Episode Details

Ras El-Hekma: Potential Addition to TMGH Valuation Is Massive

On Friday, the Prime Minister announced a USD35.0 billion investment by ADQ to acquire the development rights for Ras El-Hekma on the North Coast in Egypt. ADQ’s press release mentions TMGH as one of the partners it will work with.

• In an attempt to preliminarily gauge how much potential value this project could add to our TMGH valuation. We assume TMGH to be brought onboard as a subdeveloper by ADQ to develop a land area of 23.3 million sqm (based on unconfirmed media reports).
• We multiply this 23.3 million sqm land area by EGP2,500/sqm  to reach a valuation of EGP58.2 billion, translating into EGP28.19/TMGH share.
• This, in addition to incorporating the seven Legacy hotels (adding around EGP3.12/TMGH share post minority) would take our total TMGH valuation from EGP42.95/share to a total preliminary valuation of around EGP82.95/share.
• We reiterate our Overweight recommendation of TMGH.

Egypt’s government officially announced the Ras El-Hekma investment deal. The deal size is as big as USD35 billion, which will be divided into two installments:

• The first is in a week’s time, amounting to USD15 billion. This will be in the form of USD10 billion freshly injected, in addition to swapping USD5 billion for a part of the UAE deposits at the CBE.
• The second installment will be two months later, amounting to USD20 billion. Similarly, this will be divided into USD14 billion of fresh USD inflows and a deduction of another USD6 billion of UAE deposits.

The USD has weakened on the parallel market to something in the EGP49.50 to EGP52.00 range.

A government official said that the proceeds of the Ras El-Hekma deal will be addressing the import backlog and paying arrears owed to foreign partners as cabinet’s top priorities.

The IMF staff and Egyptian officials continue to make excellent progress towards finalizing the long-stalled first and second reviews of Egypt’s loan program according to the Fund’s director of communication said. 

The Norwegian company SCATEC plans to establish a new wind power plant in Egypt in the Gabal El-Zeit region on an area of ​​22 square kilometers.

The government will be pausing rolling blackouts during the holy month of Ramadan — expected to start 11 March — according to a cabinet decision.

Minister of Finance announced the government’s intention to draft a new income tax law, which will be presented for a dialogue within weeks.

National Dialogue sessions on the economic axis will kick off on Monday. The sessions will last for four days, with discussions on issues associated with the state’s budget, inflation, social justice, and investments.

Kima released 2Q23/24 unaudited financial indicators. Net profit grew 22% YoY (-53% QoQ) to EGP163 million in 2Q23/24. Net profit declined by 15% YoY to EGP514 million in 1H23/24. Kima is currently trading at a 2023/2024f PE of 11.8x and EV/EBITDA of 6.7x.

Egyptian Petrochemicals Holding Company (ECHEM) and Alexandria National Refining and Petrochemicals Company (ANRPC) are considering teaming up with an undisclosed local private-sector player to establish a USD380 million sustainable aviation fuel (SAF) project with an estimated production capacity of 120k tons a year.

Energean will announce the results of exploratory drilling at its Orion X1 well in the next two to three weeks.

TAQA, the Saudi Industrialization and Energy Services Company, is eyeing investment opportunities in Egypt’s offshore oil well services sector to drive its growth targets.