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

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 co-development project, according to the report.

The FV was also impacted by the adjustment in the land price of Al Yosr, 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 Russian-based 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.

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