The market has been losing ground for the last two weeks amid profit taking behaviour as well as seasonal liquidation of foreigners' positions before the Christmas holidays. Moreover, third quarter results of listed shares, with heavyweights witnessing a decline in profits, have been stripping the market of some of its strength. Average daily transactions hover around LE600 million -- low compared to the previous weeks' euphoric activity. The market's main index lost around 6.5 per cent from 12 November until the end of trading Monday. ORASCOM TELECOM HOLDING (OTH): The company made headlines through the week, starting with attacks on its Algerian units causing damages that chairman Naguib Sawiris put at $5 million and ending with a whopping $596.6 million in outstanding taxes and penalties that Algerian tax authorities want the company to pay. The taxes cover profits of the years 2005-2007, through which Orascom Telecom Algeria (OTA) had been tax exempted. The Algerian authorities' decision was based on the allegation that OTA did not keep proper accounts for the years 2005, 2006 and 2007. The Cairo-based international mobile operator said it would "take all necessary legal steps" to challenge the tax reassessment, adding that the accounts of its Algerian subsidiary had been approved by both international and local statutory auditors. However, a company statement added that the tax claim might reduce the amount to be distributed as dividends in 2010 from OTA's 2009 net results. A handful of local and regional investment banks have downgraded their ratings for OTH following the announcement. Investment bank Beltone Financial stated, in a recent report, that it can't set the impact of the Algerian tax demands on Orascom Telecom's profits as the time for paying the taxes is unknown and the extent payable is subject to negotiation. According to Beltone, the group's position is good as available liquidity reached $748.9 million in September 2009 and there is no significant debt due before 2012. CITADEL CAPITAL: The Cairo-based private equity group listed its shares on the local stock exchange as a step preceding floating a stake in the market through the coming period. The company's chairman Ahmed Heikal was quoted by Reuters on Monday as saying that shares would start trading within 5-8 working days and that the size of the rights issue will be determined a month after that. The group manages $8.3 billion in investments in 17 companies in different sectors, starting with its food industries company Gozour, which comprises Al-Rashidi confectionaries, Deena Farms and Enjoy dairy products, in addition to businesses in mining, river transportation, glass, oil and cement. Citadel Capital, which has capital of LE3.31 billion divided into 661.6 million shares, said it is looking to expand its investment in Middle East and East African countries, especially those with big domestic markets such as Algeria, Egypt, Sudan, Ethiopia and Kenya. HC Securities, a local investment bank, said in a pre-listing report it expected the company's market capitalisation after the listing to be LE16.55 billion in a best-case scenario and LE7.75 billion in a worst-case scenario. AL-SEWEDY CABLES: Egypt and the Arab region's largest cable maker by market value witnessed a 29 per cent retreat in its in nine month net profit on the back of lowered prices for cables and copper rods. A company statement noted that its net profit for the period came to LE549.8 million with sales losing 24 per cent to LE6.82 billion led by a 43 per cent drop in revenues from exports. In a conference call that followed announcement, Ahmed El-Sewedy, the company's CEO, told analysts he expects net profits for the whole 2009 "to remain flat or be slightly lower than 2008". The company was part of a consortium that won a LE1 billion contract for an electricity power project in Abu Qeer area and is a part of another consortium shortlisted to build a wind farm in Egypt. ORASCOM CONSTRUCTION INDUSTRIES (OCI): The company's third quarter net profits came in 41 per cent lower than the level one year ago, to reach $120.7 million. The company, Egypt's top listed builder and fertiliser-producer, said it will increase its ammonia production by 30 per cent in the fourth quarter and is considering bidding for the Brazilian fertiliser maker Copebras. CI Capital cut the company's target price and long-term fair value to LE260.8 and LE266.9 respectively due to concerns over the company's position in Algeria. The research company said that OCI has a robust business model supported by several cost advantages, in addition to the expected 40 per cent increase in fertiliser prices in 2010. Moreover, it believes that OCI's 2010 revenues from the fertiliser line will be supported by the establishment of strategic alliances with global fertiliser distributors and production capacity growth. EGYPTIAN FINANCIAL GROUP-HERMES (EFG-HERMES): The leading investment bank shouldered a 7.8 per cent decline in its third quarter profits as income and commissions tumbled "reflecting market conditions over the year as volumes and valuations declined," the bank said in a statement. The bank's three-month profits reached LE150.7 million with fee and commission income falling around 57.7 per cent. However, the quarter is the first since the financial crisis hit that witnessed net cash inflows, according to the bank. On another front, the private equity arm of EFG-Hermes is establishing a new fund with capital of $600 million to focus on investing in infrastructure in Egypt. Investors from France, Italy and Morocco are allocating $200 million to the fund, while EFG- Hermes will raise the remaining amount amongst regional investors. Hermes private equity farm manages $1.4 billion in six funds and is currently considering two new investments in meat processing and cement production and is close to selling its 25 per cent stake in snack maker Edita. Compiled by Sherine Abdel-Razek
