Credit Suisse raises price target on Telecom Egypt Credit Suisse raised its price target on Telecom Egypt to LE 20, saying stronger-than-expected revenues and earnings before interest, tax, depreciation and amortization (EBITDA) margins reported by the firm till date in 2009 were sustainable. We think Telecom Egypt s financial performance in 2009 is close to its estimated 2010 peak on our forecasts, said Credit Suisse, which earlier had a price target of LE 18 on the stock. The landline monopoly has benefited this year from a clamp-down on international VoIP calling and about a 60 percent reduction in mobile termination rate, boosting its international wholesale revenue and EBITDA margins, Credit Suisse said in a note to clients. The brokerage, however, said the firm might find it hard to improve on these margins and revenue in future as mobile broadband emerges as a strong competitor to its ADSL products, capping fixed broadband growth. Current aggressive mobile voice pricing raises risks of a protracted price war, it added. VoIP remains a medium-term challenge to international voice revenue and annual wage inflation remains a downside risk for margins over the longer term, Credit Suisse added and kept a neutral rating on the stock. Shares of Telecom Egypt were trading at LE 18.51 by 0947 GMT Wednesday in Cairo. -Reuters Asia Naphtha-China Fujia Dahua buys more Egypt lots China s aromatics producer Fujia Dahua snapped up at least 300,000 tons of Egyptian naphtha for September-December liftings to feed its new plant which is running at high rates, traders said on Wednesday. It had earlier scooped up more than half a million tons of the Egyptian cargoes for third quarter liftings from Suez and Alexandria. The new plant, which produces a total 1.15 million tons per year (tpy) of paraxylene, benzene and orthoxylene, was commissioned around July, traders added. It is now running at rates above 80 percent capacity, said a trader, who added that the plant will need about 2.5 million tpy of heavy naphtha if it runs at full-tilt. The privately run firm, owned by Dalian Fujia Corp and Dahua Group, bought the fourth-quarter term cargoes from Egyptian General Petroleum Co (EGPC) for lifting from Suez at a premium of around $20.00 a ton to Middle East quotes, on a free-on-board (FOB) basis. EGPC exports around two to three 35,000-tonne cargoes a month from Alexandria, and at least another 3 parcels a month from Suez. For Q4, all the Suez cargoes went to Fujia Dahua, but the Alexandria parcels went to three other traders, said a Singapore-based trader. LUKOIL, BASF and Sempra were the buyers of Alexandria parcels, said the same trader, who estimated that the premiums should be in the range of $12.00-$14.00 a ton, FOB. Overall, demand for naphtha has been steady, but supplies have been relatively tight as Europe choked off exports to the region because of refinery run cuts. This has kept the Asian naphtha crack spreads - premium/losses obtained from refining Brent crude into the petrochemical feedstock - above $100.00 ton since Aug. 26. China, usually an exporter of naphtha, was net short of the feedstock for seven straight months between November 2008 and May 2009. It resumed its net export status in June, but turned short again in July because of high cracker runs as well as new petrochemical plants starting up. -Reuters EFG keeps ST/LT rating on Egypt s OCI EFG-Hermes kept its short-term and long-term neutral rating on Orascom Construction Industries (OCI) and said the company was well positioned to benefit from the build, operate and transfer (BOT) and public private partnership (PPP) programs in Egypt and Algeria. OCI could get sizeable infrastructure awards/concessions in the second half of this year, EFG wrote in a note to clients. OCI is Egypt s largest construction company and also the country s biggest producer of nitrogen fertilizers. The investment bank, however, said it expects OCI s higher-than-estimated performance in construction to be partially offset by a decline in fertilizer prices. Shares of OCI closed at LE 229.90 Tuesday in Cairo. -Reuters OT gets two offers for Algerian operator Orascom Telecom Holding (OT) received two offers for the acquisition of the liquidated Algerian fixed-line operator it had jointly-owned with Telecom Egypt, but none of the offers had met Orascom Telecom s expectations, reported Al-Masry Al-Youm. OT decided to delay the sale until economic conditions improve and better offers are made. Separately, OT declared that the winner of the bid to acquire LinkDotNet, its internet subsidiary that was recently offered for sale, would be announced in November 2009. Egyptian telecom operators Mobinil and Telecom Egypt have submitted bids to acquire the internet operator. Amr Badawy, chairman of the National Telecommunications Regulatory Authority (NTRA), previously declared that Telecom Egypt s acquisition of LinkDotNet did not conflict with monopoly laws in the telecom market, since Telecom Egypt already owns TEData, the dominant internet operator in the market, while LinkDotNet follows in terms of market share. "We believe that Mobinil would most probably eye alternative prospects, in case it failed to win the bid, in order to ultimately support the internet and data segment of its business to face competition from Etisalat Egypt (which acquired internet companies, Nile Online and EgyNet, in 2008) and Vodafone Egypt (which acquired internet company, Raya Telecom, in 2007), Beltone Financial said in its daily market report. In related news, Standard & Poor s Ratings Services placed its B long-term corporate credit ratings on Orascom Telecom Holding (OT) and Orascom Telecom Finance CreditWatch with negative implications, reported Reuters.
