Category: HC News

• New business ventures and regional expansions, including Abu Dhabi, to add value to the company and serve as catalysts

• We forecast EGP423bn in collections over 2Q25–2032e as we expect PHDC to capitalize on its EGP679bn sales inventory

HC Brokerage issued their update about Egypt’s real estate sector through shedding the light on Palm Hills Development performance focusing on the company’s strategic decisions.

Mariam Elsaadany, real estate analyst at HC Brokerage commented that: “Strategic business decisions justify a more positive view: PHDC’s expansions extended beyond the Egyptian real estate market with a new focus on the GCC, including the newly announced Abu Dhabi project, along with potential expansions in Saudi Arabia’s real estate, commercial, and educational sectors and Egypt’s educational and hospitality sectors. These new opportunities offer value and act as stock price catalysts, in our view, as the company joins other Egyptian real estate developers in capturing a share of a lucrative GCC market. Additionally, PHDC’s Egyptian real estate business grew significantly with its launch of Hacienda Heneish and Hacienda Waters on the North Coast in 2024, and a management agreement for Jirian on the Nile Delta extension in 2025. Of the company’s EGP151bn of FY24 sales, c63% were generated from the North Coast (EGP95.1bn), with some EGP82.4bn of inventory remaining in the two projects, on our numbers. The success builds on increased demand for the North Coast following the Ras El Hekma investment deal announced in February 2024 and strengthens PHDC’s position as a major North Coast developer. PHDC expanded its hospitality exposure in 2024 to 1,262 rooms by adding around 200 rooms through an agreement with Marriott International to launch the 150-room Ritz Carlton Residences Hotel in West Cairo and increasing its stake in Maccor Hotels to c70% and targets adding 4,000 new rooms over the coming five years. Also, PHDC increased its exposure to Egypt’s education sector with the acquisition of c33% of Taaleem Management Services (TALM EY), diversifying its revenue stream and increasing its recurring income businesses. The company’s announcement to develop a 1.87m sqm plot in Abu Dhabi with Wave Seven triggers a rerating in our view, due to the project’s location, expected selling price, exposure to a USD-pegged currency, and low tax rate. The project directly faces the iconic Saadiyat Island near Yas Island and Al Reem Island and will be executed through PHD North Jubail Property Development Company, a fully owned subsidiary of Palm Hills Developments. Additionally, PHDC’s announced partnership with Saudi Dallah Al-Baraka Holding Company (DBHC) includes establishing a company with a 60%/40% ownership structure to develop several integrated mixed-use urban projects in different regions of the Kingdom is a major step. PHDC also plans to invest around USD300m in Saudi education developments in 2025 with local partners, USD300m in residential and commercial projects, and is working with a local joint venture (JV) to open 15 schools in cities including Riyadh and Jeddah, its CEO said.

“Despite lower affordability in Egypt, we still expect a decent sector performance on North Coast sales, price increases, relaxed payment terms, and regional expansion: We believe developer sales in 2025e will be driven by North Coast sales, and relaxed payment terms, while ventures into the hospitality segment, along with GCC expansions, should bode well for Egyptian real estate players. We expect developers to start reaping the benefits of Ras El Hekma as early as this year with Modon Holding’s announcement of launching the first 12,000-feddan phase of the mega-project. We see little concern of construction cost overruns during the short-medium term, provided limited currency shocks, coupled with significant price increases. A declining interest rate environment should improve real demand and open new opportunities for developers, especially those with ambitious recurring income projects that are capital-intensive. Interest savings should also boost profitability to highly leveraged developers. We expect 2025e deliveries to be somewhat impacted by higher construction costs but remain at healthy levels.” Mariam El Saadany added.

The real estate analyst concluded: “We expect strong real estate cash collections of EGP588bn over our 2Q25–38e forecast horizon: We estimate EGP588bn in collections over 2Q25–38e, including collections from existing receivables, new sales in the launched projects in the North Coast, Alexandria, and Eastern and Western Cairo, capturing sales from Badya, P/X, Hacienda Heneish, Hacienda Waters, Hacienda Blue, PHNC, Bamboo III, among other projects. We forecast total sales of EGP679bn over 2Q25–2032e, including EGP506bn from West Cairo, EGP131bn from the North Coast and Alexandria sales, and EGP41.9bn from East Cairo. We estimate EGP552bn of real-estate revenue recognition over 2Q25–2032e, accounting for the outstanding backlog of EGP68.9bn and new sales from launched projects’ phases, and all of Badya. We assume a total real estate cost recognition of EGP310bn over 2Q25–2032e, implying an average future gross profit margin of c44% for the launched projects. We expect interest rate easing to reflect positively on PHDC’s profitability throughout 2025e, as we forecast interest expense to drop to EGP2.09bn in 2025e from EGP2.31bn in 2024e. Management’s guidance is EGP160m in interest savings for every 100 bps rate cut. Given the declining cost of debt, management could seize the opportunity to increase its leverage; however, given the high sales levels we expect going forward, we expect the high collections to be sufficient to finance construction costs. Accordingly, we expect net debt-to-equity to drop to 0.55x in 2025e from 0.75x in 2024. Given the company’s expansion plans, we expect it to withhold dividends going forward. We expect revenue to grow at a 2025-28e CAGR of c7%, EBITDA at c13%, and net income at c23%.”

About HC Brokerage

HC Brokerage is an affiliate of HC Securities & Investment– a full-fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services. HC Brokerage is an Egyptian registered company and member of Egypt’s Financial Regulatory Authority (FRA), and its registered address is 34 Gezirat Al-Arab St., Mohandessin, Giza, Egypt, Dokki 12311

• In light of Egypt’s macro economy developments and the geopolitical conditions, HC Securities & Investment www.hc-si.com expects the CBE to maintain interest rates at its upcoming July 10, 2025 meeting.

Financials analyst and economist at HC, Heba Monir commented: “Egypt’s external position showed resilience during the turbulent regional geopolitical tensions in June, demonstrated in: (1) the FX flexibility with the USD/EGP rate reaching EGP49.6/USD by the end of June, almost unchanged m-o-m, (2) Egypt 1-year CDS retreating to 301 bps from 333 bps at the beginning of the year, (3) foreign investors were net buyers in the secondary market of Egyptian treasuries by EGP1.2bn in June due to the attractive treasury yields, despite some foreign outflows during June due to the Israel-Iran war, which cuased interbank volume to reach as high as USD800m in mid-June, higher than the daily average of USD150m–250m, and (4) Egypt’s worker remittances surged c39% y-o-y in April to USD3.0bn with a c77% y-o-y hike in 10M24/25 to USD29.4bn, reflecting confidence in the FX liquidity in Egypt. Domestically, the PMI index increased to 49.5 in May from 48.5 in April, still below the 50.0 mark, helped by the renewed growth in the manufacturing sector. However, many key PMI metrics indicated a deterioration in the business conditions in May. However, we expect some inflationary pressures in July as the Egyptian Parliament approved this week some amendments to the Value Added Tax (VAT) Law for some businesses, including cigarettes and tobacco, as cigarette prices are expected to increase by c16% within days besides a potential increase in electricity prices due to higher natural gas prices. Also, U.S. President Donald Trump said he was not thinking of extending the 9 July deadline for countries to negotiate trade deals with the U.S., suggesting higher tariffs to resume, which could lead to higher global inflation. As for the attractiveness of Egypt’s carry trade, the latest 12M T-bills auction of 24.833% implies a positive yield of 5.21% using our 12M inflation estimate of 16.03% (after deducting a 15% tax rate for European and US investors). Also, the average required rate of return by foreign investors on the 12M T-bills declined to 27.2% from 28.0% in May, based on our calculations, suggesting that Egypt’s Carry Trade remains attractive, especially considering further rate cuts by other developed economies. Based on our expectation of domestic inflationary pressures, geopolitical tensions, and tariff threats in July, we expect the MPC to maintain policy rates at its upcoming 10 July meeting.”

It is worth mentioning that, at its 22 May meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt www.cbe.org.eg cut the benchmark overnight deposit and lending rates by 100 bps to 24.0% and 25.0%, respectively, for the second time, after it had cut policy rates by 225 bps on 17 April, reversing a total of 325 bps of the 1,900 bps rate hikes since the CBE started its tightening policy in 2022. Egypt’s annual headline inflation accelerated to 16.8% in May from 13.6% in April, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices increased 1.9% m-o-m compared to a 1.3% m-o-m increase in April. On the global front, on 18 June, the U.S. Federal Reserve maintained the target range for the federal funds rate at 4.25-4.50%, leaving the total cuts at 100 bps after it hiked rates by 525 bps since it started tightening policy in 2022, while the European Central Bank (ECB) lowered the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility by 25 bps on 5 June to 2.00%, 2.15% and 2.40%, respectively, bringing total cuts to 200 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022. Based on Egypt’s current economic situation, we present below our expectations for the possible outcome of the 22 May MPC meeting.

About HC Securities & Investment

HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP4bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

Orascom Construction

Turning the tide

• Sizeable backlog and improved execution visibility support greater selectivity in new awards and backlog rebalancing

• Margin expansion potentially challenged by global market uncertainties

In a recent report, HC Brokerage issued an update note about Egypt’s construction sector, through shedding the light on Orascom Construction estimating that ORAS’s broad-based adjusted margins improvement to be sustained.

Nesrine Mamdouh, Industrials Analyst at HC commented that: “Rebalancing regional backlog: In Egypt, we expect construction spending to normalize, driven by a sharp moderation in public investment, accounting for c36% of total investments in 1H24/25, a c22 bps drop from its three-year historical average. Nevertheless, we anticipate a baseline level of government investments to persist, particularly in strategic infrastructure projects and projects nearing completion in the transportation, water, and electricity interconnection sectors. We remain positive on the outlook of local and foreign private investments in Egypt, particularly in mega-scale, renewable energy, and industrial projects. As for Ras El Hekma, we believe ORAS is well-positioned to secure decent awards, with more clarity after Modon Holding finalizes the project’s general master plan. We also expect improved collections for ORAS from its Egypt backlog by FY25/26e, led by an improvement in the government’s revenue-to-GDP ratio while containing expenditure-to-GDP, as per the International Monetary Fund’s (IMF) April 2025 projections. Turning to the GCC, according to Meed Projects, the long-term project pipeline is projected at USD2.7trn, with USD235bn worth of contracts expected to be awarded over the next 6–12 months, with the KSA accounting for c63%, and the UAE c20%, primarily in the construction, transport, and power sectors. However, the GCC budgets could be pressured by the declining oil price, hovering around USD63/bbl in 2025e and 2026e, based on Bloomberg data, while the fiscal break-even oil price is projected at USD93/bbl for the KSA and at USD50/bbl for the UAE in 2025e, according to Meed Projects, which could increase the need for borrowing and private investments to sustain construction activity,  reinforcing a cost-driven bidding environment, intensifying competition in public tenders and pressuring margins. Despite this, we believe the construction momentum will be maintained in the GCC, given its massive construction market size, its economic diversification efforts, and ORAS superior level of expertise and track record in infrastructure projects. ORAS is bidding for various projects and aims to increase its GCC backlog exposure, which we believe is justified, especially with potential reconstruction business in the region and Egypt’s award moderation. Besides Australia, Besix is expanding its GCC presence, which we favorably view. We forecast an average annual new awards from MEA of USD2.54bn over 2025–29e.”

“The new U.S administration presents opportunities and challenges to ORAS business; in our view: We believe data center projects offer significant growth potential, driven by newly adopted policies targeting dominance in AI innovation and expanding energy supply and affordability. According to GlobalData, the total data centers project pipeline is worth USD279bn, with USD97bn under execution and USD180bn planned. Notably, ORAS’ subsidiary, Weitz, made significant progress in diversifying its client base, creating a self-performance capability for specialized electrical works, and expanding its data center presence. Also, infrastructure spending in the U.S. is expected to remain robust through 2026 under the Bipartisan Infrastructure Law (BIL), enacted in 2021, with new policies placing more emphasis on the maritime sector. The U.S. also established an investment accelerator to facilitate investments of more than USD1.00bn. In parallel, the U.S. House of Representatives passed an ambitious budget bill that includes USD trillions in tax and government mandatory spending cuts. While the bill still requires Senate approval, potential reconciliation, and presidential enactment before becoming law, it signals a growing reliance on consumer spending, stimulating private sector investment and businesses to drive growth, and incentivizing manufacturing and energy exploration, despite concerns over the bill’s potential to widen the budget deficit. Recently, the U.S. secured USD3.2trn in committed investments and economic and commercial deals with the KSA, UAE, and Qatar, spanning AI data centers, energy, and infrastructure projects, among others. However, uncertainty continues to weigh on the global economy, driven by rising global tariffs, which hinder growth, fuel inflationary pressures, and disrupt trade, capital flows, and raw materials procurement. Additionally, recent conflicting U.S. court rulings, ranging from blocking to reinstating tariffs, have disrupted visibility. Moreover, the revisions to U.S. immigration laws may lead to the potential mass deportation of undocumented workers, which could reduce the availability of low-cost labor and drive up construction costs, in our view. However, the 90-day tariff reduction agreement between the U.S. and China has dissipated some of these risks, positioning tariffs more as a negotiating tool to secure improved trade terms for the U.S.  Despite these mixed signals, we believe the U.S. market still offers significant business opportunities for ORAS, justifying its target to increase its U.S. exposure. We forecast an average annual new awards of USD1.55bn from the U.S. over 2025–29e.” Mamdouh added.

“We estimate ORAS EBITDA to grow at a 2025–29e CAGR of c11%, backed by its optimized business positioning: We expect ORAS’s backlog to average USD8.0bn over (2025–29e) with average annual new awards of USD4.16bn. We anticipate improved project execution to lead to a revenue CAGR of c5.4% over our forecast period. We also see ORAS’s broad-based adjusted margins improvement to be sustained, driven by high-quality projects, better contract terms, higher FX and FX-equivalent exposure, improved cash flow and working capital management, a positive bottom line contribution from its existing pool of concessions, reaching USD15m by 2027e, and enhanced contribution from Besix. We forecast ORAS consolidated EBITDA and net income to grow at 2025–29e CAGR of c11% and c6%, respectively. We also estimate EBITDA margin to average c5.9% and net profit margin to average c3.5%, excluding FX gains and losses, over 2025e–29e.” Nesrine Mamdouh concluded.

 

About HC Brokerage

HC Brokerage is an affiliate of HC Securities & Investment– a full-fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services. HC Brokerage is an Egyptian registered company and member of Egypt’s Financial Regulatory Authority (FRA), and its registered address is 34 Gezirat Al-Arab St., Mohandessin, Giza, Egypt, Dokki 12311

• In light of Egypt’s macro economy developments and the geopolitical conditions, HC Securities & Investment expects the CBE to cut interest rates by 200 bps at its upcoming May 22, 2025 meeting.

Financials analyst and economist at HC, Heba Monir commented: “We see Egypt’s external position stabilizing as per the following indicators: (1) the 2Q24/25 BoP recorded a surplus of USD489m, reversing a deficit of USD638m in 2Q23/24 and USD991m in 1Q24/25, due to mainly reporting positive net errors and omissions of USD1.52bn, although we don’t have clarity on the nature of these net errors and omissions, (2) the banking sector’s net foreign asset (NFA) position widening significantly by USD4.86bn m-o-m to USD15.0bn in March from USD10.2bn in February, reversing a net foreign liability (NFL) position of USD4.19bn a year earlier, which we attribute to Egypt attracting USD2.70bn in foreign direct investments (FDIs) in 1Q25 (a c15% y-o-y increase), receiving from the International Monetary Fund (IMF) the USD1.2bn tranche of the USD8.0bn Extended Fund Facility (EFF), and improved FX liquidity at banks, (3) net international reserves (NIR) increasing by USD387m m-o-m in April to USD48.144bn from USD47.757bn in March, mainly due to a c8% m-o-m increase in gold, and a c12% m-o-m increase in Special Drawing Rights (SDRs), after receiving the IMF’s USD1.2bn tranche of the USD8.0bn EFF and deposits not included in official reserves also increasing by USD554m m-o-m to USD11.619bn in April, (4) Egypt 1-year CDS stabilizing at 354 bps since its record of 379 at the beginning of the year. However, the PMI index dropped further below the 50.0 neutral threshold to 48.5 in April from 49.2 in March on lower consumer spending. With regards to inflation, April’s inflation came close to our estimate of 13.8% y-o-y and 1.5% m-o-m, and also in line with the Reuters poll median estimate of 13.9%, mainly due to the hike in gasoline and diesel prices on 11 April by c12-–15%. As for the T-bills auctions, yields are fluctuating, with the latest 12M T-bills auction of 24.833% reflecting a positive yield of 9.32% on the 12M inflation estimate of 11.8% (after deducting a 15% tax rate for European and US investors), while the estimated average required rate of return by foreign investors on the 12M T-bills declined to 26.3% from 28.0% in the previous month, based on our calculations, considering a lower inflation differential between Egypt and its trading partners. We believe that the attractiveness of the yields on Egyptian treasuries has led to more Carry Trade inflows, which justify the recent 3% EGP appreciation against the USD since Trump and China reached an agreement on a 90-day pause and substantially moved down the tariff levels. From the above, we conclude that the Egyptian economy was able to contain the inflationary pressures (albeit still above the CBE’s targets; however, on a downward trend mainly due to base effect), our carry trade is still attractive, and there is a noticeable improvement in the NFA position of the banking sector, facilitating the FX liquidity and availability. Therefore, we expect the MPC to cut interest rates by 200 bps at its upcoming 22 May meeting, mainly to stimulate economic growth, given a relative stability in the domestic and international economic conditions compared to the previous month.”

It is worth mentioning that, in its 17 April meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) cut the benchmark overnight deposit and lending rates by 225 bps to 25.0% and 26.0%, respectively, for the first time, after it hiked them by 1,900 bps since it started its tightening policy in 2022. Egypt’s annual headline inflation accelerated to 13.9% in April from 13.6% y-o-y in March, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices increased 1.3% m-o-m compared to a 1.6% m-o-m increase in March. On the global front, on 7 May, the U.S. Federal Reserve maintained the target range for the federal funds rate at 4.25-4.50%, leaving the total cuts at 100 bps after it hiked rates by 525 bps since it started tightening policy in 2022, while the European Central Bank (ECB) lowered the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility by 25 bps on 17 April to 2.25%, 2.40% and 2.65%, respectively, bringing total cuts to 175 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022.

About HC Securities & Investment

HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP4bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

 

HC Brokerage awarded the Best Forecaster of Egypt’s Monetary sector in the 2025 FocusEconomics Analyst Forecast Awards,

• HC Brokerage’s Research Team has been awarded the Best Forecaster of Egypt’s Monetary sector in the 2025 FocusEconomics Analyst Forecast Awards, where they ranked number one in forecasting Egypt’s interest rate and number three in forecasting inflation.

Forecasters for Egypt included EFG Hermes, HSBC, Goldman Sachs, JP Morgan, Oxford Economics, Standard Chartered, EIU, Capital Economics, Delta Bank, EMFI, Emirate NBD, Euromonitor Intl., Fitch Ratings, Fitch Solutions, National Bank of Greece, National Bank of Kuwait, Allianz, BNP Paribas, Credit Agricole, and Scope Ratings.

FocusEconomics is a leading provider of economic analysis and forecasts for 198 countries in Africa, Asia, Europe, the Middle East, and the Americas, as well as for 30+ key commodities. Each month, FocusEconomics surveys over 1,500 economic experts from national and international banks, top financial institutions, and economic research companies to obtain their projections for the main economic indicators and elaborate the Consensus Forecast, which is the average of all individual forecasts. FocusEconomics has established a solid reputation among the most renowned financial institutions, multinational companies, consulting firms and government agencies as a reliable source for timely and accurate business intelligence.

Hassan Choucri, Managing Director of HC Brokerage, expressed his enduring confidence in the research team and appreciation for their continued excellence for the third year, stating: ‘HC continues to develop its capabilities to provide accurate forecasts for all Egyptian economic indicators, despite the geopolitical complexities the region is witnessing. We are committed to our role as a leading provider of financial research services in the Egyptian market through a wide range of solutions.'”

It is worth mentioning that in 2024 HC Brokerage won the Best Forecaster of Egypt’s Fiscal Balance in the 2024 and in 2023, they won the best overall Forecaster for Egypt where the Research team also secured the top spot in inflation forecasts and ranked third in exchange rate and fiscal balance forecasts.

HC Brokerage is an affiliate of HC Securities & Investment– the full-fledged investment bank has consistently maintained its position as a dynamic participant in the region. The company’s primary objective is to support its partners, clients, and staff in achieving their goals by providing exceptional financial services to local, regional and international investors.

• In light of Egypt’s macro economy developments and the geopolitical conditions, HC Securities & Investment expects the CBE to cut interest rates by 150 bps at its upcoming April 17, 2025 meeting.

Financials analyst and economist at HC, Heba Monir commented: “ Egypt’s external position witnessed a mixed performance with (1) the banking sector’s net foreign asset (NFA) position widening by USD1.48bn m-o-m to USD10.2bn in February from USD8.71bn in January, reversing a net foreign liability (NFL) position of USD22.0bn a year earlier, on narrowing mainly the banking sector’s NFL position (excluding the CBE) by USD1.38bn m-o-m, reflecting lower pressures on foreign currency liquidity, (2) net international reserves (NIR) increasing by USD363m m-o-m in March to USD47.757bn from USD47.394bn in February, mainly due to a c6% m-o-m noticeable increase in gold, and deposits not included in official reserves also increasing by USD398m m-o-m to USD11.065bn in March, and (3) Egypt 1-year CDs hiking to 525 bps in April from 379 bps as of December, negatively impacted by the global economic turmoil from the US tariffs and its implications on foreign portfolio investment outflows, which in its turn impacted Egypt’s FX rate. Foreign investors sold USD1.04bn worth of treasuries in the secondary market since the beginning of this week and as of Tuesday, and the daily interbank volume jumped to USD1.12bn on Sunday from its daily average at USD150-250m, retreating to USD700m on Monday, USD300m on Tuesday and increasing again to USD955m yesterday. Domestically, real GDP grew by 4.30% y-o-y and 0.2% q-o-q in 2Q24/25 from enhanced exports. The PMI index fluctuated, retreating slightly below the 50.0 neutral mark to 49.2 in March, mainly from a weakening in the new orders after it exceeded the 50.0 mark in January and February on an easing in the inflationary pressures with improved consumer spending. Regarding inflation, March’s reading came higher than our estimate of 12.4% and higher than the Reuters consensus median estimate of 12.6%, which we attribute to higher-than-expected food and beverage prices due to seasonality, with Ramadan occurring in March. As for the T-bills auctions, yields are fluctuating, with the latest 12M T-bills auction of 24.95% reflecting a positive yield of 9.42% on the 12M inflation estimate of 11.8% (after deducting a 15% tax rate for European and US investors). The estimated average required rate of return by foreign investors on 12M T-bills is also declining to 28.0% from 29.3% in mid-February, based on our calculations, considering a lower inflation differential and the recent hike in Egypt’s 1-year CDs, close to the average interest rate on 3M T-bills of 28.24%, given the current inverted yield curve, as shown in the chart below (3M T-bills higher than 12M T-bills). From the above, we conclude that the Egyptian economy was able to contain the inflationary pressures (albeit still above the CBE’s targets; however, on a downward trend mainly due to base effect), our carry trade is still attractive, and there is a noticeable improvement in the NFA position of the banking sector, allowing the smooth recent exit of some foreign investors from our treasuries market. Therefore, we expect the MPC to cut interest rates by 150 bps at its upcoming 17 April meeting, mainly to stimulate local economic growth, considering global recessionary fears.”

It is worth mentioning that, in its 20 February meeting, the Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) maintained the benchmark overnight deposit and lending rates unchanged at 27.25% and 28.25%, respectively, for the seventh consecutive times, after it hiked them by 600 bps in March 2024, bringing total rate hikes to 1,900 bps since it started its tightening policy in 2022. Egypt’s annual headline inflation accelerated to 13.6% y-o-y in March from 12.8% y-o-y in February, according to the Central Agency for Public Mobilization and Statistics (CAPMAS) data. Monthly prices rose 1.6% m-o-m compared to a 1.4% m-o-m increase in February. On the global front, on 19 March, the U.S. Federal Reserve maintained the target range for the federal funds rate at 4.25-4.50%, leaving the total cuts at 100 bps after it hiked rates by 525 bps since it started tightening policy in 2022, while the European Central Bank (ECB) lowered the key ECB interest rates for the deposit facility, the main refinancing operations and the marginal lending facility by 25 bps on 6 March to 2.50%, 2.65% and 2.90%, respectively, bringing total cuts to 150 bps, since it started cutting rates in June 2024 after it hiked rates by 450 bps since it started its tightening policy in 2022.

 

 

About HC Securities & Investment

 

HC Securities & Investment is a leading investment bank in Egypt and the MENA region. Since its inception in 1996, HC has utilized its relationship-driven insights, local and regional market knowledge, and industry-specific expertise and strong execution capabilities to provide its clients with a wide range of services in investment banking, asset management, securities brokerage, research, custody and online trading through its offices in Egypt and the UAE (DIFC). HC Investment Banking has an outstanding track record of advising leading corporates in Egypt and the MENA region on M&A, capital market, and financing transactions in excess of USD6.6bn. HC Asset Management now manages 7 mutual funds for commercial banks and portfolios for institutions and sovereign wealth funds with assets under management in excess of EGP7bn. HC Brokerage is ranked among the top brokers in Egypt and provides a wide array of services, including research and online trading to institutional and retail clients.

 

• We see Edita benefiting in 2026e from improved consumer spending, pent-up demand, and its expansion in Iraq, given the market’s promising dynamics

• We forecast EBITDA to grow at a CAGR of c23% and EBITDA margin to average c18% over our 2025–29e forecast period, driven by higher prices and volume recovery

In a recent report, HC Brokerage presented their evaluation of Edita Food Industries forecasting Iraq expansion to add value to the company.

Pakinam El-Etriby, Consumers Analyst at HC commented that: “ Revenue growth and margin resilience amid significant challenges: Despite notable commodity price increases due to the disruptions in global supply chains since the start of the Russian-Ukraine war in February 2022 and significant EGP devaluations over the past three years, Edita Food Industries (EFID) was able to preserve its margins relatively. In 2022, it improved its GPM by c2 pp y-o-y to c34% (a c22% y-o-y increase in volume and a c20% y-o-y increase in prices), yet recorded c2 pp y-o-y drop in GPM to c32% in 2023 (a c13% y-o-y increase in volume and a c40% y-o-y increase in prices); however, in 9M24, its GPM further dropped c2 pp y-o-y to c30%, as its volume was almost flat y-o-y (a drop of 0.14% y-o-y) after it increased prices by c36% y-o-y considering the c40% y-o-y rise in cost/pack, due to significant commodity price increases, such as a threefold rise in cocoa powder price to USD24,149/ton. During 3Q24, EFID increased selling prices by c50% y-o-y while its volume dropped c16% y-o-y, and its GPM dropped c2 pp y-o-y to c31%, indicating stretched consumer demand given the inflationary pressures. In 2025, according to data from Bloomberg, cocoa prices are expected to increase by c11% y-o-y to USD9,085/ton. We also expect inflation to remain in double-digits and the EGP to devalue by an average of c14% in 2025e, leading us to expect only a 2.0% y-o-y increase in private consumption in FY24/25e, down from 5.3% y-o-y in FY23/24. Accordingly, we estimate EFID’s volumes to drop by c4% y-o-y in 2025e (similar to an expected c4% y-o-y volume drop in 2024e), price increases to be less aggressive but still remain high at c30% y-o-y (versus an expected c39% y-o-y increase in prices in 2024e), and GPM to expand by c1 pp y-o-y to c31% for 2025e. We believe the company’s volume is supported by trade-down trends of Egyptian consumers, increasing their consumption of local snacks at the expense of imported ones due to inflationary pressures and the EGP devaluation.”

“We upward revise our 2024–28e revenue forecast by c10% and gross profit by c2%, on higher average prices despite higher costs: Over our 2026–29e forecast period, we expect revenue to grow at a CAGR of c18%, driven by higher volumes and prices, growing at a CAGR of c7% and c10%, respectively. For 2024e, we have downward revised our gross profit estimate by c13% to EGP4.92bn (up c25% y-o-y), implying a GPM of c30% (down c2 pp y-o-y), versus our prior estimate of c33%, mainly on higher production costs, especially cocoa which hiked c2x y-o-y in 2024. For 2025e, we expect gross profit to increase c28% y-o-y to EGP6.30bn, still below our previous estimate of EGP7.05bn, with GPM slightly improving by c1 pp y-o-y to c31%, versus our prior estimate of c34%, as we expect average selling prices to increase by c30% y-o-y (offsetting the c28% y-o-y increase in average cost/pack), with a 3.71% y-o-y slight decrease in volumes. In 2026e, we forecast a c11% y-o-y increase in volumes, driven by pent-up demand, easing inflation, and interest rate cuts, then gradually normalizing at a c4% y-o-y growth by the end of our forecast period. Over our 2026–29e forecast period, we foresee gross profit to grow at a CAGR of c19%, with average price per pack growing at a CAGR of c10%, offsetting the rise in cost per pack of c9%, as we expect EFID to pass cost increases onto consumers to preserve its margins. We forecast EBITDA to grow at a 2026–29e CAGR of c20% and net income at c25%. We expect EFID to report a net debt balance of EGP1.33bn in 2024e, EGP1.34bn in 2025e, then decrease to EGP728m in 2026e and turn into a net cash balance starting 2027e, assuming improved operations from its Iraqi subsidiary (valued in USD terms), and a reduction in its cash conversion cycle to 24 days by the end of our forecast period from an average of 45 days in 9M24.” El-Etriby added. For those seeking to explore more about this theme, it is highly recommended to learn about Seminararbeit schreiben lassen.

“Iraq expansion to add value to the company, in our view: In January 2025, EFID signed a partnership agreement with Baghdad-based Tuama Jebur Abbas (TJA) to acquire 49% of it for USD8m, through a capital increase. The acquisition includes a factory equipped with three production lines, two for cakes and one for biscuits. Edita Iraq plans to invest more than USD27m over three years, including relocating one bakery line from Egypt to Iraq by the end of 2025, adding a new cake line by early 2026, and carrying out renovations and expansions at the Iraqi factory. The partnership will implement a technical know-how and manufacturing assistance agreement, focusing on maximizing production capacity, efficiency, and control to ensure the transfer of EFID’s expertise and industrial capabilities. Additionally, a trademark agreement will secure the rights to launch EFID’s brand portfolio in Iraq, broadening its product range and market presence. EFID aims to leverage its brand equity through exports, including the Molto and Tiger Tail brands, which generated around USD10.2m in 2023. In our view, the Iraqi market is attractive with a population of around 44m, GPD per capita of USD5,745 in 2024 (higher than Egypt’s USD3,574), and a low-single-digit inflation and stable currency. We expect Edita Iraq to begin contributing to EFID’s total sales in 2025e, assuming around EGP588m in revenue, rising to EGP1.28bn in 2026e, and growing at a CAGR of c34% over our 2027–29e forecast period. We forecast Edita Iraq to record a GPM of c30% in 2025e, increasing to c32.0% in 2026e, and averaging c34% over 2027–29e.” Pakinam El-Etriby concluded.

About HC Brokerage

HC Brokerage is an affiliate of HC Securities & Investment– a full-fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services. HC Brokerage is an Egyptian registered company and member of Egypt’s Financial Regulatory Authority (FRA), and its registered address is 34 Gezirat Al-Arab St., Mohandessin, Giza, Egypt, Dokki 12311

For further information, please contact:

Research@hc-si.com

HC Brokerage Signs Cooperation Agreement with Fawry Plus to Enhance Trading and Investment Services

• HC Brokerage, one of Egypt’s leading securities brokerage firms, has announced the signing of a cooperation agreement with FawryPlus for Banking Services. The partnership aims to simplify trading in the stock market, in line with HC’s strategy to expand its service offerings and enhance accessibility for clients across Egypt.

Under this agreement, HC clients will be able to open securities brokerage accounts, complete bookkeeping procedures, and sign online trading contracts, among other services, through FawryPlus’ extensive branch network across all governorates. This eliminates the need for clients to visit HC branches or wait for company representatives.

Commenting on this strategic partnership, Hossam Ezz, CEO of FawryPlus stated: “Were delighted to partner with HC Brokerage, as this partnership reaffirms Fawry’s commitment to providing innovative solutions that support the growth of Egypt’s financial market fostering effective partnerships with brokerage firms to attract new segments of investors and integrate them into the formal financial sector.

He added: “FawryPlus places great emphasis on the Financial Inclusion Strategy (2022-2025) issued by the CBE. Our goal is to promote the financial inclusion, expand access to financial services for underserved consumers in rural and remote areas, improve financial literacy, and facilitate access to financial services for both individuals and businesses, ultimately encouraging a shift towards the formal financial sector.

“Hassan Choucri, Managing Director of HC Brokerage, expressed his enthusiasm for the partnership, stating: “This agreement marks a significant milestone in HC’s journey, enhancing our ability to provide more advanced financial and investment services in line with Egypt’s digital transformation and financial inclusion agenda.”

He added: “At HC, we are committed to expanding our reach by leveraging Fawry Plus’s extensive branch network. This enables us to offer innovative solutions tailored to the needs of diverse investor segments, both individual and institutional, while contributing to the development of Egypt’s capital market.”

He further emphasized: “As a leading financial advisor with over 25 years of experience in both local and regional markets, HC continuously adapts to the evolving financial landscape. The recent shift in the Egyptian stock market, where individual investors now account for the majority of trading, underscores the need for more efficient and innovative solutions to support their growth and enhance market performance.”

This collaboration ensures that HC’s diverse and integrated services are now available to all investor segments, including individuals and institutions, without the need for travel between governorates or visits to the company’s headquarters. It reflects HC’s commitment to adopting the latest digital technologies to promote financial inclusion and facilitate broader access to financial services.

FawryPlus is a leading player in promoting financial inclusion, providing accessible banking services such as digital wallet activation, prepaid cards, Know Your Customer (KYC) registration, financial inclusion account openings, and electronic remittance and collection services. Through its extensive network and innovative model, FawryPlus bridges the gap in financial service accessibility, empowering individuals and businesses to manage their financial affairs efficiently.

With over 300 branches across Egypt and operating seven days a week FawryPlus prioritizes reaching remote areas that lack access to financial services, enabling banks to serve their customers beyond official working hours. FawryPlus has also revolutionized the banking sector with its “One Zone, One Bank” model, which offers a centralized banking hub for more than 36 banks, making it easier for individuals and businesses to access various financial and banking services under one roof.

– Ends –

About HC Brokerage:

HC Brokerage is an affiliate of HC Securities & Investment– a full-fledged investment bank providing investment banking, asset management, securities brokerage, research, and custody services. HC Brokerage is an Egyptian registered company and member of Egypt’s Financial Regulatory Authority (FRA), and its registered address is 34 Gezirat Al-Arab St., Mohandessin, Giza, Egypt.

About Fawry for Banking Technology and Electronic Payments

Founded in 2008, Fawry is the largest e-payment platform in Egypt serving the banked and unbanked population. Fawry’s primary services include enabling electronic bill payments, mobile top-ups and provisions for millions of Egyptian users. Other digital services also include e-ticketing, cable TV, and variety of other services. Through its peer-to-peer model, Fawry is enabling corporates and SMEs to accept electronic payments through a number of platforms including websites, mobile phones, and POSs. With a network of 36 member banks, its mobile platform and more than 372 thousand agents, Fawry processes more than 6 million transactions per day, serving an estimated customer base of 53.1 million users monthly. Learn more at www.fawry.com.