Pharos Research has maintained its equal weight rating recommendation for Telecom Egypt (TE) with a fair value (FV) of EGP 15.25 per share. Vodafone's shrinking bottom line and debt burden have trimmed TE's profitability, the research firm said in a research note, The aforementioned pressures are likely to continue impacting the company's profitability, Pharos forecast. "The current balance of the debt burden could easily account for an annual interest expense of EGP 1.2bn, assuming a 15% rate," Pharos highlighted. TE reported a 48% year-over-year drop in consolidated profits for the first quarter of 2018, recording EGP 689.6m from EGP 1.3bn, including minority shareholders' rights. Revenues grew to EGP 4.7bn in the three-month period ending in March 2018, versus EGP 4.1bn in revenues in the year-ago period, the company said in a filing to the Egyptian Exchange (EGX). TE's share from Vodafone Egypt's earnings retreated to EGP 286m in Q1 2018 from EGP 675m in the corresponding period of 2017. Financing cost surged to EGP 291m in the first three months of this year, versus EGP 107m in the same period last year. Standalone profits shrank to EGP 362.2m in Q1 2018, against EGP 743.5m in Q1 2017. Meanwhile, Pharos Research maintained its equal weight rating recommendation for Commercial International Bank's (CIB) stock at a fair value of EGP 105 per share. The stock hit historical levels, which will bolster its performance positively, Pharos said in a research note. The bank's lending activity positively impacted earnings of the first quarter of 2018, the company added. Meanwhile, CIB reported a 15% year-over-year surge in consolidated profits for the first quarter of 2018, recording a net profit of EGP 2.02bn from EGP 1.7bn. The bank's net income grew to EGP 3.2bn in the three-month period ending in March 2018, compared to EGP 2.7bn in Q1 2017. Standalone profits doubled to EGP 2.017bn in Q1 2018, versus EGP 1.78bn in the prior-year period, the Cairo-based bank noted. On a separate note, the research firm updated its fair value (FV) for Suez Canal Bank at EGP 18.50. Suez Canal Bank was able to achieve significant profits during 2017 after years of zero bottom line to cover the gap between non-performing loans and provisions, Pharos Research highlighted. The research company projected that 2018 will be another positive year for the bank, due to the magnitude of net profit that might beat expectations. The bank's net profit soared to EGP 94.5m in the third quarter of 2017 from zero profits in Q3 2016. Lending growth is expected to increase to EGP 2.407m in 2022, versus EGP 1.068m in 2017, the report indicated. "Accordingly, we assume interest income to operating income to gather pace over our forecast horizon," Pharos noted. The bank may consider a capital increase over the coming period, Pharos said, pointing out that the bank's capital is above the Central Bank of Egypt (CBE)'s minimum. Suez Canal Bank is forecast to see a significant turnaround in asset quality in 2018, according to the report. The research company maintained its overweight rating recommendation for Orascom Telecom Media and Technology Holding's (OTMT) stock at a fair value (FV) of EGP 0.94 per share. The stock's target price (TP) may see an additional EGP 0.40 per share if North Korea-based Koryolink's operations were included in the valuation, according to a recent report by Pharos. OTMT previously said it was unable to repatriate cash from the North Korean unit after losing control of the operations there, the report highlighted. The research firm added that the proceeds from OTMT's sale of MENA Submarine Cable System will "trigger strategy updates." The valuation was also driven by Beltone Financial's plan to acquire a large market share of the initial public offering (IPO) pipeline in 2018, the report added, pointing out that OTMT's profitability will hike forward if Beltone succeeds in achieving its target profitability. OTMT reported a 48% year-over-year decline in consolidated profits for the full-year 2017, recording EGP 464.9m from EGP 897.5m. Revenues from operations grew to EGP 1.5bn last year, versus EGP 538.3m in 2016, the company said in a filing to the Egyptian Exchange (EGX). Standalone profits dropped 44% year-over-year in 2017 to EGP 606.14m from EGP 1.08bn. Income grew to EGP 765.9m last year from EGP 68.12m in 2016.
