The Egyptian iron and steel firm Al Ezz Dekheila Steel is expected to report attributable net income of EGP 2.1bn in 2018, Pharos said in a research note, reiterating its fair value (FV) at EGP 100, implying an overweight recommendation. The company's gross processing margins (GPM) are likely to hover around 15.7%, the research firm added. Al Ezz Dekheila Steel – Alexandria reported turning profitable in the first quarter of 2018 due to higher sales. Consolidated profits surged to EGP 431.7m during the three-month period ended last March, versus EGP 68.8m in Q1 2017, the company said in a filing to the Egyptian Exchange (EGX). Sales grew to EGP 1.3bn in Q1 2018 from EGP 414.5m in the prior-year period. Meanwhile, Pharos Research set its fair value (FV) for Raya Holding for Financial Investments at EGP 18.07 per share, implying a valuation gap of 80% and an overweight recommendation. The FV was driven by a number of catalysts including partial or full divestment of the well-established companies that include Raya Trade and Raya IT, Pharos said in a research note. These catalysts also included the significant growth in operations of their alpha bets, namely Aman E-payments, Aman for Financial Services, and Raya Modern Vehicles, as well as the operational turnaround of the Galleria 40 commercial and office building, the research firm indicated. On the other hand, the increased competition in the microfinancing industry with the entry of at least two more companies is deemed a risk facing Raya Holding, in addition to Ghabbour Auto's tough competition in the three-wheelers market and the continued weakness in Galleria 40's operations. Raya Holding's capital amounts to EGP 504.6m distributed over 100.9m shares at a par value of EGP 5 per share. Another note also by Pharos reiterated its FV evaluation of Orascom Construction to $11.4 (EGP 200) per share. The company's operations in the Middle East and North Africa (MENA) continues to contribute around 66% to total revenues. The research firm expects earnings margins in the US to improve to 2% post the completion of Natgasoline. Orascom Construction Ltd (OC) reported an 11% year-over-year rise in consolidated profits for the first quarter of 2018, recording $35m from $31.5m. Revenues shrank to $756.8m in the three-month period ended last March, from $1.06bn in Q1 2017, OC added in a filing to the EGX. At the level of standalone business, the company turned to losses in Q1 2018 of $1.04m, compared to standalone profits of $1.106m in the year-prior period. OC had previously posted consolidated profits of $85.1m for the full-year ended December 2017, versus $53m in 2016. Meanwhile, Pharos Research reiterated its FV for Housing and Development Bank (HDB)'s stock at EGP 75, with an overweight recommendation. The bank's borrowing rate is expected to grow by 23% during the period from 2018 through 2022, Pharos added in a recent research note. The research firm also forecast HDB's deposits to rise by 20% during the same aforementioned period. Pharos projected the bank's net income, excluding interests, to make up 36% of the operative income in 2022, versus 28% in 2017, according to the research note. A separate note maintained Pharos' FV for Sixth of October for Development and Investment (SODIC)'s stock at EGP 45.5, with an overweight recommendation. This was mainly driven by SODIC's projects in eastern Cairo, Pharos said in a research note. There are many catalysts bolstering SODIC's performance, such as the 2.1m sqm of lands it owns, in addition to the firm's planned launch in the North Coast this year, the research firm indicated. SODIC is projected to generate around EGP 15bn in sales during seven years from the possible arm, according to the research note. SODIC posted EGP 212.11m in consolidated profits for the first quarter of 2018, slightly above EGP 211.9m in Q1 2017, including minority shareholders' rights. Revenues retreated to EGP 512.12m in Q1 2018, versus EGP 703.47m in the prior-year period. Meanwhile, standalone profits fell to EGP 82.7m in the three-month period ended last March, from EGP 114.6m in the year-prior period. Finally, a recent report by PricewaterhouseCoopers said that investors are looking at Egypt with renewed interest now that the currency issues seem to have subsided. Meanwhile, deal activity in 2017 was at its lowest level in five years. Egypt's favourable demographics, coupled with new, greenfield investments in energy and infrastructure, have heightened the country's potential and appeal, the report added. High inflation and elections later this year, however, mean that deal flow is more likely to grow over the medium term rather than in 2018, it concluded.
