CASE bulges as reform drive continues

23 September 2005
The Cairo & Alexandria Stock Exchanges (CASE) continues to soar on the back of the government's vigorous economic reform programme and the strong performance of local companies. Deepening of the market is also on the horizon, with the latest initial public offering (IPO) launched in mid-September and further share sales on the cards. And though rising, valuations in regional terms remain very reasonable.

'During the past couple of months, the market underwent a slight correction but then recovered,' says a Cairo-based analyst. 'The average PE [price/earnings] ratio is in the region of 12-14 and the impact of the presidential election [which saw President Mubarak return for a fifth term] has been positive, because people know that the government's direction is likely to remain the same.' The CMA index is up by about 50 per cent since the start of the year, while the Hermes index has risen even more impressively, by some 80 per cent.

Share prices are up virtually across the board, but the cement sector has performed particularly well, as the local real estate sector booms. The stock of Misr Beni Suef Cementis up by 101.7 per cent this year, according to the daily market report by EFG Hermesfor 12 September, while shares in local blue-chip Orascom Construction Industries (OCI)have risen by 155 per cent as the company continues its expansion. The latest venture announced is a plan to set up a joint venture cement plant in Fujairah with Dubai Investment Group.

Banking stocks are also generating excitement as the government moves ahead energetically with long-delayed plans to sell off its holdings in the sector. The price of shares in Misr International Bank (MIBank), in which Cairo's stake was sold in August to National Societe Generale Bank, is up by close to 30 per cent since the start of the year. Next on the cards is likely to be the sale of the combined 74.7 per cent stake held by Bank of Alexandria and American Express in Egyptian American Bank (EAB). EAB shares are unsurprisingly buoyant, showing a year-to-date gain of 64.2 per cent.

The primary market is also heating up, with the energy sector the new focus as the government plans a series of part-privatisations. Sucking a little liquidity from the bourse in recent days has been the impending sale of a 20 per cent stake in Alexandria Mineral Oils Company, which kicked off on 13 September and closes on 22 September. Small investors will be offered 10 per cent of shares while the remaining 10 per cent will be sold through a private placement. Also in the pipeline are public offerings of shares in Middle East Oil Refinery (Midor) and Tharwa Petroleum Company.

Investor interest appears assured given the stock market's recent performance. In June, 10 per cent of shares in Sidi Krier Petrochemicals Company (Sidpec) were put up for sale at a price of £E 70 ($12.10) a share. On 12 September, they closed at £E 102.07 ($17.69).

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