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We hope you had a lovely start to the work week. Today’s issue packs updates on growth forecasts for the country’s construction sector, a new target date for Raya IT’s listing on the EGX, and much more. Let’s dive right in.
Raya IT’s delayed public debut now scheduled for October
The Clap:
Raya Information Technology — the IT division of Raya Holding— will now proceed with its delayed IPO by October, planning to list between 30-35% of its shares on the EGX, the parent company’s CFO, Hossam Hussein, said in an interview with Al Borsa.
Why the wait:
The plans — announced in December — were shelved from the original target date of 1H 2024 due to unfavorable market conditions for new offerings. Raya has now completed all the needed listing requirements, and tasked EFG Hermes with leading the transaction.
Refresher:
The company integrates IT systems to businesses, ranging from ATM & self service solutions and tech solutions to data centers.
Projects include:
The second phase of Telecom Egypt’s data hub, which sees Raya IT handle the center’s design and construction of its power infrastructure, cooling solutions, physical security, fire suppression systems, and rack and cabinet installation.
What’s next?
Raya IT is eying expansions both locally and regionally in the Gulf, with a particular focus on enhancing its business operations in Saudi Arabia. The company’s revenues hit the EGP 5 billion mark last year, and are expected to grow by 30% in 2024.
More IPOs to come from Raya:
Remember, Raya is still putting on ice the listing of two of its subsidiaries Raya for Trade and Distribution, and Aman Consumer Finance until market conditions are more favorable.
Egypt's construction industry to grow 8% annually through to 2029
The Clap:
According to Chicago-based JLL’s latest construction market intelligence report, Egypt’s construction sector is expected to expand at a compound annual growth rate of over 8% until 2029. The projections are mainly coming on the back of increased FDI injections providing ample liquidity, higher government spending, and more public-private sector partnerships
What happened in Q1+ where we’re going:
During the first quarter of 2024, Cairo saw the addition of more than 7,000 residential units, with average prices for sales and rentals rising by 83% and 42% in 6th October respectively, and in New Cairo by 95% and 43%. By the end of the year, approximately 24,000 units will be delivered, the report notes.
For the tourism industry:
Cairo’s overall hotel capacity held steady in Q1 2024 at 26,700 rooms, with no significant additions. Yet, about 1,400 more rooms will be added this year with the opening of new or refurbished hotels, according to JLL forecasts.
Remember:
Egypt’s tourism industry began on a positive note with a new EGP 50 billion plan to build at least 200,000 new hotel rooms to attract some 30 million tourists annually by 2028, and is reportedly planning to offer a subsidized loans program catering to both local and foreign hospitality investors to realize their target.
Overall, we hold 12% of the regional project pipeline:
Egypt has a 12% share of MENA’s construction sector’s project pipeline, amounting to USD 515 billion. In terms of residential projects, ventures in Egypt are worth about USD 36 billion, giving it the third position in the MENA after Saudi Arabia and the UAE, while mixed-use projects in the country account for USD 115 billion (22% of the regional pipeline).
The Clap:
According to the most recent S&P Global Egypt PMI survey, there was a significant rise in sales volumes for Egyptian non-oil companies in June, marking the first growth seen since August 2021. The S&P Global Egypt Purchasing Managers’ Index (PMI) increased slightly from 49.6 in May to 49.9 in June, staying close to the 50.0 threshold for growth.
Growth drivers:
The progress comes after recent indications of economic stabilization, backed by policy changes focused on reducing price pressures and improving demand outlooks.
Notable changes:
- New orders increased for the first time since December 2021, mainly in the manufacturing and service industries, while construction as well as wholesale and retail sectors reported falls.
- Even though input costs rose slightly to a three-month peak last month, this did not prevent a small increase in selling prices.
- Improvements in both domestic and international markets led to a rise in new export orders, the highest seen in two-and-a-half years.
Business optimism dropped to a record low though:
Confidence in future business activity saw a downtick in June, recording its lowest level ever due to unpredictable financial conditions. As a result, several companies reduced their staff and reported non-replacement of leavers.
The Clap:
In a new report the Bank of America (BoA) said that the current USD/EGP exchange rate of the Egyptian pound is approaching its fair value, and currently projects the pound to strengthen in the near term amid recent FX inflows, which have offset the anticipated deficit in the balance of payments.
Remember:
The USD had risen beyond the EGP 48 mark late last month, but has dipped below the level once again (EGP 47.99 as of yesterday.)
More forecasts:
The bank also projects that the second tranche of the IMF loan, in addition to inflows from the Ras Al-Hikma deal — expected to collectively total between USD 5-10 billion — could cover Egypt’s external financing gap for a period ranging from one to two years.
Interest rate projections:
The lender expects the Central Bank of Egypt to continue tightening its monetary policy while maintaining stable interest rates in the near term. BoA also anticipates that the real interest rate in Egypt — lending interest rate adjusted for inflation — will become positive by 4Q 2024.
What else is clapping?
In EGX33 news:
Local asset manager Azimut plans to launch its first shariah adherent investment fund this month following the launch of Egypt’s Islamic index (EGX33) last month.
Similarly, CI Capital Asset Management plans to initially rake in EGP 25 million from the IPO of its first shariah compliant investment fund.
Other updates:
The government has set a target to raise the private sector’s share of total investments in the economy to over 65% within the next two to three years. The Cabinet will prioritize the real estate, tourism, industry, agriculture, and communications sectors as part of its strategy.
Egypt’s biggest LNG tender in years — 20 shipments — will reportedly take off between USD 880-910 million from the state’s purse, Asharq Business reported, quoting government sources.
The British International Investment, a part of the UK government, has allocated a budget of USD 100-200 million to invest in Egypt’s financial industry in 2024, including banks and companies specializing in consumer finance and payments.
Updating previous reports, Act Financial plans to earmark between EGP 3-4 billion in investments following its IPO on the EGX to invest in three companies, one of which is in the real estate sector, and the other in the building and construction materials field, the company’s CEO said in an interview with Hapi.
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