Egypt | EGX

The EGX 30 was able to close near 10,900 despite that it reached 10,300 during the week, but was able to close clearly above 10,400 at the end of the weekly bar.

One year ago, we were wondering to what extent the outbreak of COVID-19 would affect the Egyptian real estate market in 2020, the span which has witnessed a series of events, between negative and positive for the sector. Today, we present our review for 2020 with an analysis of the sales performance of the largest real estate developers listed on the Egyptian Exchange.

Ibnsina Pharma managed to grow its market share from 15.4% in 2015 to 22.4% in 2020 as revenues grew at a 5-year CACGR of 29%. Across our forecast period, we assumed Ibnsina Pharma will manage to grow its market share by c.1% to reach 25.5% by 2025, thanks to the presence of small players who are not profitable and are exiting the market that is highly regulated. Market share growth translates into a top line 5-year CAGR of 15%, where retail revenues is assumed to capture an average of 70% across our forecast period. Given the fact that industry prices and margins are regulated, we assumed GPM to start at 7.8% in 2021, before hovering around 8.3% across our forecast period. Moreover, 60% of salaries are fixed, translating into an average EBITDA margin of 4% compared to 3.6% in 2020 and a historical average of 3.9%.

Last week was a negative week as the market declined significantly, leading the EGX 30index below its support that lies at 11,300. The index is approaching our target that lies at 10,700and should begin to rebound once again near this area. It is important, however, not to break below 10,400-10,500as a violation below this major support will have real bearish implications on the market.

The weekly chart of the EGX 30 index shows the breakout above 11,500, which was broken to the downside after few bars; if we look at the chart we will note that the breakout above 11,500 was not significant as the index did not witness a significant rise after the breakout. The decline after this took the index near 11,100-11,200 which is currently serving as support.

The Prime Minister, Mostafa Madbouly approved during the last week’s meeting, the proposed green incentive for car owners to replace their old cars with new ones running with natgas or dual-fuel models. Owners of private old cars can get 10% off the price of the new car with a cap of EGP22k. For taxis and microbuses, they can get a discount of 20% and 45% respectively, with an upper limit of EGP45k and EGP65k. These financial incentives are part of the government’s plan to convert 1.8mn cars, running using clean energy in an attempt to reduce dependency on petrol-fuel. Moreover, the Central Bank of Egypt (CBE) along with the Trade and Industry Ministry promised to provide EGP1.2bn low-interest financing to encourage the conversion process.