Are the fears of some market observers that the Cairo and Alexandria Stock Exchange (CASE) is overheating and will soon face a reversal of the upward trend in prices justified? Predictions of a major readjustment have yet to come true, and many analysts believe last week's retreat in prices represented no more than short-lived profit taking spree. Indeed, selling shares to enhance liquidity has become a common feature of the market before major IPOs as investors seek to free up cash to subscribe to new offerings. Bank of Alexandria, Egypt Aluminum and CID for Pharmaceuticals are all due to be listed. Add to this EFG Hermes's private placement, open to all the company's existing shareholders, and it is hardly surprising that investors have been selling. The result was that the CASE30 ended 4.4 per cent down on 7447.65 points following overall market transactions valued at LE11.7 billion. Commercial International Bank was the market's star performer, jumping to an all time high of LE79 as the Ripplewood Holdings consortium acquired the 18.7 per cent stake in CIB from the National Bank of Egypt for LE1.3 billion. CIB's weekly turnover came in at LE2.190 billion, making it the week's most actively traded stock. Ripplewood's presence supports CIB's position in the market and raises expectations that negotiations to acquire the National Development Bank will soon show results. EASTERN TOBACCO also bucked the market's downward trend to end the week at its highest ever level of LE372. Egypt's state-owned tobacco monopoly posted LE93.8 million in net profits in the first quarter of fiscal year 2005/2006, a seven per cent increase on last year's figure. A report by HC Securities attributed the increase to a 36 per cent fall in tax as last year's cuts begin to take effect. The company also engineered an increase in Ex- factory prices as it shifted its product mix to more profitable brands. FY04/05 also saw a significant reduction in overheads on the back of an appreciating pound which reduced the bill for imported raw tobacco. EC now imports one third of its raw tobacco customs free from COMESA. The company is in the process of relocating production facilities to the 6th of October City and Borg Al-Arab and could well realise significant capital gains if it sells the land on which its current plant stands, which is valued at more than LE1.2 billion. Despite EC's mother company, the Holding Company for Chemical Industries, denying it intends to sell a stake in EC the company remains tipped for privatisation. The Holding Company owns 52.8 per cent of EC's equity, with a further 36 per cent free floated. On a related note, EFG Hermes upgraded the company's fair value from LE284 to LE406, a valuation that weighs in the possibility that EC will be sold to an anchor investor. The upgrade was based on an 86 per cent increase in EC's share price since EFG issued its last valuation of the company in September 2005. MobiNil announced its results for 2005. Net income reached LE1.4 billion, 65.3 per cent up on 2004. Active subscribers increased by 67 per cent, taking their number to 6.7 million. MobiNil repaid the final instalments on its $220 million loan during the last quarter of 2005. The year also saw the appointment of Alex Shalaby as the new CEO following Osman Sultan's resignation in November. With a 52.2 per cent market share MobiNil is Egypt's largest mobile operator. Egypt's cellular market grew faster than ever in 2005 with the total number of subscribers increasing by 69 per cent from 7.6 million in to 12.8 million. The company ended the week LE10 less at LE194. ORASCOM Construction Industries is consolidating its fertiliser operations by expanding into new regional markets. The company, a leading player in both the construction and cement industries, has signed an agreement with Algerian state- owned oil and gas company Sonatrach to establish an ammonia and urea plant in Algeria with an annual capacity of one million tonnes. OCI will take a 51 per cent share of the $746 million new investment with the rest being held by Sonatrach. Conditional on the approval of the Algerian authorities Sonatrach may also enter into a 20-year gas supply agreement with the new venture. The deal consolidates OCI's move into the fertiliser market. Last October it contributed 50 per cent of the capital of the Middle East Petrochemical Company (MEPCO), owner of 60 per cent of Egyptian Basic Industries Corporation (EBIC) which is currently constructing a 2,000 tonne per day ammonia plant in Ain Al-Sokhna. The plant is scheduled to come on line early in 2009. OCI is planning a capital increase of a minimum of $200 million to finance expansion plans in the MENA region. TELECOM EGYPT was among the week's best performers, gaining 16.77 per cent to reach LE22.49 a share. The revival to a price unseen since the second day of trading in TE shares was propelled by news of TE's determination to bid for Egypt's third mobile licence. TE has chosen Baker and McKenzie Egypt to conduct due diligence of Nile Online for Internet Services. TE plans to increase its holdings in the latter from its current 38.5 per cent to 65.8 per cent by acquiring IT Invest's stake. The deal, if concluded, will take account of the LE100 million Nile Online owes Telecom Egypt. By Sherine Abdel-Razek
