your week in egypt - vodafone cash

7/31/2019 Your Week in Egypt - Vodafone Cash

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Egypt - WEEKLY

URSA MAJOR BIG DIPPER

A week of Ministers and meetings with the Egypt Euromoney conference. But its

hard to find any firm catalysts or conclusions other that how nice we are doingbetter than we feared. All this is overshadowed by disappointing USmanufacturing figures Stellar disappointment double dippers back in vogue.This disappointment came after the build up of IMF upgrading global growth andsome better than anticipated retail sales figures. As usual the bears and bulls readwhat they like, the former pointing out the that US is stagnating as the stimuluspackage is nearing an end, and the latter that the way to recovery comes in fitsand starts. Our market ended up on the day, but before these figures came out.As we write markets are falling. Can we now decouple, given that we and otheremerging markets can grow? Yes we can but I wouldnt bet on the high correlationto US markets unwinding just yet. So major bears for a while Ursa MajorakaBig Dipper. And to play the record yet again this is what we want to see to pickup the names we like.

FOCUS: ETEL a storm in a teacup: The Telecommunications and ICT Minister

dropped an apparent bombshell by announcing 2 new fixed line licenses and TelecomEgypt fell sharply on thoughts that its monopoly is over. The devil in the detail sees thesenew licenses as rather limited in application. In any case our forecasts already includedfactors for a second licence. Buy on the Dips

FOCUS: Banks sell cars:Banks, rather state banks have boosted consumer lending,which has been driving up car sales. So this is rather why Egypt may finally lessen itscorrelation with US markets, as here is consumer demand in action. We wait to see ifthis reads across to other consumer items

FOCUS: just build it: The Euromoney conference emphasised over and over again thestimulus package and concentration on infrastructure. El Sewedy would be one of thosethat should be attractive to pick up on any decent pull back.

FOCUS: clinker and clunk, tinker with cement: Unused cement licences may becancelled, and then again they may be reissued if pricing pressure results. And thenagain who would want to invest with all this interference going on? Certainly we thinkCement demand is rising and so capacity constraints are coming. We upgraded ourtarget price for Misr Beni Suef a massive 38% as the price shot up, but keep a hold.Why? Well the insiders (owner/managers) are buying, wary of being taken over and of afreefloat. A good catalyst for the short term maybebut when the m usic stops will youstill have a chair!

Half a FOCUS: Insiders out: With a check on the movements of insider transactions itseems that, aside from Misr Beni Suef, insiders have been selling. More grist for theUrsa Majors. Olympic has seen large insider selling rather at odds with my view wemay see consumer sales start to motor.

Figure 1: Market wrap

Source: Bloomberg, EGX

September 27-Sep 28-Sep 29-Sep 30-Sep 1-OctLocal % -88.1 -85.9 -87.0 -84.7 -82.8

Foreign % 6.4 -8.4 7.1 -9.6 11.0

Arabs % -5.5 -5.7 -6.0 -5.7 -6.2

100 100 100 100 100

Retail % 65.1% 65.1% 65.0% 65.1% 63.9%

Institutions % 34.9% 34.9% 35.0% 34.9% 36.1%

EGX Performance -1.32% -2.15% 0.61% -0.62% 0.42%

Total Value traded (LEbn) 1.2 1.2 1.3 1.4 1.5

YOUR WEEK IN EGYPT

Mark [email protected]

Mona [email protected]

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4500

6500

8500EGX 30 Performance ytd
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Executive Summary

Below is a summary of the most important events of the last week. To learn more abouteach of these stories, take a look inside:

Euromoney Conference Egypt 2009A two day gathering of Government officials, business leaders, industryexperts and international guests. Staged at the Semeramis Hotel in Cairo, this48-hour summit helped clarify the position of and outlook for the Egyptianeconomy, in the context of continued macro economic uncertainty.

Drop in the number of vessels passing through Suez Canal Egypt's Suez Canal Authority reported that revenues from the waterway havedropped 26% to US$371.8mn in August 2009 compared to the same month ayear ago.

Bank aim to drive up car salesBanks have initiated a new wave of car-loan programs as a means ofenhancing credit borrowing and, ultimately, boosting car sales. Between them,Banque Misr and the National Bank of Egypt (NBE) allocated LE 10 bn in theform of personal and car loans

Attracting exploration projects to EgyptOne discussion that received attention at the Euromoney Conference waswhether investors might be granted contracts for exploration of raw materials.

Going, Going, GreenWind as a new energy sourceSince 2004/5 wind generated power has made an increased contribution tototal electricity generation. Alternative sources of energy are set to play a keyrole in Egypts energy future.

Removal of sugar Import tariffsTariffs on both raw and white sugar have been removed until the end of 2009.

A busy week for wheatRussian shipments seized, farmers turning to other crops and more importedRussian wheat. Turn to Mills to find out more.

New rivals for Telecom Egypt?The Minister of Communications & IT's sprung a surprise, announcing live onair that two new licenses for triple-play services in gated communities wouldbe granted. Telecom Egypts share price dipped as a result.


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Table Of Contents

Executive Summary ....................................................................................................... 2Euromoney conference ................................................................................................. 4Economy ................................................................ ....................................................... 11

A drop in the number of vessels passing through Suez Canal ................................... 11Steady average yield on 91-day T-Bills...................................................................... 11

Automotive ................................................................................................................... 12Banks take centre stage in driving up car sales ......................................................... 12

Banking and Financial ................................................................................................. 13The reluctant bull market ........................................................................................... 13Weekly News ............................................................................................................. 13

Cement ................................................................. ......................................................... 14Cement: IDA may cancel the licenses for un-implemented projects .......................... 14Misr Beni Suef Cement: Company update - ............................................................. .. 15

Consumer ..................................................................................................................... 16Fertilizers ...................................................................................................................... 17

Attracting exploration projects to Egypt...................................................................... 17Deregulating the N fertilizer market in January 2010 ................................................. 17

Green Energy .................................................................. .............................................. 18Going, going, green ................................................................................................... 18Wind energy in the South Valley ................................................................... ............. 19

Hydrocarbons & related services ............................................................................... 20Maridive & Oil Services ........................................................... ................................... 20

MILLS ............................................................................................................................ 21Upper Egypt Mills: Net profit up 8% YoY ................................................................... 21North Cairo Mills: Net profit down by 37% YoY ......................................................... 21Middle & West Delta Mills: AGM & EGM decisions .................................................... 21Wheat: GASC contracted to import 150k tons of Russian wheat .............................. 22Wheat: Farmers turned to other crops ....................................................................... 22Wheat: 63k tons of Russian wheat seized ................................................................. 22

Real Estate ............................................................. ....................................................... 24Nasr City Housing & Development (MNHD) .............................................................. 24

Sugar ............................................................................................................................. 25Removal of import tariffs on raw and white sugar ...................................................... 25

Telecom ................................................................ ......................................................... 26Orascom Telecom (OT) ............................................................................................. 26Miscellaneous ............................................................................................................ 27


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Euromoney conference

Key takeaways

The Euromoney Conference that was held over the past two days highlighted Egyptsresilience to the global economic crisis. Moreover, FY09/10 is expected to go on with itsresilience and grow +4% - the GoE targets 5% - and keep unemployment rate at 9%.Key takeaways to achieve such goal include:

Enforcing the Public-Private Partnership (PPP) initiative to enhance theprivate sector role in the economy Minister of Investment confirms Egyptsresilience.

Focusing on infrastructure developments.

Another stimulus package of LE8-9 bn might be considered in this fiscal yearin addition to an LE8 bn of continued investment from the previous stimuluspackage.

Activating excellence units within governorates to improve theadministrative process of doing business in Egypt.

Expanding the contribution of the internal trade in the economy.

Focusing on SMEs.

Increasing the non-oil and gas exports.

Improving human capital and investing in labour-intensive projects.

The Euromoney Conference Egypt 2009

In the opening session of the Euromoney Conference 2009 Dr. Mahmoud Mohieldin,Minister of Investment, highlighted Egypts solid performance during the crisis andconfirmed a slightly higher economic growth in 2010.

Future targets are indicated below:

A GDP growth of 5% in FY09/10 up from 4.7% in FY08/09.

Unemployment target of 9% in FY09/10.

An inflation target of 6-8% in the medium term.

A fiscal deficit to GDP is expected to range from 7-7.5% in FY09/10 up from6.9% a year earlier.

More focus on SMEs and easing their access to finance.

FDI target of US$10 bn in FY09/10 with a more diversified inflow.

Enforcing the Public-Private Partnership (PPP) initiative to enhance theprivate sector role in the economy.

A PPP law and a new bankruptcy law will be referred to the Parliament inNovember 2009.

A target of LE 135 bn worth of private investments in FY09/10 up from theLE120 bn a year earlier.

The GoE is expected to invest LE 100 bn in FY09/10.


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Activating excellence units within governorates to improve theadministrative process of doing business in Egypt.

Another stimulus package of LE8-9 bn might be considered in this fiscal yearin addition to an LE8 bn of continued investment from the previous stimuluspackage.

Ensure an efficient trickle down effect through increasing infrastructureprojects connecting all governorates in Egypt.

Establishing malls and trading centers all over Egypt to ensure a bettersupply chain, hence more competitive pricing. There are 5 planned tradingcenters in Delta and 2 in Upper Egypt.

Banking

In the New Age Banking in the Post-Crisis Era workshop, EuroMoney welcomed thefollowing guests:

Mr. James Gohary, Senior Operations Manager, Financial Markets, InternationalFinance Corporation (IFC)

Ms Hala el Said, Executive Director, The Egyptian Banking Institute, Central Bankof Egypt

Mr. Arthur Koops, Head of Risk Management, Arab African International Bank.

The above guests focused their presentation on risk management, identifying thefollowing major points:

Bank management have started to pay greater credit to riskmanagement policies,

Banks have begun to focus on the liabilities side of their balance sheetby securing long term retail funding, so as to mitigate the withdrawal riskthat asserts itself in a whole-sale funding strategy currently employed bythe system,

In terms of assets, the banking institutions will slow down the growthexperienced in the boom years,

The result of such moves will be to revert back to granting credit onlywhere it is warranted,

this will dry up funding for start-ups and holding companies (the formershould seek venture capital),

will bring down the tenor of loans (recommended 5-year maximum) loan structure will improve as more collateral will be required,

pricing of loans will improve, and with it margin banks will become more transparent and hopefully disclose their risk

management practices.

In the Retail Financial Services a rapid evolution or a quiet revolution workshop,EuroMoney welcomed the following guests:

Mr. Amro Abouesh, Executive Chairman, Tanmeyah Microenterprise ServicesMs. Hala Bassiouni, Managing Director, Egyptian Housing Finance CompanyMr. Basel el Hini, Managing Director, Banque du CaireMr. Mohammed Farid, Senior Financial Economist, Head of Capital Markets Unit,Ministry of InvestmentMr. Henri Guillemin, Managing Director, Credit Agricole EgyptMr. Mohamed Ozalp, Vice Chairman, Banque Misr

The guests focused their presentation micro lending and borrowing, and financing smallenterprises, they made the following comments:


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Mr. Ozalp warned that we should not get ahead of ourselves, take a stepback and be a more realistic when it comes to what we hope to achievefrom small enterprise finance,

He pointed out that the numbers for small enterprises are not that greatand that the moral hazard induced by forgiveness programs in days gonepast, has led prospective small borrowers to believe they dont need topay back their loans or that they will be bailed out if they default.

Taxi finance given as an example He also drew a clear line between retail banking and small enterprise

banking as he believes the foundations for growth in the former are wellestablished

Mr Amro Abouesh was clear to point out that they are not competing withbanks as his clients could not get a loan from a bank if they wanted to,

He stated that low income groups have the lowest default risk at a 2%average in Egypt, and backed this claim by research and experience,

He believed the microfinance business could reach about 5 millionpeople.

Ms. Hala Bassiouni stressed that her business is also different thanbanks and reaches customers on a different level, by providing them achance of owning a home. She said that at EHFC, each mortgage loan istailored to the consumers needs.

Mr Henri Guillemin said that he sees room for improvement in CBEmortgage and retail regulations

Mr. Basil described days gone by when banks were being bought out inmultiples not seen anywhere else

He attributed this to the banking systems self constraining strategy tocompete for market share in the same pie, but that all investorsacknowledged that there is a much bigger pie out there that willinevitably be tapped.

A focus on internal trade and non-oil & gas exports

In the second day of the Euromoney Conference Eng. Rachid M. Rachid, Minister ofTrade and Industry highlighted the key role of internal trade and non-oil and gas exportsin creating a high level of competitiveness to Egypt.

Internal trade:

Significance:

A direct link to most of the vital sectors in Egypt.

The short-term investment nature makes it more lucrative to investors. It will help reduce unemployment.

Its development will result in reducing the informality in the Egyptian economy.Current status: Internal trade accounts for c.2% of the Egyptian total investment -equivalent to LE 2.5 bn a very low contribution.

GoEs plan: The government is planning to expand this contribution to 8% -equivalent toLE 25 bn.

Non-oil and gas exports:

Current status: These exports increased by 116% to LE 95 bn in 2008 from LE 44 bn in2004.

GoEs plan: The GoE is planning to increase non-oil and gas industrial exports to LE 200bn in a 4-year time span. Moreover, it is planning to introduce the following:


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1000 new exporters to be introduced to the market next year.

A support scheme for exporters i.e. feasibility studies, marketing support, fullaccreditation and labor training.

Meanwhile, the GoE has no intention to increase exports of raw materials - on thecontrary it aims to depress it. Yet, Eng. Rachid highlighted that the GoEs direction is nottowards protectionism and the decisions applied to some industries and products likecement were a sort of measures to curb inflation and to satisfy the market needs.

Enhancing Bilateral trade with the UK

The Minister of Trade & Industry, Eng. Rachid Mohamed Rachid, has started a two-dayvisit to the United Kingdom (UK) in order to enhance the bilateral trade between the twocountries. It is worth mentioning that bilateral trade between Egypt and UK hit GBP1.53bn in 2008, of which GBP 617mn were exports to UK, while the balance wereimports from UK. Moreover, the cumulative UK investments in Egypt as of March 2008amounted to LE 17.8bn in the fields of manufacturing, services, tourism, agriculture,construction, finance, communication, and information technology.

Essentials for growth

On the second day of the Euromoney Conference 2009 Prime Minister, Ahmed Nazif,highlighted the essentials for growth:

Enforce consumer and investor confidence

Encourage investment in labor intensive sectors

Transport is a pre-requisite for growth

Focus sectors are health, transport, energy and education

GoE is working on health insurance packages

More schools and better curriculum are on the way currently there are 40kschools and 15 mn students.

Invest in human capitalMeanwhile, he pointed out that there is no intention to influence the LE/US$ exchangerate and confirmed that it should be a market-based rate. It is worth highlighting thatsince net international reserves has been growing MoM, the local currency saw someappreciation against the US dollar. August net international reserves grew even strongerwith 4%MoM vs. 1% growth a month earlier. Hence, August LE/US$ exchange rateaveraged LE 5.546 compared to LE 5.636 in March the weakest monthly averagereached since the beginning of the year. Moreover, in September the LE gained morestrength against the US$ with an average exchange rate of LE 5.523.


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Figure 2: Net International reserves & LE/USD exchange rate

Source: Bloomberg and CICR

Infrastructure: Key for further economic growth

In the second day of the Euromoney Egypt Conference 2009 event, we attended a panelregarding the Infrastructure under a theme of Will they come before we can build it?Given the fact that Infrastructure projects are key drivers for the economy, the paneldiscussed the role, opportunities, and obstacles in the infrastructure projects for the

investors as well as the financiers. Key points discussed were:

A wide range of opportunities will be introduced during the next 5-10 years, including 52planned infrastructure projects targeting essential and critical sectors e.g. transport (road& river), logistics, seaports and terminals, tourism, waste water, education, and health.

Investment in these projects is worth LE 137 bn.

The 52 projects could increase to 120 projects.

The expected investment structure for these projects is 25-30% for the government, 30-40% for the financial institutions, while the balance is for the private sector.

A key obstacle in investing in infrastructure projects is its non-profitable nature. However,in order to mitigate this risk, the private investor can make the infrastructuredevelopments needed as a part of its investment cost

Infrastructure projects are the GoEs focus in order to ensure a sustainable economicgrowth. Since the onset of the crisis the GoE introduced an LE 15 bn stimulus package;of which LE 6.6 bn was directed to infrastructure projects. The offering of 52infrastructure project under Public-Private Partnership (PPP) arrangement is integral toinvestments, as it relieves part of the burden on the GoEs budget. One of the mainsectors that witnessed PPP projects is the transport sector. Also there are other sectorsthat are planned to be established under this scheme including water facilities andsanitation as well as electricity plants. We highly believe that endorsing PPP will supportthe economy.

Could SMEs be the economy rescuers?

During the SMEs session Can they ride to the rescue of the real economy? on thesecond day of the Euromoney Conference the panel discussed the key challenges that

face the development of SMEs in Egypt, which can be briefed as follows:

Lack of access to finance

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Lack of formal set up for SMEs.

Absence of professional management.

Lack of required up-dated information. Lack of subcontracting culture in Egypt.

In addition, the guests stressed on the importance of Nominated Advisors (Nomads) tohelp SMEs attain the expected growth.

Acknowledging that SMEs have a vital role in the economy - they contribute c. 80% ofthe countrys value added and c.75% of its non-agricultural private sector workforce, theGoE introduced a set of incentives to support SMEs.

Further SMEs support

The Social Fund for Development has announced that it has allocated LE 200mn to helpstimulate the growth and creation of small business enterprises. The money will be

placed in the National Bank of Egypt s custody and will be dispersed throughout thebanks branches nationwide. The funds will be used across the industrial, trade andservices sectors and are expected to fund more than 4,400 different projects.

Figure 3: GoE's support to SME's

Source: CICR Database

Real Estate:

A key driving sector to the economy

The Euromoney Egypt Conference 2009 covered the Real Estate industry over two days.The first panel was named 'Real Estate in Egypt' and it raised the following questions:

Will 2010 recovery be strong or sluggish?

What are the key catalysts?The second panel was named 'Real Estate Why are there homes without loans andloans without homes'. The panel raised the following issues:

Despite global real-estate horrors, the Egyptian real-estate market must beconsidered an investment choice among both domestic and international

investors. It is also home to innovation and growth in retail finance, developerfinance and retail outlet development. The demographic structure of Egypt putsthis asset class on the horizons of both direct and portfolio investors. Can the

Authority Facility

Ministry of Finance

New easy terms for the taxation of small enterprises in accordance with the

investor's capital and the volume of the business. The rules allow the

repayment of 60% of the value of the last tax over three batches at the end

of June, September and December

Social Fund for Development

An agreement with a financial leasing company in Upper Egypt to provide

SMEs with a minimum financing limit of LE 10 K to be used in purchasing

needed equipments and vehicles

Ministry of Local DevelopentLE1.6 mn worth of loans to finance 1,663 small projects in 15 governorates;of which 622 projects are located in Suhag governorate

Social Fund for Development (SFD)LE 15 mn for financing micro-projects in five Governorates; Souhag, Asuit,

Al-Fayoum, Al-Sharkya and Al-Beherya

The Social Development Fund and

The Principal Bank for Development

and Agriculture

An agreement to finance small projects particularly agriculture in Qena and

Asuit Governorates worth LE 5 mn

Social Fund for Development (SFD) Reduced interest rate on SMEs loans by 2%


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promise be fulfilled and what does the government want from the sector homes for people or taxes for the budget?

The panel highlighted that the Egyptian domestic real-estate market was not affected inthe same magnitude as the global real estate markets.

They stressed the importance of activating the system of mortgage finance, seeing it askey catalyst to boosting the real-estate industry. It was argued that the system ofmortgage finance should be customized to meet the needs of middle and lower incomehouseholds. The Mexican mortgage system was cited as a good example of such asystem.

Regarding the psychology of the market, the panel said that most home sellers are notlowering their prices, as required by buyers to close a deal leading to a stagnantsecondary market. In fact, home owners preferred to lease their units rather than sellthem. The drop in prices reached 15-20% in some areas of Cairo.

The panel highlighted that the real estate sector is likely to witness some enhancementover 2010, whilst the high-end would probably reach saturation by the end of the sameyear. The catalysts of the real-estate enhancement are the strong unmet demand bylocals and the pending activation of the mortgage system.

Regarding investment return, the panel indicated that Egypts real estate sector is one ofthe best real estate sectors in the region. Over the past 30 years interest rates havehovered around 8% per annum whilst real estate price appreciation has averagedaround 30% per annum over the same period. This has resulted in an average return of22% per annum.

For mortgage rates, the panel stressed that rates are directly related to those of thebanks. Mortgage rates cannot go lower than current levels due to this bank ratebenchmarking.

Finally, the panel believed that the new tax law will have a minimal impact on the real-estate market. This view was based on the fact that, historically, sectors exposed to newtaxes have absorbed such changes yet still maintained the same growth levels.

Conference topics covered in later sections:

Green Economy

Fertilisers

Telecoms and ICT


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Economy

Mona Mansour | [email protected]

Alia Mamdouh | [email protected]

Egypts solid performance to continue in 2010

Though Egypts economic performance dropped to 4.7% in FY08/09 , up from the 7.2%achieved in the previous year, the country is still revealing strong growth potentials. Anexpected growth of +4% in 2009 is well above the IMF's 2.7% expected growth for theregion. With a higher FDI inflows of US$10 bn (in line with CICRe); an expected exportsgrowth of 10%; and an anticipated increase in consumption at around 5%, GDP couldmanage to grow close to 5%. The enforcement of the Public-Private Partnershipscheme, the focus on SMEs, and GoEs commitment to support growth will place Egyptat a more competitive level than its regional peers.

A drop in the number of vessels passing through Suez Canal

Egypt's Suez Canal Authority reported that revenues from the waterway have dropped26% to US$371.8mn in August 2009 compared to the same month a year ago. A total of1,453 vessels have passed through the Suez Canal this month compared to 1,521 inJuly 2009 and 1,993 in August 2008.Despite the strong improvement in the Canalsrevenues at the beginning of FY09/10 marking a MoM growth of 10% in July revenues reflected signs of weakness in August. August saw a widened YoY drop of26.3% vs 21.9% in July. This drop was associated to the further YoY decline in thenumber of non-oil tankers by 29% and the drop of 19% of the number of oil tankers. Webelieve in a better performance in FY09/10 with expected revenues of US$5 bn fromUS$4.74 bn in FY08/09.

Figure 4: Suez Canal Performance

Source: CBE & IDSC

Steady average yield on 91-day T-Bills

The average yield on Egyptian 91-Day Treasury Bills remained almost constant at9.611%, at an auction held on Sunday, compared to 9.617% at last auction datedSeptember 13, 2009. The Central Bank of Egypt (CBE) accepted bids for the sameamount it was seeking, worth LE 2 bn (US$363.5 mn) at rates between 9.501-9.64%,compared to 9.48-9.669% at the previous auction. Bills are to be issued on September

29, 2009 and to mature on December 29, 2009.

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Automotive

Fadwa Hossam | [email protected]

Banks take centre stage in driving up car sales

The role of banks in addressing the crippling affects of the global financial crisison the auto sector has begun to take centre stage. With mounting pressure toraise their investments and reduce interest rates, banks have responded with newwave of car-loan programs as a means of enhancing credit borrowing and,ultimately, boosting car sales. Between them, Banque Misr and the National Bankof Egypt (NBE) allocated LE 10 bn in the form of personal and car loans.

Automotive: Banque Du Caire approves car loans worth LE 50 mn

According to the CEO of BANQUE DU CAIRE, The BoD has given a preliminaryapproval to its car loan program. This is expected to be launched next month. The bankwill provide an initial LE 50 mn worth of car loans, to be increased later on. (Al Alam Al

Youm, 30-Sep-09)

Comment

In 2008, 70% of passenger car sales were backed by car loans. On the back of thefinancial crisis, the risk of employee layoffs and the heightened threat of loan defaults,banks grew both hesitant and stringent in their retail loan requirements.

The average 2.75% increase in lending rates administered by the CBE in 2008 reached12.30% and heightened to 13.50% in Jan-09. This filtered trough to car loans and drovecustomers away from credit borrowing. Some banks raised interest rates on loans to9.5%, other banks lending rates reached as high as 18% and 20%.

However, as CBEs lending rates began to trend lower, reaching 10.50% in Jun-09, PCsales showed signs of a revival, growing MoM by 23%.

Figure 5: Passenger car sales vs CBE lending rates

Source EAMA and CBE

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Banking and Financial

Alia Abdoun I [email protected]

Karim Meleka I [email protected]

The reluctant bull market The EUROMONEY Egypt Conference 2009: Banking The Agricultural Credit & Development Bank: To establish new financial

and investment tools

The reluctant bull market

Egyptian banks failed to keep up with their global counterparts in the FTSE Global BankIndex this week after beating them last week. Banks, in conjunction with the broaderlocal market, lost ground at the beginning of the week but slowly recovered near the end.Ultimately it lost -2.2% when the FTSE Global Bank Index went up 1.2%.

All of the banks covered by CICH retreated, with NSGB severely damaged by the sell-

off. CIB (COMI) declined by -2.1%, National Societe General Bank (NSGB) declined by -8.0% after gaining a massive 8.4% last week. Credit Agricole Egypt (CIEB) was down by-0.9%.

NSGB and CIEB have 20% and 16% upside potential respectively, according to CICRTarget Prices.

Figure 6: Weekly Trading


Weekly News

The Agricultural Credit & Development Bank: To establish newfinancial and investment tools

The Chairman of the Agricultural Credit & Development Bank (ACDB), Mr. Ali Shakerannounced in a press conference held on September 27, 2009 that the bank is on itsway to launch new financial and investments tools for the benefits of its client base.Amongst these tools would be the establishment of an investment fund with a value of

LE 100 mn in addition to a company specialized in the financial leasing, and finallybuying a stake in one of the insurance companies. (Al-Alam Al-Youm, 29-Sep-09)


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Cement

Basma Shebeta | [email protected]

Ghada Refky | [email protected]

Cement: IDA may cancel the licenses for un-implementedprojects

Eng. Amr Assal, INDUSTRIAL DEVELOPMENT AUTHORITY (IDA)S CHAIRMAN,revealed that the IDA may cancel the licenses for cement companies that have not yetstarted their projects. If necessary, the IDA would re-issue these licenses amongst othercompanies. (Al-Alam Al-Youm, 30-Sep-09)

Comment

The IDA will study the cement sector dynamics. If they conclude the sector needs newproduction capacities, the IDA will issue new cement licenses. In reference to the

indicators below, we believe demand for cement will grow in 2009 and 2010 by 20% and11%, respectively. Hence, the cancellation of licenses may well pressure utilization ratesfurther.

The government may consider issuing new cement licenses, especially if it is keen tolower selling prices. However, we believe investors would be reluctant to enter into suchlicences due to the hike in cost of establishing new cement plants since the last auctionin Oct-07. The high level of government intervention in the cement sector could also playa role in detracting potential investors.

In sum, we believe that if new, additional capacities were decided upon, severalinvestment incentives would need to be offered by the government.

Figure 7: Weekly cement prices


Company Name Ticker

National Cement NCEM 35.64 35.81 0% NA

Torah Cement TORA 42.79 42.63 0% NA

Misr Beni Suef Cement MBSC 129.90 134.79 -4% H

Helwan Cement HCCO 44.69 36.42 23% NA

Sinai Cement SCEM 45.44 46.95 -3% B

South Valley Cement SVCE 7.96 8.15 -2% NA

Suez Cement SUCE 40.97 41.68 -2% NA

Misr Cement (Qena) MCQE 91.32 92.48 -1% H

Sector Average *** -3%

* As of 1-Oct-09

** As of 24-Sep-09

*** WoW % in cement sector Mkt Cap

Closing

Price *

Last Week

Price ** WoW % Rec.


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Figure 8: Cement sector outlook

Source: Ministry of Investment and CICRe

Misr Beni Suef Cement: Company update - Hold maintained.

We have upgraded our estimates for domestic cement consumption by an average of6% through 2009-13 due to the favourable conditions (+25% YoY in 7M09). We haveenhanced our estimates for MISR BENI SUEF CEMENT [MBSC.CA; MBSC EY]sutilization rates, revenues, and margins. Electricity provision, natural gas supply, andlicense fees are three issues forming the bedrock of on-going contract negotiationsbetween MBSC and the authorities. MBSC is expected to secure these contracts shortly,facilitating the operation of its new 1.5 mtpa production line. Accordingly, weincorporated these contracts into our estimates, enhancing our capex forecast for MBSCby 25%. As a final result we increased our LTFV by 38% to LE 211/share from LE152.5/share, implying an upside potential of 57%. We also increased our TP by 115% toLE 156/share from LE 72.5/share. This implies a 16% upside potential. Following thestrong rally in MBSCs stock price (3M increase of 56%), we maintain our Holdrecommendation.

Unit 2008 A 2009 E 2010 F 2011F 2012 F 2013 F

Consumption mn tons 38.4 46.2 51.4 54.6 58.9 64.5

Chg. 20% 11% 6% 8% 9%Production mn tons 39.8 45.7 51.7 57.1 63.3 66.5

Chg. 15% 13% 11% 11% 5%

Utilization Rate mn tons 94% 99% 98% 89% 95% 99%

Chg. 482 bps -48 bps -899 bps 527 bps 474 bps

Exports mn tons 1.34 0.3 0.3 1.6 3.1 4.3

Chg. -79% 7% 440% 91% 38%

Imports ** mn tons - 0.7 - - - -

** Including imports by local producing Co.s


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Consumer

Ingy El Diwany | [email protected]

Most of the consumer stocks were correlated to EGX 30 side-way movement. Webelieve that the third quarter results are expected to be better QoQ, yet lower YoY, giventhat bulk of the demand is concentrated in the third quarter. No significant news wasrevealed concerning the sector during the last week.

Stock price performance

Figure 9: Weekly prices

Source: Reuters and CICR

Open

27 Sep

Close

1 Oct

Weekly

change

Mkt cap

(mn)Target Price

Upside to

TPRec.

EGX 30 7,003 6,790 -3% NA NA NA NA

Al-Arafa for Investment & Cons. US$0.87 US$0.85 -2% 193 US$0.89 5% Underweight

Eastern Company LE 132.79 LE 135.01 2% 6,751 LE 117.50 -13% Underweight

Olympic Group LE 33.53 LE 34.05 2% 2,046 LE 35.30 4% Hold

Oriental Weavers Carpets LE 34.29 LE 34.29 0% 2,558 LE 37.40 9% Hold

Raya Holding LE 6.77 LE 6.60 -3% 376 LE 5.30 -20% Sell


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Fertilizers

Muhammad El Ebrashi | [email protected]

Ahmed Abdelghani | [email protected]

What is next? is this weeks activity. The Euromoney Egypt 2009 was concludedon Wednesday offering some opportunities to P fertilizer investors. Explorationrights were also mentioned in conjunction with infrastructure activities. Inaddition, PPP is becoming a worldwide notion. Mergers and acquisitions in thefertilizers industry are also still in the air.

Figure 10: Weekly Trading


Attracting exploration projects to Egypt

Infrastructure panellists on Day 2 of the Euromoney Egypt 2009 workshop discussedwhether investors might be granted contracts for exploration of raw. One such materialthat received mention was phosphate rocks. Such exploratory activities are very muchlinked to infrastructure projects, such as the building of railroads, which facilitate thetransfer of raw materials. The below paragraph is an excerpt from the workshop

discussion:''on the other side, infrastructure investments in Egypt are hurdled with their low returnyields when compared with other project returns. For example, railroads and highwaysare being established by the GoE, which subsidise their costs. However, in order tomitigate this risk, the private investor can make the infrastructure developments neededas a part of its investment cost. For example, investor who is looking for concessionrights to extract phosphate rocks used in P fertilizers, he should undertake all theappropriate infrastructure development needed, such as railways or river ports, totransfer the raw materials and goods.''

Comment

Although it is premature to judge the feasibility of the project, we believe that P fertilizersinvestors (existing and potential) might be able to reduce raw material costs, especially

those of phosphate rocks, through the securing of exploration rights. It is worth notingthat phosphate rocks costs represent 34% 38% of total inputs costs in the SSPfertilizers. In addition, we believe that the Government of Egypt (GoE) is using the stickand carrot method to better exploit its natural resources. Accordingly, P fertilizersinvestors might be able to incorporate infrastructure costs in their explorationinvestments.

Deregulating the N fertilizer market in January 2010

GoE decided to liberalize the N fertilizer trade next January in view of stable the market.Governmental official asserted that the final decision depends mainly on global fertilizerprice trends their effects on local market. (Almasry Alyoum through Arabfinance, 24-Sept-09)


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Green Energy

Mona Mansour I [email protected]

Mayan Elmenshawy I [email protected]

Going, going, green

The combination of growing electricity demand (a CAGR of 7% over 2004-2008)and dwindling oil production (a CAGR of -0.5% over the same time span)highlights the key role of alternative sources of energy. One of the morenoticeable developments in this field is the expanding contribution of wind-generated power. Indeed, wind-installed capacity increased from 0.8% in FY04/05to 1.6% in FY07/08 of the total installed electricity capacity.

Growing foreign and private sector participation in the energy industry,particularly in renewable energy, adds to the sectors potential.

A focus on renewable energy in the Euromoney Conference

Dr. Hassan Younes, Minister of Electricity and Energy, gave a keynote speech on Day 2of the Euromoney conference 2009. He stated that whilst 89% of current electricitygeneration stems from conventional sources, the Government of Egypt's (GoE)renewable energy plan should contribute 20% of generated electricity by 2020. It is worthnoting that the GoE plans for 63% of the electricity generated from green energy sourcesto be produced by the private sector.

The Minister highlighted a number of projects currently in progress, especially in windenergy. Several wind farms will be established in the both the West of Egypt and alongthe banks of the River Nile.

The plan includes the following:

The implementation of an energy conservation program

A street lighting program is under execution.

A solar energy program in which 140 MW solar installations will be in full use bythe year 2010.

Additional US$100 -120 bn worth of new projects.Figure 11: Planned green energy projects

Source: CICR Database

PROJECT PARTNERS CAPACITY COMPLETION DATE

WIND

Zafarana wind farm 192 MW 2010

Phase 8 Japan 75 MW 2009

Phase 9 Denmark 120 MW 2010

Gabal El-Zayt wind farm in

Suez Gulf2010

Phase 1Germany and European

Investment Bank (EIB)250 MW In the bidding process

Phase 2 Japan 220 MW Under Study

Phase 3 Government of Spain 300 MW Under Study

Private wind farmItalian, a subsidiary of the Italian-

based Italcementi120 - 400 MW Not Available

SOLAR

Kuraymat solar thermal power

plantNREA, EPC and the Spain-based

company (Iberdrola), Mistui Co.

Ltd of Japan, Orascom

Construction and Industries

Company (OCI)

140 MW 2010


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The Minister also pointed out several investment incentives to private investors,including:

(1) A reduction in custom duties on wind-energy related raw materials from 5% to 2%.

(2) The GoE will offer to purchase the electricity generated for 20-25 years.

Dr. Younes pointed out that electricity prices will not rise in 2009, though they mayincrease starting 2010 (the matter is under study). He also clarified that electricity priceswere increased by 5% in 2004 followed by a 2.6% in 2006.

Given that Egypts renewable energy stems mainly from hydro, the expansion of itshydro pool is critical. Egypt is participating in the Nile Basin initiative the Inga Dam.

In addition, Ethiopia, Sudan, and Egypt have developed a plan to create aninterconnection through the River Nile. This will allow the extension of existingtransmissions and permit Egypt access to hydro resources in both Ethiopia and Sudan.Participants are currently in the fund raising phase.

Wind energy in the South Valley

The Cabinet of Ministers approved 1.5mn feddans for wind power, across the east andwest of the Nile. The project is expected to generate over 30 GW and will be financed byboth public and private sectors. The Minister of Energy said that all wind equipment willbe produced locally.


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Hydrocarbons & related services

Maridive & Oil Services

Fadwa Hossam | [email protected]

Weekly Trading

Overall the oil service sector with the exception of Egypt Gas declined evenly over lastweeks performance. Maridive, AMOC and Sidi Kreir recorded respective WoW declinesof 3% and 2.2% and 1.2%. EGAS on the other hand grew by 8% to close at LE 90.29.


Source: Bloomberg and CI Capital

Price as of Price as of WTD* Target Upside/

Company Ticker 1-Oct 24-Sep Perf. Price (Downside) Rating

Maridive MOIL 4.14 4.27 -3.0% 4.7 13.5% HoldAMOC AMOC 44.01 44.98 -2.2% NA Not Covered

Egypt Gas EGAS 90.29 83.62 8.0% NA Not Covered

Sidi Kerir Petrochemicals SKPC 11.84 11.98 -1.2% NA Not Covered


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MILLS

Ahmed Abdel Ghani | [email protected]

Mirette Mohamed Ghozzi | [email protected]


This week, most of the Mills-sector stocks recorded small movements. Alexandria Mills[MILS.CA, MILS EY] was the exception, increasing 9.6% to reach LE 50.3/share.

Figure 13: Stock price performance

Source: Reuters & CICR estimates

Upper Egypt Mills: Net profit up 8% YoY |Positive

UPPER EGYPT MILLS [UEFM.CA, UEFM EY] released its FY08/09 financial resultsended June 30, 2009, reporting 8% YoY higher consolidated net profit of LE 94.8 mn(+13% vs. CICRe of LE 83.9) vs. LE 87.7 mn in FY07/08. We will comment further on theresults once we receive detailed financial statements. (www.egyptse.com, 30-Sep-09)

(6-Sep-09): [UEFM | LTFV EGP 109.9/share |TP EGP 118.5/share| Strong BUY | LowRisk]

North Cairo Mills: Net profit down by 37% YoY | Negative

NORTH CAIRO MILLS [MILS.CA, MILS EY] released its FY08/09 financial results endedJune 30, 2009, reporting 37% YoY lower net profit of LE 31.9 mn (-16% vs. CICRe of LE37.8) vs. LE 50.7 mn in FY07/08. We will comment further on the results once wereceive detailed financial statements. (www.egyptse.com, 30-Sep-09)

(6-Sep-09): [MILS | LTFV EGP 28.2/share |TP EGP 32.8/share| Underweight | LowRisk]

Middle & West Delta Mills: AGM & EGM decisions

In its AGM held on September 30, 2009, MIDDLE & WEST DELTA MILLS [WCDF.CA;

WCDF EY] approved the following:

FY08/09 financial statements ended June 30, 2009.

A DPS of LE 3.60 (+21% vs. CICRe of LE 2.98), implying a dividend yield of9%.

Charging wages expenses account with LE 3.5 mn to save employees sharefrom profits.

Using LE 4.02 mn from general reserve in addition to LE 2.5 mn from retainedearnings to support share dividend yield according to Article No. 40 from lawno.159/1981.

Refusing Mr. Mohamed Al-Fekys - the second largest shareholder with a stakeof 11.1%- request to be a board member.

Company TickerPrice at

30-Sep

Price at

27-Sep

Weekly

Change

Target

PriceRec. Risk Rating

Alexandria Mills AFMC 50.3 45.9 9.6% 14.6 Sell Moderate

Central Egypt Mills CEFM 22.4 21.0 6.5% 13.7 Sell Low

East Delta Mills EDFM 37.1 37.27 -0.4% 47 Strong Buy Low

Middle & West Delta Mills WCDF 40.27 40.09 0.4% 49.3 Strong Buy Low

North Cairo Mills MILS 31.1 31.92 -2.5% 32.8 Underweight LowSouth Cairo & Giza Mills SCFM 63.6 61.84 2.8% 53.3 Sell Moderate

Upper Egypt Mills UEFM 85.9 85.4 0.6% 118.5 Strong Buy Low


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On a different note, in its EGM, WCDF approved the following:

Amendments to article No.3 of the company s Articles of Incorporation to addnew activities to the company including the establishment of a social club,

commercial stores, restaurants, events hall and hotels. This will enhance thecompanys revenues from other activities and enable it to utilise its unusedlands.

Amendments to article No. 56 giving the AGM the right to approve ceasing the5% of the companys profit legal reserve accumulation once the reservereaches 50% of the companys paid-in capital. Prior to amendments, thecompany would set aside 5% of the annual profit when the reserve fell below50% of the companys paid-in capital.

(6-Sep-09): [WCDF | LTFV EGP 47.4/share | TP EGP 49.2/share | Strong BUY | LowRisk]

Wheat: GASC contracted to import 150k tons of Russianwheat | Neutral for milling companies

THE GENERAL AUTHORITY FOR SUPPLY COMMODITIES (GASC) has secured acontract to import 150k tons of Russian wheat, at US$170/ton. This is to be delivered inthe first half of November. (Al-Masry Al-Youm, 1-Oct-09)

Comment

We believe that this Russian wheat will have minimal impact on Egyptian millingcompanies due to the requirement that all imported wheat pass the Egyptian standardsof quality. Russian wheat accounted for 36.4% of GASC's total wheat imports in 2009, atan average price of US$174/ton.

Wheat: Farmers turned to other crops | Neutral for milling

companiesWheat farmers announced that, in the current season, they have turned away fromwheat cultivation to other, more profitable crops like sugar, trefoil and Syrian pulp. (Al-Gomhorya, 29-Sep-09)

Comment

We believe that shifting from wheat cultivation to other economic crops will have noeffect on the milling companies. This is due to the fact that The General Authority forSupply Commodities (GASC) - the main buyer and importer of wheat - will secure anyshortage of wheat locally or directly through international bids.

We believe that the farmers decision to cultivate other, more profitable crops stems fromthe GoE's delay in announcing the wheat procurement price for the current season on

September 9, 2009 -the farmers day- as announced before.

Farmers were dissatisfied with the procurement prices for 08/09 season. Wheat pricesranged between LE 240/Ardab-LE 250/Ardab, due to the higher cultivation cost (whichreached LE 2,000/feddan) and the long cultivation period (six months, from November toApril).

Wheat: 63k tons of Russian wheat seized | Neutral for millingcompanies

Dr. Ali Soliman, Head Of Central Department for Agricultural Quarantine, announced thatthe Agricultural Quarantine Outlets (AQO) in Port Said has seized a shipment of 63k tonsof Russian wheat. This shipment will be held in custody until a certificate from theexporting country, confirming that the shipment is free from any inspects or plant

diseases, is received. AQO refused The General Authority for Supply Commodities'(GASC) request to release the shipment until the certificate has been received. (Al-Masry Al-Youm, 26-Sep-09)


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Comment

We expect the seizure of this shipment to have no effect on the milling companies giventhat GASC will secure any shortage of wheat locally or directly through international bids.

We believe that the AQO's decision to detain this shipment comes in the wake of theMinister of Agriculture's instructions, in May 2009, to AQO in the Egyptian ports to (1)ban the entry of wheat shipments not from the origin country and (2) ensure the ports oforigin and plant characteristics' certificates are included to improve the imported wheatquality.


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Real Estate

Hany Mohamed Samy | [email protected]

Nasr City Housing & Development (MNHD) AGM approves aDPS of LE 0.8

In its AGM held on September 30, 2009 , Nasr City Housing & Development (MNHD)approved its FY08/09 financials, in addition to the distribution of a DPS of LE 0.80 nextNovember. This DPS of LE0.80 implies a dividend yield of 2.2%.

[MNHD | LTFV EGP 84.7/share | TP EGP 84.7/share | Strong BUY | High Risk]


Figure 14: Real Estate companies weekly trading

Source: Reuters

CommentIn the Euromoney conference discussed in the earlier section the panel discussionhighlighted how Egypts real estate market has been relatively unaffected. It was alsothought the new property tax would not affect the sector. The new mortgage marketshould benefit the sector but this would take time and some change of culture. Webelieve the panel accurately reflected the current dynamics of the local real-estatemarket. They highlighted the main drivers, catalysts, and hindrances faced by theindustry and their outlook was in line with our expectations and analysis.

We believe the strength and opportunities within the real-estate industry are reflected inour target prices below:

[TMGH | LTFV EGP 12.8/share | TP EGP 11.5/share | Strong BUY | Moderate Risk]

[PHDC | LTFV EGP 12.5/share | TP EGP 11.3/share | Strong BUY | Moderate Risk]

[MNHD | LTFV EGP 84.7/share | TP EGP 84.7/share | Strong BUY | High Risk]

27-Sep 28-Sep 29-Sep 30-Sep 1-Oct

From 27-

Sep to 1-Oct

TMG 6.57 6.45 6.48 6.44 6.49 -

% Change na -2% 0% -1% 1% -1%PHD 9.07 8.87 8.9 8.86 8.83 -% Change na -2% 0% 0% 0% -3%

NCHD 36.49 35.9 36.03 35.81 35.92 -% Change na -2% 0% -1% 0% -2%na: not available


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Sugar

Mirette Mohamed Ghozzi | [email protected]

Removal of import tariffs on raw and white sugar| Positive forDelta Sugar

Prime Minister, Dr. Ahmed Nazif, announced the decision to remove import tariffs onboth raw and white sugar for the period starting August 15, 2009 until December 31,2009. (Al-Ahram, 25-Sep-09)

Comment

The announcement of this decision put into effect the Minister of Finances proposal toremove import tariffs on sugar over a month ago. The decision came in response torising international sugar prices. The increased cost of sugar is itself a product ofshortages in global supply, particularly in India and Brazil.

We feel that the tariff removal does not pose a threat to Delta Sugar [SUGR.CA; SUGREY] given that international prices (over LE 3,200/ton) have recently risen faster thanlocal prices (LE 2,750/ton). However, we do believe the lower local prices present anopportunity for SUGR to sell its accumulated inventory. The company recorded aninventory of 283k tons of sugar in 1H09.

We expect domestic prices to rise, though not at the same rate as international prices,given that local prices are controlled by the Sugar Committee. The Committee stabilizedlocal prices at LE 2,750/ton during the Holy month of Ramadan, up from LE 2,500/ton atthe beginning of the year. The Committee will meet shortly to set the new sugar price.



[SUGR | LTFV EGP 22/share | TP EGP 19.8/share | Underweight | Moderate Risk]

Company Name Ticker

Delta Sugar SUGR 26.75 24.36 10% Underweight

* As of 1-Oct-09

** As of 24-Sep-09

*** WoW % in sugar Mkt Cap

Closing

Price *

Last Week

Price ** WoW % Rec.


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Telecom

Amr Hussein Elalfy, CFA | [email protected]

Mohamed Hamdy | [email protected]

Noran Ali | [email protected]

This week, Orascom Telecom (OT) reversed its positive performance witnessed in

the previous week, down 5.5% WoW, albeit the rumor of OT's bidding for the

acquisition of a Nigerian company is still circulating in the market. Telecom Egypt

(TE) showed a negative performance by end of week impacted by the Minister of

Communications & IT's announcement of offering two licenses for offering triple-

play services in gated communities with US$1bn estimated investments over the

next 5 years. Although the impact was negative on TEs stock price, we had

already factored the impact of new entrants in our projections. Hence, the new

announcement is not a surprise and we think reaction to the news was overdone.

Meanwhile, Mobinil continues to trade around our target price of EGP 220.

Figure 16: Stock performance this week

Source: Bloomberg and CICR estimates

Orascom Telecom (OT)

ORASCOM TELECOM HOLDING (OT) has sent a statement to EGYPTIANEXCHANGE concerning the conclusion of GDRs transfer. It is worth noting that theEGYPTIAN FINANCIAL SUPERVISORY AUTHORITY had announced earlier itsexemption of both WEATHER CAPITAL LIMITED and WEATHER CAPITAL SP1 SAfrom submitting an obligatory tender offer to buy 50,974,601 GDRs, representing254,873,005 shares of OT.

On a different note, OT is reportedly interested in buying a Nigerian company, which willbe sold as a part of government privatization plans. The company provides fixed linesservices, marine cable in the south of Atlantic Ocean, and mobile through its unitNITEL. OT reportedly intends to bid for 75% of Nitel as a part of its expansion plans inAfrica through the Nigerian market which include five mobile companies.(www.arabfinance.com, 27-Sep-09)

Comment

OTs officials refused to comment on such a rumor. Nigeria is considered one of thelargest and fastest growing telecom markets in Africa. Over 2002-2007, mobilesubscribers grew by a CAGR of 92%, well above the African regional CAGR of 49%. In1H09, mobile subscribers in Nigeria grew YoY by 28% reaching 66.4 mn, implying a 44%penetration rate.

Price as of Price as of WTD* Target Upside/

Company Ticker 1-Oct 24-Sep Perf. Price (Downside) Rating

Mobinil EMOB 220.91 224.29 -1.5% 220 -0.4% Underweight

Orascom Telecom ORTE 34.70 36.72 -5.5% 45 29.7% Strong BUY

Telecom Egypt ETEL 17.94 18.78 -4.5% 21 17.1% Hold

* Week to 1-Oct-09


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Weather Capital, parent of Orascom Telecom (OT) said on Friday, September 25, that ithas completed the purchase of EUR 825mn-worth of outstanding exchangeable bondsas part of a buyback program. The bondholders agreed to sell to Weather EUR 750.5mnof exchangeable bonds that were due for payback 2013 and had a coupon rate of4.75%. Weather said it also exercised its right of redemption to acquire the remaining

EUR 74.5mn of the bonds. Settlement of the offers to sell and the redemption of thebonds were completed on September 24, the company said. (Weather Capital pressrelease and Down Jones Newswires, 25-Sep-09)

Miscellaneous

Dr. Tarek Kamel, the MINISTER OF COMMUNICATIONS & IT highlighted the followingpoints during his speech in the EUROMONEY CONFERENCE:

Strong contribution of ICT sector in the economy:

The real GDP contribution of the ICT sector is around 3.8% or US$7bn.

The mobile sector growth reached 37% in 2008/09 with a penetration rate of 70%.

The sector has the challenges of finishing the overall infrastructure and renovation.

Egypt is becoming a leader in off-shoring and outsourcing through special incentivesprovided by the government and the INFORMATION TECHNOLOGY INDUSTRYDEVELOPMENT AGENCY (ITIDA).

Egypt is reportedly number "4" worldwide for off-shoring services.

The ministry has dedicated 75 acres to establish an outsourcing zone in Maadi. The firstthree buildings are finished, and the first companies will come within few months.

The ministry is committed to creating innovation centers. It started with MICROSOFTINNOVATION CENTER.

The ICT sector plays a big role in providing better education and health services. Theministry is also trying to introduce technology-based components for Higher Education.

Opening up the fixed-line sector

(please read below news & view):

As a step to opening up the fixed-line sector and providing added value for both thesector and consumer, the NTRA has approved two licenses for the telecom sector. Thismove will help some areas in Egypt to solve their network problems. International playerswere invited to come with their expertise to provide value-added services to the sector.

Details of the tender will be announced in the next 48 hours by the NTRA chairman.

Hosting a forum for internet:

Egypt will invite international partners and stakeholders to a forum on internet services in

Sharm El- Sheikh.

The forum will reflect the hot debates concerning cyber security, the internet as media forvalue-added services and domain services, etc.

The MINISTER OF COMMUNICATIONS & IT announced offering of a new generation oflicenses, triple-play services. The two licenses include the provision of bundled value-added services (voice, data, and internet) to the countrys higher-income bracket nowlocated in the expanding nationwide gated communities. The new services would bringtotal estimated investments of around US$1 bn over the next 5-year period. Suchannouncement is deemed a technological turning point in Egypts telecom market. Theentrants along with TELECOM EGYPT (TE) will adopt a fiber-optic network, whichenjoys a technological edge and lower maintenance cost than the existing coppernetwork. Although, the initial impact has been negative on TEs stock price (down to aslow as LE 17.49 intraday or 3.2% lower vs. previous close but rebounded later), we hadalready factored the impact of new entrants in our projections for TE. Hence, the newannouncement is not a surprise since competition will mainly take place in new gated


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communities, which are considered under-served areas. Accordingly, we maintain ourHold recommendation for TE with our target price of LE 21/share.

Following details were stated by the Minister:

The licenses will only cover small gated communities including 50-5,000 unitswhere the two new licensees, in addition to TE, will be able to compete.

For more than 5,000 units, TE will be the only telecom operator and willmaintain its monopoly position.

The new licenses will enable telecom providers to offer bundled servicesincluding voice, data and internet.

Revenue sharing with the government will be 8% with no "significant" upfrontfees.

The investment of the new licenses is expected to reach US$1 billion over thenext 5 years.

The new licenses will be offered to both Egyptian and foreigninvestors/consortia.

Licenses closing date will be January 12, 2010.

Operation is expected by 2H10.

In the EUROMONEY CONFERENCE 2009, we attended a workshop hosted byVODAFONE EGYPT (VFE) titled Dial M for Money: Empowering access to finance.The workshop presented the case for mobile banking worldwide with focus on emergingmarkets. They shared with us the success story of SAFARICOM (VODAFONEGROUPs subsidiary in Kenya), which set up a subsidiary called M-PESA to offer money

transfer services through mobile handsets. The major points discussed during theworkshop are:

By 2012, up to 364mn unbanked customers will have adopted mobile financial services(MFS) according to a McKinsey study.

The two markets that have successfully implemented MFS are:

Kenya: In just 2 years, 7mn customers joined the service and the market showed asuccessful adoption rate.

The Philippines: There is real competition in the market in terms of business modelsapplied (e.g. competition between mobile opcos and banks).

ALLIANCE FOR FINANCIAL INCLUSION (AFI) is a global network of policymakers indeveloping countries that provides its members with the tools and resources to share,

develop, and implement their knowledge of cutting-edge financial inclusion policies thatwork. Its goal is to enable people living on less than US$2 a day to have access tosavings accounts, insurance and other formal financial services: an extra 20 mn by 2011and 50mn by 2012.

The CENTRAL BANK OF EGYPT (CBE) is currently discussing the rules and regulationsof mobile financial services in Egypt.

Comment

Of the companies under our coverage, only ORASCOM TELECOM (OT) has put mobilebanking as one of its main initiatives over the coming years. Meanwhile, its subsidiaryMOBINIL has received initial approval from the CBE to launch money transfer andpayment services via mobile phones with a final decision is yet to be made. Last butnot least, VFE, a subsidiary of TELECOM EGYPT (TE) had previously launched a similar

service Vodafone Cash Card in cooperation with HSBC BANK EGYPT for fees of 2% oftransferred amount with a minimum of EGP 2/transaction.


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We definitely believe there is tremendous potential for MFS, not only in Egypt but in allemerging markets where OT operates. However, the timeline for implementation maytake longer than expected since its development requires (1) regulatory approvals, (2)partnership agreements between mobile operators and regulated banks, and (3) mostimportantly an overall education process and culture change to adopt such new services.

With an under-penetrated banking market, Egypt we think could potentially be one ofthe leading markets for these new services. Yet, we believe it is too early to attach avalue to its new business model.


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Figure 17: Rolling one month research

Source: CI Capital Research

Date Title/Company/Sector Type of report Pages

31-Aug-09 AIVC Newsflash 2

1-Sep-09 Canal Shipping Agencies Newsflash 2

1-Sep-09 EZZ Steel Company Note 102-Sep-09 United Arab Stevedoring Newsflash 2

3-Sep-09 OCI Newsflash 2

6-Sep-09 MENA TELECOMS WEEKLY | ISSUE NO. 18 THE MENA RINGTONE 13

6-Sep-09 Mills IoC 49

8-Sep-09 ALCN Company Note 6

8-Sep-09 Sinai Cement Company Note 5

9-Sep-09 Hard times, good banks Sector Note 23

9-Sep-09 Tighter budgets bring CPI lower Economy Newsflash 1

13-Sep-09 MENA TELECOMS WEEKLY | ISSUE NO. 19 THE MENA RINGTONE 14

13-Sep-09 OLYMPIC GROUP Company Note 7

14-Sep-09 RECENT MARKET DEVELOPMENTS CEMENT MONTHLY 1615-Sep-09 Middle and West Delta Mills Newsflash 216-Sep-09 AIVC Newsflash 316-Sep-09 MNHD Newsflash 417-Sep-09 Eastern Company Newsflash 222-Sep-09 MENA TELECOMS WEEKLY | ISSUE NO. 20 THE MENA RINGTONE 1524-Sep-09 ORTE Newsflash 127-Sep-09 MENA TELECOMS WEEKLY | ISSUE NO. 21 THE MENA RINGTONE 1527-Sep-09 Misr Beni suef Cement Company Note 630-Sep-09 Triple

play services Industry Note 2


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RIC Company

Risk

Recom.

Curr.

Price LTFV TP Up/

(Dn)

P/E

08

P/E

09E

P/BV

08

P/BV

09E

ROE

08

ROE

09E

ROA

08

ROA

09E

DY

07

DY

08

Financial

CIEB Credit Agricole - Egypt M H EGP 12.70 15.5 14.7 16% 7.7x 9.7x 2.2x 2.0x 28.1% 20.7% 2.2% 1.6% 7.9% 8.7%

COMI CIB M N/A EGP 57.59 N/A N/A N/A 12.3x 9.6x 3.1x 2.4x 25.5% 25.2% 2.4% 2.7% 1.2% 1.7%

NSGB NSGB M B EGP 28.54 36.2 34.4 20% 8.4x 9.5x 1.9x 1.6x 22.4% 17.1% 2.5% 2.0% 0.7% 3.2%

RIC Company

Risk

Recom.

Curr.

Price LTFV TP Up/

(Dn)

P/E

08

P/E

09E

P/BV

08

P/BV

09E

EV/

EBITDA

08

EV/

EBITDA

09E

ND/

EBITDA

08

ND/

EBITDA

09E

DY

07

DY

08

Building Materials

ECAP Al-Ezz Ceramics H S EGP 7.79 5.5 4.7 (39%) 39.4x 40.6x 1.3x 1.3x 12.5x 8.5x 5.0x 3.9x N/A N/A

ESRS Ezz Steel M SB EGP 15.37 34.2 27.5 79% 6.8x 30.8x 1.6x 1.5x 2.7x 6.4x 0.8x 2.7x 2.2% 16.3%

IRAX Ezz Al-Dekheila M SB EGP 841.75 1,501.9 1,200.0 43% 3.9x 11.9x 3.7x 3.2x 3.1x 6.8x 0.4x 1.6x 16.9% 15.5%

PACH PACHIN M SB EGP 45.44 56.0 56.0 31% 11.0x 7.5x 1.6x 1.5x 10.0x 6.7x 0.5x 0.1x 8.2% 6.9%

Cement

MBSC Misr Beni Suef Cement M H EGP 129.29 211.0 155.8 21% 12.8x 6.7x 3.1x 2.5x 5.7x 5.6x -0.4x 0.3x 2.3% 3.1%

MCQE Misr Cement (Qena) M H EGP 91.32 104.9 97.9 7% 9.0x 7.8x 2.9x 2.8x 5.5x 4.7x -1.2x -1.3x 5.5% 9.0%

SCEM Sinai Cement M B EGP 45.44 91.5 57.3 26% 7.7x 4.6x 2.1x 1.9x 6.4x 3.8x -0.2x -0.3x 1.4% 11.0%

Chemicals

EFIC EFIC M S EGP 24.42 21.4 20.6 (16%) 7.5x 19.0x 2.0x 2.0x 8.6x 9.7x 2.9x 2.7x N/A 3.1%

Housing & Real Estate

MNHD Nasr City H&D H SB EGP 35.92 84.7 84.7 136% 33.5x 28.3x 14.7x 13.6x 28.9x 21.4x 0.1x -0.1x N/A N/A

PHDC Palm Hills Dev. M SB EGP 8.83 12.5 11.3 28% 9.5x 13.5x 2.2x 2.4x 9.5x 5.9x 0.5x -1.8x N/A N/A

TMGH TMG Holding M SB EGP 6.49 12.8 11.5 77% 9.1x 4.9x 0.6x 0.5x 8.9x 4.1x 1.7x 0.0x N/A N/AContracting

OCIC OCI M UW EGP 237.14 216.5 207.9 (12%) 12.5x 16.6x 2.7x 2.6x 9.5x 10.8x 0.6x 1.1x 128.0% 1.6%

Mills

AFMC Alexandria Mills M S EGP 50.47 10.0 14.6 (71%) 28.0x 21.6x 3.3x 2.9x 8.7x 6.6x -4.7x -4.7x 1.5% 1.0%

CEFM Central Egypt Mills L S EGP 22.36 13.7 13.7 (39%) 17.4x 14.4x 1.8x 1.7x 6.4x 6.0x -0.7x -0.2x 3.6% 2.7%

EDFM East Delta Mills L SB EGP 37.12 54.4 47.0 27% 10.0x 7.3x 1.4x 1.2x 5.0x 2.6x -2.0x -1.9x 8.5% 8.5%

CI Capital Research Coverage Universe (simple avg.) 14% 10.3x 10.9x 2.1x 1.9x 6.0x 6.2x 1.1x 1.1x 0.1x 6.1%


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Market Sectors P/E

08

P/E

09E

P/BV

08

P/BV

09E

EV/

EBITDA

08

EV/

EBITDA

09E

ND/

EBITDA

08

ND/

EBITDA

09E

DY

07

DY

08

Banking 8.6x 9.6x 2.5x 2.1x 0.3x 0.2x 0.0x 0.0x 4.2% 4.4%

Building Materials 7.3x 16.0x 2.4x 2.2x 2.9x 6.6x 0.6x 2.1x 9.6% 11.2%

Cement 10.4x 5.9x 1.9x 2.3x 5.2x 4.6x -0.6x -0.4x 5.1% 6.8%

Chemicals 5.8x 19.0x 2.0x 2.0x 8.6x 9.7x 2.9x 2.7x 14.5% 3.1%

Contracting 12.9x 16.6x 2.7x 2.6x 9.5x 10.8x 0.6x 1.1x 128.0% 1.9%

Engineering 10.3x 11.1x 2.8x 2.3x 12.2x 10.4x 2.6x 1.8x 6.2% 1.6%

Financial 11.6x N/A N/A N/A N/A N/A N/A N/A N/A 1.7%

Food & Beverage 10.2x 10.6x 2.5x 2.2x 6.6x 7.5x 0.2x 0.6x 4.6% 5.4%

Housing & Real Estate 11.4x 7.0x 0.8x 0.8x 10.0x 5.1x 1.3x -0.3x 0.8% N/A

Insurance 7.4x N/A N/A N/A N/A N/A N/A N/A N/A N/A

Mills 9.4x 9.1x 2.1x 1.9x 6.4x 4.5x -1.7x -1.6x 5.6% N/A

Paper 14.2x N/A N/A N/A N/A N/A N/A N/A N/A 5.3%

Pharmaceuticals 10.4x 9.4x 1.9x 1.8x 6.0x 5.7x -1.0x -1.2x 4.0% 5.7%

Services 12.3x 9.7x 3.9x 3.3x 1.9x 1.4x 0.1x 0.1x 9.3% 5.5%

Telecom, Media, & Technology (TMT) 11.4x 10.8x 2.4x 2.1x 5.3x 5.0x 1.5x 1.4x 8.8% 5.3%

Textiles 10.1x 9.0x 0.9x 0.9x 5.5x 4.3x 1.2x 0.6x 5.4% 5.5%

Tourism 13.4x 10.3x 1.6x 1.5x 3.8x 4.4x -0.5x 0.6x 5.2% 2.4%

* For banks, EV/EBITDA is ROE ** For banks, ND/EBITDA is ROA

Market (simple avg. of all stocks above) 10.4x 10.9x 2.1x 1.9x 5.9x 6.1x 0.9x 1.1x 8.4% 5.2%

Distribution of recommendations

SB Strong BUY 11 29%B BUY 4 11%H Hold 8 21%UW Underweight 6 16%S SELL 9 24%

Total 38 100%

Note: All multiples are calculated based on a market captialization-weighted average. Market sectors multiples are for all stocks that we track and not necessarily the ones in our coverage

universe. ** Banking ROE and ROA instead of EBITDA


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Contents and Disclaimer:

CI CAPITAL RESEARCHMark Rorison | Group Director, Head of Research

[email protected] Amr Hussein Elalfy, CFA | Director

[email protected] Mona Mansour | [email protected]

CIBCAmr Mostafa | Managing Director

[email protected]

DYNAMIC SECURITIESAhmed Roushdy | Managing Director

[email protected]

DISCLAIMERThe information used to produce this market commentary is based on sources that CI Capital Research (CICR) believes to be reliable and accu-rate. This information has not been independently verified and may be condensed or incomplete. CICR does not make any guarant ee, representa-tion or warranty and accepts no responsibility or liability to the accuracy and completeness of such information. Expression of opinion containedherein is based on certain assumptions and w ith the use of specif ic financial techniques that reflect the personal opinion of the authors of the com-mentary and is subject to change without notice. It is acknowledged that different assumptions can always be made and that there is a wide choiceof techniques that can be adopted each of which can lead to a different conclusion. Therefore, all that is stated herein is of an indicative and infor-mative nature as forward-looking statements, projections, and fair values quoted may not be realized. Accordingly, CICR does not take any re-sponsibility for decisions made on the basis on the content of this commentary. This commentary is made for the sole use of CICR s customersand no part or excerpt of its content may be redistributed, reproduced or conveyed in any form, w ritten or oral, to any third party without the prior

written consent of CICR. This commentary does not constitute a solicitation or an offer to buy or sell securities.

CI CAPITAL HOLDING

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Egypt

Reuters pages: COIW, COIX, COIY, andCOIZ

Bloomberg page: COIB

For more information,please contact CI Capital Research on +2

(02) 33 38 62 59,send e-mail to [email protected] visit our website at www.cich.com.eg

RATING SYSTEM

In February 2009, CI Capital Research (CICR) launched a new rating system to give analysts more freedom to be market responsive. This is tomake one element of our research more dynamic, namely the advertising of target prices and recommendations. What we did not c hange is ourassessment of the Long Term Fair Value (LTFV) , nor have we stopped our detailed industry and company research. What we did is changing the

target pr ice to trade in the balance of where a share should trade and where we think it will trade.

LTFV: As before we continue to estimate a fundamental valuation, largely DCF and/or NAV based.

Target Price: The target price, which is not necessarily the LTFV, is where the analyst, given all (qualitative as well as financial) infor mation avail-

able, thinks the share price can get to within the next 3-12 months. This can be changed at any time on changing facts, and perceptions.

Recommendations: Our new rating system falls out from the total return relating to the share price performance to the target price, and includingany distr ibutions as may not be included in the target price calculation. This is shown in the table below, and to be BUY mus t return over 19%, an

arbitrary hurdle rate we think reasonable given prevailing interest rates and risks. (Please see table below.)

Recommendation structure: Change to Target Price

Strong BUY > 30% Strong Conviction

BUY > 20% < 30%

Hold > 10% < 20%

Underw eight > 0% < 10%

SELL < 0%

your week in egypt - vodafone cash

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