SODIC, MHND merger to have strate­gic im­pact on both firms: re­port

Syn­ergy be­tween two com­pa­nies to en­hance Egypt’s real es­tate sec­tor

The Daily News Egypt - - Stock Market -

A re­cent re­port is­sued by Pharos Re­search said that the po­ten­tial deal be­tween Sixth of Oc­to­ber for Devel­op­ment and In­vest­ment (SODIC) and Madinet Nasr for Hous­ing and Devel­op­ment (MNHD) would have a strate­gic im­pact on both firms, with “SODIC be­ing an es­tab­lished devel­oper and MNHD be­ing a cov­eted land bank owner.”

Pharos fore­casted that SODIC would ben­e­fit more than MNHD from im­ple­ment­ing the po­ten­tial deal.

Ear­lier this month, SODIC wel­comed en­ter­ing pre­lim­i­nary ne­go­ti­a­tions with MNHD to dis­cuss pos­si­ble col­lab­o­ra­tion.

The board of MNHD has dis­cussed pos­si­ble co­or­di­na­tion with SODIC and has agreed on ap­point­ing EFG Her­mes and Zaki Hashem and Part­ners law firm as the com­pany’s le­gal ad­vis­ers for the deal.

The re­search firm has up­graded its fair value (FV) for SODIC’s stock to EGP 45.50 per share from EGP 27.77, main­tain­ing an over­weight rec­om­men­da­tion.

Up­grad­ing the FV was driven by rais­ing the re­search firm’s sales fore­cast for 2018 to EGP 7.7bn from EGP 5.7bn as a re­sult of ad­just­ing sell­ing prices in SODIC East, in ad­di­tion to the newly signed North Coast code­vel­op­ment pro­ject, ac­cord­ing to the re­port.

The FV was also im­pacted by the ad­just­ment in the land price ofAlYosr, as well as SODIC’s lat­est re­ceiv­ables and net cash po­si­tion, the re­port added.

Mean­while, Pharos Re­search has raised its tar­get price (TP) for Ara­bian Food In­dus­tries Co (Domty) to EGP 13.18, main­tain­ing an over­weight rec­om­men­da­tion.

Domty has been able to achieve a bet­ter-than-ex­pected profit mar­gin in the first quar­ter of 2018, record­ing a con­sec­u­tive re­cov­ery in mar­gins on a quar­terly ba­sis, ac­cord­ing to a re­cent re­port.

The gross mar­gin of the Egyp­tian dairy prod­ucts firm is fore­cast to grow to 24.4% in 2018, the re­port pointed out.

Domty had pre­vi­ously posted a 140% year-over-year hike in con­sol­i­dated prof­its dur­ing the full-year 2017 due to a growth in sales, record­ing a net profit of EGP 61.52m from EGP 25.5m in 2016, in­clud­ing mi­nor­ity share­hold­ers’ rights.

The com­pany’s board of di­rec­tors had pro­posed re­tain­ing 2017 prof­its, ex­cept for em­ploy­ees’ shares.

On another note, Re­nais­sance Cap­i­tal has raised the tar­get price (TP) for Elsewedy Elec­tric’s stock to EGP 229 per share, down­grad­ing the stock to hold from buy due to higher en­ergy prices since the be­gin­ning of 2018.

Elsewedy has been able to main­tain its cur­rent growth lev­els in the mar­ket, in line with seal­ing the $300m en­gi­neer­ing, pro­cure­ment, and con­struc­tion (EPC) con­tract award for phase four of the Al Aweer power plant, ac­cord­ing to a re­cent re­port by Re­nais­sance Cap­i­tal.

This is the first power gen­er­a­tion con­tract Elsewedy has won in the Ara­bian Gulf as a lead con­trac­tor, the re­port added.

Elsewedy is likely to achieve es­ti­mated an­nual awards of around $1.03bn from the afore­men­tioned pro­ject in four years, the Rus­sian­based in­vest­ment bank said.

Mean­while, Pharos Re­search has re­it­er­ated its over­weight rec­om­men­da­tion for Qatar Na­tional Bank Alahli (QNB Alahli) at a fair value of EGP 60 per share.

The re­search firm fore­cast the bank’s fur­ther reg­u­la­tory ad­just­ments to raise the free float stake to 10% would boost the stock, but this would not take place in the short term, ac­cord­ing to a re­cent re­port.

In Fe­bru­ary 2018,CI Cap­i­tal said that QNB had nar­rowed down its stake in the Egyp­tian unit, QNB Al Ahli, to 95.6% from 97.12% to com­ply with the Egyp­tian Ex­change (EGX)’s list­ing rules.

QNB Al Ahli’s cap­i­tal amounts to around EGP 8.9bn, dis­trib­uted over 89.4m shares at a par value of EGP 10 per share.

Another re­search note is­sued by Pharos Re­search has raised its fair value (FV) for Oras­com Devel­op­ment Egypt to EGP 65 per share, main­tain­ing an over­weight rec­om­men­da­tion.

The FV was driven by Oras­com’s resid­ual land in El Gouna, which will be mon­e­tised in many ways,ac­cord­ing to a re­cent re­port.

The re­search com­pany has at­trib­uted the in­crease in FV to “the ad­just­ment of the price/sqm of resid­ual land in El Gouna, the ad­di­tion of the new West Cairo pro­ject, the sale of non-core as­sets, the im­prove­ment of the ho­tel oc­cu­pancy rate in El Gouna, and the lat­est re­ceiv­ables and net debt po­si­tion.”

It is worth not­ing that Oras­com Devel­op­ment had signed of­fers to sell some of its non-core as­sets at around EGP 1.24bn two months ago.

Oras­com Devel­op­ment’s cap­i­tal amounts to EGP 1.1bn, dis­trib­uted over 221.16m shares at a par value of EGP 5 per share.

PHAROS FORE­CASTED THAT SODIC WOULD BEN­E­FIT MORE THAN MNHD FROM IM­PLE­MENT­ING THE PO­TEN­TIAL DEAL

SODIC wel­comed en­ter­ing pre­lim­i­nary ne­go­ti­a­tions with MNHD to dis­cuss pos­si­ble col­lab­o­ra­tion

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