on the back of limited
new supply. Although vacancies are still high, this decline of 4% is considered as positive for the office segment.
27
LIMITED NEW SUPPLY BROUGHT DOWN VACANCY STRONG GROWTH IN FUTURE SUPPLY

EGYPT BOOK
REAL ESTATE SECTOR
28
We set SODIC’s FV at EGP 16.6/share; 48.2% upside potential, with “Strong Buy”
rating: Using the Sum of the Parts method (SoTPs), where we applied DCF valuation
method for the 11 launched projects and the recently signed Co-Development with
Heliopolis Housing, we recommend “Strong Buy” for SODIC, at a FV of EGP16.78/share,
implying an upside potential of 48.2%. SODIC is one of our top picks within the real
estate sector, as the company enjoys strong brand equity with significant clients’ loy-
alty. This came as a result of the impressive track record of the company, as well as its
abide to the delivery time schedule, at the time when most local developers delayed
their delivery time schedules due to the political conditions in the country. In addition,
the company will be executing its strategy towards achieving further sustainable
growth into the future, focusing in particular on building up its recurring income port-
folio.
Fast growing land bank, strong track record and well diversified portfolio: The
growth and development of the SODIC land bank has been at the heart of the perform-
ance and strategy of the company over the past two decades. SODIC’s focus and ef-
forts towards expanding its project portfolio has paid off in FY2015. Total of 3.3 million
sqm of land was added to SODIC’s land bank in FY2015, bringing the total undeveloped
land bank to 6.1mn sqm. SODIC enjoys a very well diversified portfolio right from resi-
dential units to offices and retail. Even within the residential portfolio, SODIC caters to
a very wide range of customers with its projects ranging from residential family units,
general residential, high end apartments and secondary home. The company plans to
execute EGP 45 –50bn worth of ventures over the next five years and will act to ex-
pand their land bank whilst diversifying into locations in more coastal and secondary
city locations.
Mega Co-Development project in East Cairo: SODIC inked a Co-development agree-
ment with Heliopolis Housing and Development Company to develop 655 acres
(2.75mn sqm) in East Cairo. SODIC will be entitled to 70% of revenue and will perform
the master planning, designing, marketing & sales and construction. The project will
enhance Sodic land bank, especially in East Cairo, with no associated land liability.
However, our main concern is; SODIC currently have 6.1mn sqm of undeveloped land.
Out of this 2.7mn sqm is a co-development with Heliopolis housing. Acquiring new
land bank will cost higher to SODIC due to increasing land prices. This puts SODIC at a
disadvantaged position as other players have already acquired huge land bank at lower
prices.
Strong off-plan sales: The off-plan sales of SODIC grew from EGP 2.5bn in FY2013 to
EGP 4.4bn in FY2015, annual growth of 33%. From strong line-up of launches of big
projects such as Villette, Eastown residence and Courtyards in the coming years, we
see off-plan sales of SODIC to remain strong in coming years. Net Contracted Sales in
FY2016 and FY2017 is forecasted to be EGP 4.1bn and EGP 4.5bn, respectively. Villette
is expected to contribute to 41% of total Contracted Sales of EGP 4.1bn in FY2016.
Launch of the Co-Development with Heliopolis Housing and Development Co. by the
end of 2016 is expected to drive Contracted Sales further in FY2017.
SIXTH OF OCTOBER FOR DEVELOPMENT AND INVESTMENT..
Healthy Land Bank Replenishment, with Diversified Projects Portfolio...
“STRONG BUY”
MARKET PRICE EGP 11.32
FAIR VALUE EGP 16.78
POTENTIAL 48.2% UPSIDE
INVESTMENT GRADE
“GROWTH”
Stock Data
Outstanding Shares [in mn] 338.9
Mkt. Cap [in mn] 3,514.5
Bloomberg – Reuters OCDI EY / OCDI.CA
52-WEEKS LOW/HIGH EGP 6.56 – EGP 13.38
DAILY AVG TURNOVER (IN MN) 1.59
Ownership
Abanumay Family 13%
Olayan Saudi Investment Co. 13%
Ripplewood Advisors L.L.C 9%
Rashed Al Rashed & Sons Co. 5%
EFG-Hermes 4%
Norges Bank 4%
Juma Al Majid Investments L.L.C 3%
Free Float & Others 49%
Source: Bloomberg
0
1
2
3
4
5
6
Auto EGX 30 - Rebased
 Company Profile
SODIC was incorporated in 1996 and has since
become one of Egypt’s leading real estate develop-
ment companies. Headquartered in Cairo and
listed on the Egyptian stock exchange, – under-
pinned by a goal from the leaders of the business
seeking to develop a residential neighbourhood on
the outer west region of Cairo. The initial phase of
SODIC development through the decade spanning
from 1996 to 2005. Sodic was a pioneer in the
area of ‘New Urban Community’ in property devel-
opment and developed a first of its kind residential
community - Beverly Hills – with a size exceeding
1.7mn sqm of land that has now become home to
over 2,900 families.
0
2
4
6
8
10
12
14
OCDI EGX 30-rebased
All Prices are as of 31 May 2016

EGYPT BOOK
REAL ESTATE SECTOR
29
Project nearing completion leads to decline in Revenue: Top-line declined by 34.2% y-o-
y from EGP 284mn in 1Q2015 to EGP 187mn in 1Q2016. The slump in Revenue is due to
the decline in the number of units delivered by the Company in 1Q2016. SODIC delivered
101 units in 1Q2016 as compared to 108 units in 1Q2015. Decline in delivered units is
because delivery of Allegria and Katameya Plaza is nearing completion, while delivery in
Eastown will show effect from 2Q2016. The Net Profit for 1Q2016 declined by 32.0% to
EGP 51mn from EGP 75mn in 1Q2015. This was primarily due to decline in delivery and
higher costs. Net Profit Margin, which was 26.4% in 1Q2015, has improved to 27.3% in
1Q2016, an increase of 0.9%, primarily due to decline in taxes.
Strong sales backlog: SODIC sales backlog in terms of sold but undelivered units amount
to EGP 9bn. Along with the strong expected off plan sales in the coming years SODIC`s
backlog will maintain revenues throughout 2020 with healthy and resilient margins.
Maintained Delivery Path: FY2015 revenue increased by 7.7% yoy compared to 3.1% y-o-
y growth in FY2014 from sustainable delivery momentum. West Cairo projects dominate
units delivery by 94% out of the 721 units delivered. From FY2016 to FY2020, SODIC will
deliver c.3,900 units from its existing projects. Sum of 49% of the expected delivered
units are from Eastown Residences, totalling 1,902 units. Westown Residence is expected
to deliver about 751 units. Villette and Courtyard Westown delivery will reach 698 and
357 units, respectively. The strong delivery commitment from launched projects and
expected delivery from the unlaunched projects will drive the SODIC Top line to increase
to EGP 2.47bn in FY2018 from EGP 1.47bn in 2015.

EGYPT BOOK
REAL ESTATE SECTOR
30
 Financial Statements … Historical & Forecast
SOURCE: SODIC, PRIME
Income Statement Brief Hist. Forecast
In EGP Mn 2015 2016F 2017F 2018F
Revenues 1,471 1,424 1,487 2,474
Change 8% -3% 4% 66%
Cost of Operations 862 839 845 1,441
Change -3% -2.7% 0.7% 70.5%
Gross Profit 609 585 642 1,033
EBITDA 408 401 449 812
NPAT 321 323 384 706
Balance Sheet Brief Hist. Forecast
In EGP Mn 2015 2016F 2017F 2018F
Cash & Cash Equivalent 2,016 1,895 3,053 4,811
Net Receivables 6,886 8,171 7,878 7,723
WIP 7,036 7,680 8,790 9,852
Other Current Assets 554 506 513 518
Total Current Assets 16,493 18,252 20,234 22,904
Net PPE 136 125 115 106
Other LT-Assets 129 35 356 354
Total Long Term Assets 265 160 471 460
Total Assets 16,758 18,412 20,705 23,363
Liabilities
STD - incl CPLTD 173 135 126 119
Accounts Payable 1,766 1,928 2,841 4,085
Customers’ Advance Payment 8,914 10,522 12,514 13,921
Other Current Liabilities 71 71 71 71
Total Current Liabilities 10,925 12,656 15,552 18,196
LTD 2,446 2,047 1,064 377
Other Long Term liabilities 1 1 1 1
Total Long Term Liabilities 2,447 2,048 1,065 378
Total Liabilities 13,372 14,704 16,617 18,574
Equity
Paid-in-Capital 1,356 1,356 1,356 1,356
Reserves 1,637 1,648 1,656 1,675
RE 93 93 93 93
Total Equity 3,386 3,709 4,088 4,789
Margins & Ratios
2015 2016F 2017F 2018F
GPM 41.4% 41.1% 43.2% 41.8%
EBITDA Margin 28% 28% 30% 33%
NPM 22% 23% 26% 29%
EPS 0.9 0.9 1.1 2.0
P/E 12.3x 12.3x 10.3x 5.6x
BV/S 10 11 12 14
P/BV 1.1x 1.0x 0.9x 0.8x
Debt/Equity 0.77x 0.59 0.29 0.10

EGYPT BOOK
REAL ESTATE SECTOR
31
We set PHDC’s FV at EGP 3.64/share; 46% upside potential, with “Strong Buy”
rating: Using the Sum of the Parts (SoTPs) DCF valuation for launched projects and
existing hotels, we recommend “Strong Buy” for PHDC, at a FV of EGP 3.64/share,
implying an upside potential of 46%. PHDC is also one of our top picks within the
real estate sector.
Financial restructuring pays off: PHD succeeded to overcome the liquidity squeeze
which disrupted operations over the past years, through securing different financ-
ing channels. Post the 2011 revolution, the major shareholder MMID supported
the company with shareholders’ loans totaling EGP 562mn as at the end of FY14. In
addition, during 2014, PHD succeeded to increase paid-in capital by EGP 600mn
and secured a syndicated loan of EGP 2.4bn. In 2015 capital was increased by EGP
1.65bn. As a result, the company’s performance improved significantly during the
year and was able to regain clients’ confidence. PHD posted construction spending
of EGP 350mn in 2013 which was more than tripled in 2014 to reach EGP 1.1bn.
Accordingly, PHD succeeded to increase its deliveries from an average of 330 units
in 2011 and 2012 to 981 units in 2014. Moreover, cancelation rate declined to
9.2% of 2014 reservations, down from 225%, 170% and 21% in 2011, 2012 and
2013 respectively, reflecting improved clients’ sentiment. In addition, the company
diversified its target clients base, through targeting upper middle income segment
besides its main target the high end income segment.
PHDC is well positioned, supported by litigation free land bank complemented by
sound commercial strategy: PHDC succeeded to solve all legal disputes regarding
its land bank, as four land plots in New Cairo, 6th of October and Al Alamain were
either returned or settled through reconciliation. Currently the company`s land
bank stands at 27.1 million Sqm, of which 9mn sqm is under development, 12.7mn
sqm is raw land, 2.1mn sqm is completed projects and 3.2mn sqm is Co-
development land.
PHD initiated an ambitious commercial real estate development strategy to build
and operate mixed use projects in order to diversify revenue stream, generate
more recurring income and minimize high revenue contribution from residential
projects. The company plans to roll out a number of community malls, neighbor-
hood malls and commercial offices. PHD also owns 60% of Maccor which owns and
operates Novotel October Hotel, Mercure Ismailia Hotel and Novotel Sharm El
Sheikh Hotel.
However, our main concern on PHDC is that; PHD highly focuses on the upper class
and upper middle class which might be adversely affected as the economic growth
slowdown.
Massive Co-Development Projects in pipeline once agreement finalised: In addi-
tion to the signed Co-development project with MNHD, additional 10,000 Feddans
in West Cairo and 500 Feddans in East Cairo will be developed with the govern-
ment on revenue sharing basis, with low initial investment and low associated
land liabilities, once the MOUs turns to definitive agreements. It has been re-
ported that, the government may cancel the MoU signed with PHD for “October
Oasis", the 10,000 feddans project, but the company denied such action.
PALM HILLS DEVELOPMENT COMPANY...
Well Positioned with Considerable Land Bank Size...
“STRONG BUY”
FAIR VALUE EGP 3.64
POTENTIAL 46% UPSIDE
INVESTMENT GRADE
“GROWTH”
Stock Data
Outstanding Shares [in mn] 2172.3
Bloomberg – Reuters PHDC EY /PHDC.CA
52-WEEKS LOW/HIGH EGP 1.77 – EGP 3.15
Ownership
M & Mfor Investment and Development 42.5%
Other 2.1%
Free Float 55.4%
Source: Bloomberg
0
1
2
3
4
5
6
0
0.5
1
1.5
2
2.5
3
3.5
PHDC EGX 30-rebased
 Company Profile
Palm Hills Developments (PHD) is one of the
largest real estate developers in Egypt. PHD
focuses on developing midsize residential pro-
jects mainly in new urban communities of Cairo.
Launched projects include villas (Detached Vil-
las, Town Houses and Twin Houses), residential
apartments or both. The company’s residential
units are marketed to upper class and middle
class, positioning Palm Hills as one of the lead-
ing luxury developer in the country. PHD’s main
residential developments are located in West-
ern Cairo (Sixth of October and Sheikh Zayed),
Eastern Cairo (The Fifth Settlement and New
Cairo) and Egypt`s Northern Coast. Since inau-
guration, PHD delivered 4,401 units.

EGYPT BOOK
REAL ESTATE SECTOR
32
Record Quarterly Pre Sales: Palm Hills reported a record Pre Sales (New Sales) of EGP
2.2bn in 1Q2016, a growth of 62% y-o-y, recording the highest quarterly New Sales since
inception. 1Q 2016 Pre Sales has surpassed the previous record of EGP 2bn achieved in
3Q 2015. The stunning double digit growth stemmed from the strong demand for the
Company’s units, whether from launched projects or from existing inventory, coupled
with successful sales and marketing campaigns for higher unit prices. The total number of
units sold in 1Q2016 was 567, 32% higher than 1Q2015 due to strong Pre Sales in Palm
Valley, Capital Garden, Golf Extension as well as the North Coast.
In Q12016, PHD changed its accounting method, which resulted in lower margins. Under
the New Accounting method, Net Profit of PHD declined by 43% yoy. Apart from the
change in accounting method, expiration of the tax exempt status and higher minority
interest resulted in this decline. However, PHD reported revenue of EGP 1.07bn, a
growth of 44% yoy, backed by strong pace of construction and deliveries. PHD delivered
377 units in 1Q2016, a growth of 47% y-o-y.

EGYPT BOOK
REAL ESTATE SECTOR
33
In EGP Mn 2015 2016F 2017F 2018F
Revenues 3,561 4,393 4,878 3,901
Change 69% 23% 11% -20%
Cost of Operations 2,362 2,848 3,161 2,529
Change 21% 11% -20% -40%
Gross Profit 1,198 1,545 1,715 1,372
EBITDA 770 1,025 1,125 1,014
NPAT 1,031 691 758 682
In EGP Mn 2015 2016F 2017F 2018F
Cash & Cash Equivalent 966 877 1,108 1,410
Net Receivables 3,075 4,027 4,422 4,111
WIP 0 0 0 0
Other Current Assets 7,340 3,552 1,935 1,904
Net PPE 335 326 316 307
Other LT-Assets 7,149 5,980 6,322 5,690
Total Long Term Assets 7,483 6,305 6,639 5,998
Total Assets 18,864 14,762 14,103 13,423
Liabilities
STD - incl CPLTD 929 644 954 1,121
Accounts Payable 407 421 430 438
Customers’ Advance Payment 6,170 2,952 1,952 952
LTD 3,335 2,162 1,376 406
Total Long Term Liabilities 3,821 2,657 1,881 922
Equity
Paid-in-Capital 4,345 4,345 4,345 4,345
Reserves 1,109 1,109 1,109 1,109
RE 860 1,496 2,224 3,180
Total Equity 6,584 7,270 8,053 9,083
Margins & Ratios
2015 2016F 2017F 2018F
GPM 34% 35% 35% 35%
EBITDA Margin 22% 23% 23% 26%
NPM 29% 16% 16% 17%
EPS 0.47 0.31 0.34 0.31
P/E 5.3x 8.0x 7.3x 8.1x
BV/S 2.9 3.2 3.5 3.9
P/BV 0.9x 0.8x 0.7x 0.6x
Debt/Equity 0.65x 0.39x 0.29x 0.17x
SOURCE: PHDC, PRIME

EGYPT BOOK
REAL ESTATE SECTOR
34
We set EMFD’s FV at EGP 3.94/share; 67% upside potential, with “Strong Buy”
rating: Using the Sum of the Parts (SoTPs) DCF valuation for launched projects, we
recommend “Strong Buy” for EMFD, at a FV of EGP 3.94/share, implying an upside
potential of 67%. Although our estimated FV of Emaar, implies an upside potential,
above current market price, that is higher than that of Palm Hills, we prefer PHD
over EMFD. Emaar targets mainly high income segment in general and ultra high
end segment in some projects. The majority of demand for real estate units within
these segments is mainly for investment purposes, which is the most affected one at
the times of economic slowdown. While, after realizing this point due to the tough
years that the company faced post 2011, PHDC widened its clients base through
targeting upper middle income segment, where the real demand for real estate
units is stronger than that of high end segment.
Large Land Bank, strong brand name and regional expertise: EMFD posses a land
bank of 15.3mn Sqm distributed over three major projects in the North Coast, East-
ern and Central Cairo regions alongside a separate undeveloped land plot in Cairo`s
west axis. Emaar Misr is a member of Emaar Group which was established in 1997.
Since establishment, the company has developed several well-known master
planned projects including Downtown Dubai, Burj Khalifa, Armani Hotel in Dubai,
Arabian Ranches, The Address, BLVD Heights, Dubai Marina, and Emirates Living.
Headquartered in UAE, Emaar Properties is now a leading real estate developer in
the MENA region. EMFD was established in 2005 as a joint venture between Emaar
Properties and Artoc Group for Investment and Development. In 2007, Emaar prop-
erties acquired the full ownership of the company by purchasing shares from Artoc
Group.
Emaar Misr develops premium quality master-planned real estate properties target-
ing the higher income segments of Egyptians. The management of the company
opines that, increasing level of disposable income will create more demand for luxu-
rious projects in the coming years. As the product of the company is catered to-
wards the wealthy segment, the selling price of the company is also very high. Ap-
proximately 43% of the customers of the company earn monthly income between
EGP 45,000 to EGP 65,000 and 30% of the customers earn above EGP 65,000 per
month. As the customers of the company are only the wealthy segment, the com-
pany runs concentration risk. In the down cycle of the economy, demand for luxuri-
ous products typically decrease.
Prime location: EMFD`s three major projects enjoy strategic locations. UpTown
Cairo (UTC) is located with close proximity to the city center but elevated 200 me-
ters above the sea level. Marassi is located in one of the sweat spots of the Mediter-
ranean North Coast, while Mivida is strategically located near the popular area of
New Cairo and the second ring road.
EMFD plans to retain control of the majority of its commercial properties for the
foreseeable future. By maintaining this control of commercial assets, the company
will be able to adapt to changing real estate market conditions, with the goal of
maximizing revenue streams and sustainable stable cash flows with an adaptive
approach. As of 1Q2015, the company has an area of 5,961 sqm under general lease
agreements across its projects. The planned commercial projects include UTC Retail,
Mivida Retail and Marassi Retail in the Retail segment. Emaar Misr also plans to
offer quality resorts in the hospitality segment with its UTC Hotel, Marina Hotel and
Mivida Hotel projects.
EMAAR MISR FOR DEVELOPMENT...
The High End Target is the Main Concern…
“STRONG BUY”
FAIR VALUE EGP 3.94
POTENTIAL 67% UPSIDE
INVESTMENT GRADE
“GROWTH”
Stock Data
Outstanding Shares [in mn] 4,619.3
Bloomberg – Reuters EMFD EY / EMFD.CA
52-WEEKS LOW/HIGH EGP 1.88– EGP 4.08
Ownership
EMAAR Properties 85.3%
Other 3.8%
Free Float 10.9%
Source: Bloomberg
0
1
2
3
4
5
6
0
1
2
3
4
5
7/5/2015
8/5/2015
9/5/2015
10/5/2015
11/5/2015
12/5/2015
1/5/2016
2/5/2016
3/5/2016
4/5/2016
5/5/2016
EMFD EGX 30-rebased
 Company Profile
Positioned as a premier real estate develop-
ment company in Egypt and recognized as an
offspring of Emaar Properties UAE, Emaar Misr
has a diverse portfolio of assets with particular
focus on the area of developing premier life-
style communities in strategically selected su-
perior venues. Three major projects alongside a
separate plot of undeveloped land make up the
company`s portfolio. The projects span the
North Coast area alongside the Eastern, West-
ern and Central Cairo regions. Emaar is a re-
nowned and highly regarded name in the Mid-
dle Eastern development market and beyond.
This strong reputation and track record pro-
vides Emaar Misr with a significant competitive
advantage not only in name but also in infra-
structure, skills and logistics. Emaar has a vast
breadth of experience and expertise in real
estate development within the MENA region.

EGYPT BOOK
REAL ESTATE SECTOR
35
Net profit of Emaar grew by 47.4% from EGP 173mn in 1Q2015 to EGP 254mn in
1Q2016. Net profit margin improved significantly from 23.0% from 1Q2015 to 42.6% in
1Q2016. Apart from the improved operating margins, the increase in net profit margin is
attributed to higher interest income from deposits as well as EGP 69mn interest earned
from held to maturity investments. Emaar Misr reported revenue of EGP 597mn in
1Q2016, 20.5% lower than 1Q2015 revenue of EGP 751mn. The decline in the Revenue
was due to significant decline in revenue from the Marassi and Mivida projects. 1Q2016
Gross Profit Margin (GPM) was higher at 40.6% as compared to the Gross Profit margin
of 30.4% in 1Q2015. Gross Profit margins of all the three projects increased significantly.
The operating profit in 1Q2016 stood at EGP 151mn, 5.3% higher than the operating
profit margin of 20.0% in 1Q2015.

EGYPT BOOK
REAL ESTATE SECTOR
36
In EGP Mn 2015 2016F 2017F 2018F
Revenues 3,237 2,898 3,046 2,891
Change 24.3% -10.5% 5.1% -5.1%
Cost of Operations 2,259 1,649 1,738 1,688
Change 24% -6.6% -23% 2.4%
Gross Profit 978 1,249 1,308 1,202
EBITDA 580 848 865 711
NPAT 854 708 786 762
In EGP Mn 2015 2016F 2017F 2018F
Cash & Cash Equivalent 2,093 3,884 5,940 9,117
Net Receivables 1,381 3,233 4,694 5,673
Other Current Assets 12,427 12,196 14,162 16,795
Net PPE 511 643 707 778
Other LT-Assets 1,102 257 267 278
Total Long Term Assets 1,613 900 974 1,056
Total Assets 17,514 20,212 25,770 32,641
Liabilities
STD - incl CPLTD 395 695 600 495
Accounts Payable 2,153 2,868 4,367 6,373
Customers’ Advance Payment 7,330 10,384 13,941 18,320
LTD 630 372 177 0
Total Long Term Liabilities 642 372 177 0
Equity
Paid-in-Capital 4,619 4,619 4,619 4,619
RE 839 1,603 2,390 3,152
Total Equity 6,740 5,623 6,410 7,171
Margins & Ratios
2015 2016F 2017F 2018F
GPM 30.2% 43.1% 42.9% 41.6%
EBITDA Margin 17.9% 29.3% 28.4% 24.6%
NPM 26.4% 24.4% 25.8% 26.3%
EPS 0.18 0.15 0.17 0.16
P/E 12.8x 15.4x 13.9x 14.3x
BV/S 1.46 1.22 1.39 1.55
P/BV 1.6x 1.9x 1.7x 1.5x
Debt/Equity 0.15x 0.19x 0.12x 0.07x
SOURCE: EMFD, PRIME

EGYPT BOOK
37

EGYPT BOOK
BANKING & FINANCIAL SECTOR
38
The performance of the banking and financial services is an accurate reflection of the economic situation of the
country. Egyptian economy has been struggling with dropping foreign currency reserves opposed to rising FX needs
due to the country’s heavy rely on imports. As a result, the Central Bank of Egypt is continuously issuing new regula-
tions in order to preserve the scarce foreign currency and meet the local market needs smoothing the functions of
the banking sector. The continuous issuance of aggressive regulations is aiming at developing the banking sector
making it more dynamic and developed; however, the banks are changing their strategies and future plans in order
to abide by these new regulations.
The CBE’s recent regulations include:
17 April,2016
23 March,2016
22 March,2016
With the intention of introducing the application of Basel III in the Egyptian banking sector, CBE
has introduced a new Capital Conservation Buffer of 0.625%, to be implemented starting Janu-
ary 2016, raising the minimum Tier1 ratio to reach 6.625% compared with 6% and the CAR ratio
(Capital Adequacy Ratio) to 10.625% compared with the current 10%. It is worth mentioning
that, this new regulation has to come into effect immediately and will be gradually raised annu-
ally in order to reach 2.5% increase in Capital Conservative Buffer attaining 8.5% required mini-
mum Tier1 ratio and 12.5% required CAR ratio by January 2019, as presented in the table be-
New Capital requirements Jan-2016 Jan-2017 Jan-2018 Jan-2019
Going Concern Capital 4.5% 4.5% 4.5% 4.5%
Capital Conservative buffer 0.625% 1.250% 1.875% 2.5%
Additional tier 1 capital 1.5% 1.5% 1.5% 1.5%
Minimum tier 1 capital 6.625% 7.25% 7.875% 8.5%
Tier 2 Capital 4% 4% 4% 4%
Minimum CAR ratio 10.625% 11.250% 11.875% 12.5%
The CBE issued a circular limiting the time period of banks’ chairmen to 9 consecutive or incon-
secutive years in a bank. If this new regulation is valid on one of the banks chairmen, then it will
be is executed once the financials of 2016 are stated or in the next Assembly General Meeting.
 In a circular published on the 11th
of January 2016, CBE has decided new and higher risk-
weighting scheme for the concentrated loans portfolios. According to the new measures, a)
If the ratio of loans provided for the top 50 clients to the total loans portfolio came in be-
tween 50% and 70% of bank’s Tier1 Capital, then the risky-weight applied would be 200%
and b) if it was more than 70%, the risky-weight applied should be 300%. Banks are allowed
to comply with this measure within one year. In March 22nd
, the CBE has clarified this regu-
lation by saying that the top 50 clients are based on calculated credit facilities granted and
not the facilities which they are authorized to have. In addition the risky weight applied
should only be applied on the amount exceeding Tier1 Capital.
 For personal loans CBE indicated that; monthly installment should not exceed 35% of the
individual’s monthly salary after taxes, and mortgage loans could reach 40% of individual’s
monthly net salary. However on the circular of March 22nd
that, the monthly income should
be calculated based on the validation process by the board of any bank, besides if the al-
lowable limit was passed, limits of the individual’s credit cards should not be lifted up in
future, with no effect at the current time. In addition, bankers can extend their personal
credit limits to 50% of their monthly salaries; and banks should monitor their corporate
clients who provide loans for retail clients, making sure that those institutions abide with
the above mentioned limits.

EGYPT INVESTMENT RESEARCH REPORT HIGHLIGHTS KEY SECTORS

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