Macro Analysis /

Egypt equity strategy: Earnings and market are moving in tandem with one another

  • We expect the relative improvement in 3Q20 and 4Q20 results to be a key driver for market performance

  • In this strategy report, we also present where we should be positioned short term...

  • ... and our fundamental long-term picks

Al Ahly Pharos Securities Brokerage
10 August 2020

In our latest Egypt strategy report titled 'EGX: I track earnings therefore I am', we answer the following key questions:

  • Where should EGX head from here and why? EGX has been tracking FX and earnings since early 2019, with signs of earnings weakness reflecting on performance since mid 2018. However, with the market hitting a bottom by mid-March, where TTM P/E hit 7.3x, the market has started to gradually recover. We expect the relative improvement in 3Q20 and 4Q20 results to be a key driver for market performance; that is in addition to a recovery in market P/E to c.11x from the current 9.4x. Please check two graphs on slide 2 in the full report.

  • Where should we be positioned short-term? Over the short term, we choose stocks that did not re-rate much since mid March and will end 2020 with a relatively healthy set of results. Hence, those are trading at quite attractive P/E multiples. We want to cite those: COMI, EAST, EKHO, DOMT, MTIE, PHAR, ABUK, CIEB, MNHD, and ADIB. Please check graph on slide 3 in the full report.

  • What are our fundamental long-term picks? Long term picks include more names that might have already re-rated YTD, due to different catalysts, but whose prices continue to be below LT potential, especially for 2021. Those include: COMI, CIEB, CICH, EKHO, HRHO, EAST, EFID, JUFO, ABUK, CLHO, ISPH, ETEL, TMGH, OCDI, and ORHD. Please check table on slide 4 in the full report.