MENA-2 TUESDAY MORNING ROUND-UP
Egypt
Egypt: inflation accelerates to 12.1% Y-o-Y in April
Government to uphold court ruling to scrap PHD’s Katameya land plot
Ministry of Housing to implement Cabinet decision to reschedule NUCA's dues
Saudi Arabia
King Abdullah approves new low-cost housing unit designs
EFG Hermes Research
Paints and Chemical Industries (Pachin) - 3Q2010-2011 Sales Beat Expectations, Net Income Below
Estimates; Upgrade to Neutral - Flash Note 09 May 2011
Agenda
Egypt
Wed 11 May >> Orascom Construction Industries (OCI) 1Q2011 results and conference call
Wed 11 May >> Commercial International Bank (CIB) 1Q2011 results
Thu 12 May >> Telecom Egypt (TE) 1Q2011 results
Thu 12 May >> Credit Agricole Egypt (CAE) 1Q2011 results (estimated)
12-15 May >> Juhayna 1Q2011 results (expected)
15-19 May >> Elsewedy Electric 1Q2011 results (expected)
Wed 18 May >> Orascom Telecom (OT) 1Q2011 results
Thu 19 May >> Mobinil AGM
Mon 23 May >> Orascom Development Holding (OD Holding) AGM
Tue 24 May >> Telecom Egypt (TE) ex-dividend date for EGP1.3 cash DPS
Saudi Arabia
Wed 1 June >> Alujain AGM
Egypt News
Egypt: inflation accelerates to 12.1% Y-o-Y in April
Urban consumer price inflation accelerated to 12.1% Y-o-Y in April from 11.5% Y-o-Y in March, according
to data realased by CAPMAS today. The monthly read is only slightly higher than our forecast of 11.9% Y-o-
Y. Rising prices were mainly driven by food prices, up 2.6% M-o-M, albeit slower than the 3.6% M-o-M
increase recorded in March. Food price inflation in April remained largely driven by seasonal increases in
prices of domestically-produced fruits and vegetables, while rising global commodity prices had only a
minor impact on food inflation due to increased spending on subsidies. Non-food price inflation inched up
only 0.1% M-o-M in April, maintaining an annual growth rate of 5.4% Y-o-Y, according to our estimates, as
most non-food items remained largely unchanged M-o-M. We expect core inflation (to be released later
today by the Central Bank of Egypt (CBE)) to remain stable at 8.5% Y-o-Y and above the CBE’s comfort
zone of 6-8%. We note that core inflation excludes prices of fruits, vegetables and regulated items from
the headline index.
We maintain our 2011 inflation outlook and forecast average headline inflation of 12.0% Y-o-Y (YTD the
average is 11.3% Y-o-Y). Inflation will remain largely driven by rising food prices (mostly local, as subsidies
shield the population from rising global commodity prices) and a weakening USD-EGP, in our view. We
also maintain our expectation of stable interest rates throughout 2011 on the back of a weak
macroeconomic backdrop and stable non-food inflation. The CBE has kept interest rates unchanged in its
first three meetings in 2011, and we expect it to do the same when it next meets on 9 June 2011.
(CAPMAS, Mohamed Abu Basha)
Government to uphold court ruling to scrap PHD’s Katameya land plot
The Egyptian government will uphold an April court ruling to scrap Palm Hills Development’s (PHD’s)
[[Link]] c1 million square metres (sqm) land plot in Katameya. However, the government will ensure
that Egyptian buyers are not negatively affected, Reuters reported, citing the Minister of Housing,
Utilities and Urban Planning (Minister of Housing), Mohamed Fathy El-Baradei. El-Baradei noted that the
government is awaiting details of the ruling. (Reuters)
PHD: EGP1.64, Rating: Neutral, FV: EGP5.1, MCap: USD289 million, PHDC EY / [Link]
Ministry of Housing to implement Cabinet decision to reschedule NUCA's dues
The Ministry of Housing, Utilities and Urban Development (Ministry of Housing) and the New Urban
Communities Authority (NUCA) will implement the Cabinet of Minister's decision to reschedule payments
(worth EGP2.6 billion) due to NUCA, Al Ahram reported. Dues from housing unit buyers and land buyers
will be rescheduled, Al Ahram quoted the Minister of Housing, Mohamed Fathy El-Baradei, as saying. (Al
Ahram)
Saudi Arabia News
King Abdullah approves new low-cost housing unit designs
King Abdullah has granted initial approval of designs for low-cost housing units, Zawya Dow Jones
reported. This comes after the King’s royal decree in March, which ordered that 500,000 low-cost units be
constructed. King Abdullah has allocated SAR250 billion for these units. The development of low cost
housing accounts for around USD66.7 billion of the USD100.0 billion spending package announced in
March. Reducing the housing shortfall remains one of the government’s central aims, although we believe
that it will take a number of years for the funds announced to be deployed. The General Housing
Authority has started to implement 35 projects that consist of 15,000 housing units to be located across
various parts of Saudi Arabia. (Zawya Dow Jones)
EFG Hermes Research
Paints and Chemical Industries (Pachin) - 3Q2010-2011 Sales Beat Expectations, Net Income Below
Estimates; Upgrade to Neutral - Flash Note 09 May 2011
Upgrade to Neutral On Drop In Share Price: We upgrade our rating for Paints and Chemical Industries
(Pachin) to Neutral from Sell as Pachin’s share price recently dropped to EGP36.73/share and as our
unchanged fair value (FV) implies 8% upside potential over the market price. We may revisit our valuation
once Pachin releases detailed financials. Our forecasted FY2010-2011 dividend payout offers strong
downside protection for the stock; even if we lower our DPS forecast to EGP4.5/share (equal to the latest
payout), the stock still offers 12% dividend yield.
Net Income Misses Expectations On Non-Operating Expenses: Pachin’s unaudited consolidated net income
for 3Q2010-2011 came in at EGP11.5 million, down 60% Y-o-Y and 62% Q-o-Q, missing our EGP17.7 million
estimate by 35%. No further details on the results are available, however, we estimate the miss to have
been driven by: i) provisions on receivables and inventory; and/or ii) FX losses. We may revisit our
forecasts following the release of the company’s full financials.
3Q2010-2011 Operational Performance Beats Expectations: Unaudited consolidated sales in 3Q2010-2011
decreased 4% Y-o-Y and 11% Q-o-Q to EGP144 million, but came in above our EGP110 million forecast on
higher-than-estimated prices, in our view. We had estimated that Pachin would decrease 3Q2010-2011
selling prices by 4% Q-o-Q for paints (86% of revenue) and 16% Q-o-Q for inks (14% of revenue) on lower
demand. Pachin witnessed an increase in costs/tonne (estimated 22% Y-o-Y and 16% Q-o-Q) mainly on: i)
higher oil prices, up 33% Y-o-Y and 20% Q-o-Q, which are directly linked to the company’s raw material
costs; and ii) EGP depreciation (Pachin imports over 60% of its raw materials). Gross profit margin came in
at 18% in 3Q2010-2011 versus 21% in 2Q2010-2011, 24% in 3Q2009-2010, and our estimate of 15%. (Malak
Youssef, Ahmed Gad)
[Note – EFG Hermes is not responsible for the accuracy of news items taken from other media.]
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