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MEEF - CyberShow Middle East Projects News 

UAE company wins bid for resort development project in north Egypt

Emaar Properties, the Dubai-based real estate company, Saturday defeated the other two bidders to win the right to develop a big seaside tourism project in north Egypt, Egypt's official MENA news agency reported.

Emaar offered a bidding price at one billion Egyptian pounds ( about 174 million U.S. dollars) and outbid the other two Egyptian companies, namely Orascom Hotels and Development and Talaat Mustafa Firm.

With the win, Emaar will be authorized to develop the first phase of a giant tourism project, which was located in the Mediterranean city of Sidi Abdel Rahman, about 350 northwest of Cairo.

The first-phase project, with an area of 6.2 million square meters, would include 9,000 residential units, two five-star hotels, a marina, luxury golf grounds, shopping centers and sports facilities.

Emaar Egypt said that the company planned to spend 10 billion Egyptian pounds (about 1.7 billion dollars) to develop the site and put it into operation within five years.

The project is aimed at developing and reconstructing Sidi Abdel-Rahman area and turning the northern coast of Egypt into an international tourist resort, said MENA.

The tourism industry was considered the bread and butter of the Egyptian economy. Egypt ranked the 28th biggest tourism destination.

Egypt received 8.6 million tourists in 2005, 6 percent up from 8.1 million in 2004, and tourists spent some 6.5 billion dollars in the year.

Emaar is the largest overseas investor in the United Arab Emirates (UAE), with a portfolio of projects topping some 84 billion U.S. dollars.

The company has launched major developments in a number of countries including Saudi Arabia, Egypt, Turkey and Tunisia.

Source: People's Daily

(Nearly) the Biggest Loser

The CASE is now the second- or third-worst performing market in the world, with investors choosing to sell and stay on the sidelines despite outstanding corporate performance and increasingly strong economic fundamentals.

By Fatima El-Saadani - Business Today

From the best performing exchange in the world for the last three years running, the Cairo and Alexandria Stock Exchange is now the second- or third-worst performing on the planet, in a neck-and-neck race for last place with Saudi Arabia and Dubai.

Last month’s performance made it official, as the benchmark CASE30 Index slipped more than 16% tumbling to 4,972.09 points on June 20 — a level the market had last seen almost a year ago after terror attacks shook Sharm El-Sheikh on July 23, 2005.

The market hit rock bottom on June 14, stricken with global fears of another interest rate hike by the US Federal Reserve and a slowdown in the US economy, mirroring the performance of pretty much every other market in the world.

After a 10% slide in May, blamed by players on inexperienced small-time retail investors, market officials teamed up with the media, broadcasting an advertising campaign targeting small investors and encouraging them to educate themselves about the stock market in order to make well-informed decisions.

Meanwhile, government officials, local papers and international investment banks and rating agencies — including JP Morgan, Standard Chartered and Moody’s — flooded the papers with statements attesting to Egypt’s economic strength.

Audited figures show foreign direct investment (FDI) increased from $2 billion in FY2003-04 to $3.9 billion in FY2004-05 and should top out at over $5 billion by the end the now-ending fiscal year. Tourist numbers increased 12.5%, from 819,000 in April 2005 to 921,000 in April 2006, while tourist nights climbed from 7.43 million in April 2005 to 7.65 million in April 2006. Foreign reserves hit $22.79 billion at the end of April 2006, up from $22.53 billion at the end of March. Privatization revenues in the nine-month period ending March 2006 reached LE 19.95 billion, while exports increased 55.6% to LE 19.6 billion in 1Q06, compared to LE 12.6 billion in the same quarter last year, and imports increased 8.4%, to LE 28.5 billion, in the same period.

On the downside, inflation increased to an annualized 5.3% in May 2006, compared to 4.1% the month before and 4.9% in May 2005.

So it’s back to the drawing board: Why is the market crashing if the economy’s doing so well? Have investors simply lost confidence in the CASE? Sure, the local market is affected by rising interest rates and the falling Arab markets, but despite all that, the CASE has much stronger fundamentals than other regional markets, from valuations to the market’s depth and regulatory systems.

Generally speaking, the summer months are a period of slow growth on the market. Nevertheless, the string of terrorist attacks the country has witnessed over the last couple of years (Taba in October 2004, Sharm El-Sheikh in July 2005, Dahab in April 2006) and their obvious correlation to Egypt’s national holidays have made it hard not to wonder whether another is in store for this month’s Revolution Day holiday.

That, coupled with the continued fall of Gulf markets and the noisy political-reform debate, might explain investors’ apparent ‘wait and see’ strategy.

But that’s a sentimental explanation of what’s going on in the market. Speaking in numbers, market experts expect an economic slowdown in the next few months in light of the losses incurred on the stock market, which have cut market capitalization by as much as LE 170-200 billion — a sum equal to 50% of almost one million families’ savings. It’s a loss bound to have an effect on purchasing power and demand for goods.

Amidst all the chaos in the market, the Capital Market Authority (CMA) continues to maintain its promise to introduce new tools to expand the market, while the small investor is calling for the return of tighter regulatory controls. Same-day clearance and stocks trading without price-change limits are great when the market’s on the way up, but they can just as easily play against you when it’s deep in the grip of a correction.

The CMA announced last month that it will soon introduce short-selling, paving the way for margin trading and complementing same-day trading (T+0), which was launched last October. The CMA has also issued the regulations necessary for the trading of omnibus accounts. Meanwhile, small investors are calling on the CASE to prohibit same-day trading, or at least suspend its application until the market stabilizes.

  The market’s fall was exacerbated by the fact that some Gulf institutions moved their capital out of the market to reinvest elsewhere, disregarding a strong wave of earnings growth in recent months and the increasingly attractive valuations of many of the CASE’s blue chips.

But every cloud has a silver lining: Investors pulling out have made the Egyptian market increasingly cheap, with valuations so low a comeback seems inevitable. We hope.

Orascom Telecom (OT, bt100 number 1) sank with the market last month, sliding as much as 15% to LE 235 despite news of the company’s growth. Its Algeria-based subsidiary, Orascom Telecom Algeria (OTA), secured a $307-million additional long-term financing facility arranged by Calyon Bank and Citibank at the beginning of our reporting period to finance new expansion and to repay its existing debt. In Serbia, OT was short-listed to buy a 70% stake in one of Belgrade’s top privatization candidates, MOBI63. In addition to OT, nine other bidders — including UAE’s Etisalaat, France Telecom, and Deutsche Telecom — are in the race for the $977 million mobile company. Weak GDR performance also affected OT’s local stock performance, which in turn saw local telcos MobiNil and Vodafone Egypt take hits.

Telecom Egypt (TE, bt100 number 3) made the short list of qualified bidders for the nation’s third mobile operator’s license, joining eight others on June 10. TE’s shares were immune to the good news, though, as they plunged for the rest of the month. That might be explained by the disqualification of Saudi Telecom Company (STC) from the technical bids for the third mobile license: STC had announced that if it were awarded the third license, it would give an Egyptian company up to 20% of its share. With STC now out of the way and TE still standing a chance to lose its lucrative revenue-generating 25% stake in Vodafone Egypt (bt100 number 5) if it wins the bid, investors are dumping the stock to see how events unfold.

TE has been a disappointing stock. It brought in thousands of new profit-seeking retail investors who lost their savings as its shares dropped below their initial offering level. Its recent announcement that it had netted international call revenues worth LE 616 million would usually signal growth for the company, but did little to alleviate selling pressure. Its agreement with the Libyan Ministry of Telecommunication to establish a land and maritime cable service between the two countries similarly failed to buoy TE’s stock.

Of all the telecom stocks, Vodafone Egypt fared best, incurring a loss of only 8% this month. OT shares, by comparison, shed more than 15%, MobiNil (bt100 number 6) dropped 20%, TE lost 13% and Raya Holding (bt100 number 17), which also made first cut to bid on the third mobile license, dipped 13%.

Stumbling with the rest of the market, Orascom Construction Industries (OCI, bt100 number 2) closed the period at LE 180, a loss of nearly 13%. The company had announced receiving a seven-year, $287-million long-term facility from local banks, including the Arab African International Bank, Bank of Alexandria, Banque Misr, National Bank of Egypt, Citibank and Commercial International Bank (CIB, bt100 number 13). OCI also announced plans to invest $200 million to build a new cement factory in Algeria with an annual capacity of 1.5 million tons.

  OCI also announced last month that it is on schedule to deliver a new cigarette factory to Eastern Company (bt100 number 8) in October worth LE 245 million.

Orascom Hotels and Development (OHD, bt100 number 32) dipped to a low of LE 25.26 this month even though it announced the start of its joint venture in Oman, Moria for Tourism Development. Moria is 70%-owned by OHD (70%), while the Oman Company for Tourism Development holds the balance. The new venture has investments worth $574 million and will build OHD’s four projects in the Sultanate. With stock performance driven by investor sentiments, news of competition from UAE-based Emaar did not faze OHD’s performance. Emaar announced last month that it plans to acquire a 40% stake of the Egyptian market, with investments of $8 billion in five real estate projects in Egypt already underway, including a contract to develop land adjacent to the Bibliotheca Alexandrina as well as the facing seafront.

In banking and finance, regional investment bank EFG-Hermes (bt100 number 26) and National Société Generale Bank (NSGB, bt100 number 23) were two of the worst performing stocks of the month. By the end of the period, EFG-Hermes had lost more than 40% on its share price, while NSGB closed down more than 30%.

Al-Watany Bank of Egypt (WATA, bt100 number 36) was 14% lower at the end of the period, unaffected by the establishment of its first LE 100 million investment fund, with one million certificates worth LE 100 each at par. Meanwhile, Egyptian American Bank (EAB, bt100 number 37), recently acquired by France’s Calyon Bank, fared relatively well, shedding only 11% by the end of the period. The two banks were to be fully merged by the end of June with an estimated financial position worth LE 15 billion. Calyon Bank is planning a three-part capital increase to LE 500 million from LE 93.86 million. CIB plans to follow suit, raising its issued and paid-in capital to LE 1,950 million from LE 1,300 million, through a stock dividend financed from bank reserves.

In the cement sector, production, sales and exports increased throughout 1Q06, a fact that did absolutely nothing to prop up key stocks.

Suez Cement (bt100 number 11) and Misr Beni Suef Cement (bt100 number 48) fell more than 17% each. Suez Cement had signed a preliminary agreement to buy a 52% stake in two ready-mix companies for a total LE 78 million. The two, RMB and RMBE, together control 30% of ready mix-production in Egypt.

ASEC Cement (bt100 number 20) announced the establishment of a new cement company in Syria. With total investments worth $180 million, ASEC Syria Cement Company capital stands at $90 million; the factory will have a production capacity of 1.5 million tons per year.

  In the textile industry, Arab Polvara Spinning and Weaving (APSW, bt100 number 58) slipped a hefty 24% this month, even as its EGM approved a 100% increase in authorized and paid in capital to finance the construction of a new spinning facility. The new line will produce fine threads for export with a capacity of 30,000 spindles per year. The company’s stock traded below LE 6 for almost a week after the announcement, down from LE 8 at the end of May, before gaining slightly.

As the market continues to be led by trends and unaffected by fundamentals, it seems unlikely it will swing up until bargain-seekers realize the potential and trigger a new wave of buying.


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