Egypt Economy Survives Global Financial Turmoil

Global Research Economy
Egypt

Egypt Economic Review
December 2008
Surviving the World Financial Turmoil ...

Global Research
Global Egypt
Tel: 20 (2) 37609526
Fax: 20 (2) 37609506
Address: 7 Abdel Hadi Saleh St.,
El-Nasr Tower, Giza,
Postal code: 12311
Omar M. El-Quqa, CFA
Egypt
Executive Vice President
omar@global.com.kw
Phone No:(965) 2295 1110

Faisal Hasan, CFA
Head of Research
fhasan@global.com.kw
Phone No:(965) 2295 1270

Mahmoud Soheim
Manager-Egypt Research
msoheim@globalinv.com.eg
Phone No: (202) 37609526

Ahmed Abu Hussein, CFA
Financial Analyst
aabuhussein@globalinv.com.eg
Phone No: (202) 37609526

Cherine Fayez Farkouh, CFA
Financial Analyst
cfarkouh@globalinv.com.eg
Phone No: (202) 37609526

Radwa Weshahy
Financial Analyst
rweshahy@globalinv.com.eg
Phone No: (202) 37609526

Table of Contents
Economy ...................................................................................................................................................... 2

The Banking Sector....................................................................................................................................... 8

Real Estate Sector ....................................................................................................................................... 2

Steel Sector ................................................................................................................................................. 24

Cement Sector ............................................................................................................................................. 28

Fertilizers Sector ......................................................................................................................................... 33

Telecom Sector ........................................................................................................................................... 38

Stock Market ............................................................................................................................................... 44

Global Investment House Egypt Economic Review - December 2008

Egypt - Economy
Economic Performance 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 *
Real GDP ^ (LE bn) 390.7 407.0 425.2 454.3 486.5 798.
Real GDP Growth Rate (%) 3.2% 4.% 4.5% 6.8% 7.% 7.2%
Per capita GDP (US$) ,6 ,7 ,247 ,460 ,65 2,42
Inflation (%) 3.2% 0.3% .4% 4.2% .0% .7%
Unemployment (%) .0% 0.3% .2% 0.6% 8.9% 8.4%
Population (mn) 69.2 70.5 7.9 73.6 77.5 77.5
Government Finance
Total Revenues and Grants (LE mn) 89,46 0,88 0,865 5,266 80,25 28,500
Total Expenditures (LE mn) 27,320 45,987 6,60 207,8 222,029 277,432
Cash Surplus/(Deficit) (LE mn) -38,74 -44,07 -50,747 -56,545 -4,85 -58,932
Overall Fiscal Surplus/(Deficit) (LE mn) -43,559 -45,877 -5,643 -50,386 -54,698 -59,234
Government Debt
Gross Domestic Public Debt (LE mn) 323,97 388,377 469,039 470,264 493,879 537,68
Gross External Debt (LE mn) 77,438 85,385 67,474 69,868 70,865 77,336
Balance of Payment
Trade Balance (US$ mn) -6,65 -7,834 -0,359 -,986 -5,87 -23,45
Total Exports (US$ mn) 8,205 0,453 3,833 8,455 22,08 29,356
Total Imports (US$ mn) -4,820 -8,286 -24,93 -30,44 -37,834 -52,77
Current Account (US$ mn) ,943 3,48 2,9 ,752 2,696 888
Current Account/Nominal GDP (US$ mn) 2.4% 4.3% 3.3% .6% 2.% 0.5%
Capital Financial Account (US$ mn) -2,734 -5,06 3,378 3,5 ,34 7,37
Overall balance (US$ mn) 546 -58 4,478 3,253 5,282 5,420
Money Supply
Money Supply - M (LE mn) 67,22 77,606 89,685 09,274 3,290 70,579
Quasi Money (LE mn) 37,050 357,305 404,99 45,082 53,398 596,085
Total Domestic Liquidity (M2) (LE mn) 384,262 434,9 493,884 560,356 662,688 766,664
^ Using 2001/02 prices for the period 2002/03 to 2006/07 and prices of 2006/07 for 2007/08
* Preliminary
Source: Central Bank of Egypt, Ministry of Finance, The Egyptian Exchange (EGX) and Global Research

Global Investment House 3 Egypt Economic Review - December 2008

Egypt - Economy
GDP Composition by Economic Activity in FY 2007/08

» The Egyptian economy maintained its robust GDP Others
Agriculture,
6.2%
General Forstry Fishing
growth during the previous three years, at around 7%
Government 13.2%
8.4%
Real Estate
annually. Oil
2.7%
6.9%
Tourism
3.7%
Insurance
Natural Gas
» GDP is expected to grow by 6%, double the world 3.6%
9.1%
Financial
average growth. Services
Oil Other
3.7%
Manufacturing
Wholesale Ind.
Retail Trade 16.3%
» This strong growth enabled Egypt to be an attractive 11.2%
Suez Canal Const.

FDI destination, rising by 9.4% in FY 2007/08, Transport Building
3.4%
Warehousing 4.3%
Communications
4.1%
reaching US$3.2bn. 3.2%

LE bn Real GDP Growth
900 8%
» The challenge facing the Egyptian economy was the
7.2%
7.1%
6.8%
800 7%

rising inflation rate, reaching 2.5% in September 700
6%

2008. 600 4.5%
5%
4.1%
500
4%
3.2%
400
3%
» Inflationary pressures generated from surging food 300
2%

and fuel prices worldwide. With the ease of these
200

1%
100

prices internationally, the inflation is believed to be - 0%
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
brought down. Real GDP (LE bn) Real GDP Growth Rate (%)
Source: Central Bank of Egypt (CBE) and Global Research

4 Egypt Economic Review - December 2008
Global Investment House

Egypt - Economy
Economic Outlook

Global financial crisis will not affect Egypt financially

» The exposure of the Egyptian financial institutions in the world’s financial credit market is minimal.

» Local banks have abundant liquidity, with an average loan to deposits ratio of 54% compared to
approximately 80% as an international norm.

What will be the economic threats?

» Lower exports proceeds, on the back of expected drop in prices, which is anticipated to be more severely
affected than quantities. Negatively affecting the Balance of Payment.

» Lower return from Suez Canal, due to reduced global trade activity.

» Lower proceeds generated from tourism, due to slower expected economic performance in Europe.


Egypt - Economy
Economic Snapshot

Could any benefit emerge from this situation?

» Reduction in international oil, food and metal prices will :

• Make imports cheaper, relieving some pressure from the Balance of Payment.

• Save huge expenditures for the government budget, especially on subsidies, which have surged by
56% between 2006/07 and 2007/08.

• Lower the inflation rate, which was 20.2% in October 2008 down from 23.6% in August 2008.

» More attention should be directed to SMEs because 80% of employment in Egypt work in SMEs and
their products are directed to the local market , therefore they are protected from global recession.

» Currently, SMEs are targeted by Banks, as they are believed to drive economic growth in the coming
period.


Egypt - Economy
Economic Snapshot

How Egypt economy is expected to perform against %
8
the world economy? 7.2
7.1
6.9
6.8 6.8
7 6.5
6.0 6.0
» IMF projected that Egypt GDP will grow by 6% 6

in 2009, which is double the world expected GDP 5 4.5
5.1 5.0
3.6 4.9
growth. 4.8 4.8 4.7
4.5
4
4.2
3.9
4.1
3
» And almost in line with the emerging and developing 3.0
3.2

countries forecasted average GDP growth. 2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Egypt World

» This should attract more FDIs from around the %
9
world. 8.0
7.9
7.5
8 7.2
7.1 6.9 6.9 6.9
7
» Future FDI inflows are expected in more 6.3 6.7
7.1 6.1
6.9 6.9
6.8 6.8
6.5
6
manufacturing sectors benefiting from low labor 6.0 6.0
5
cost, abundance of several raw materials, as well
4.5
as Egypt’s geographical location. 4
4.1
3
3.2

» Transportation, education and health care are 2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
projected to attract FDIs too. Egypt Emerging developing countries
Source: IMF


The Banking Sector

» Significant banking reforms since 2004.

» Attractive sector dynamics led to international and regional acquisitions over Egyptian banks.

» Domestic Liquidity (M2) growing by a CAGR of 4.8% over the 5-year period starting 2002/03 to
2007/08.

» Potential lending opportunities to fund future projects, stemmed by accelerated GDP growth, even with
slight deviation than expected, as a result of the current global conditions.
Loans to Deposits Development
LEbn
800 80%
LE bn 70.6%
Domestic Liquidity Growth 700 70%
900 64.2%
59.3%
57.0%
800 600 60%
54.4% 53.7%
700
500 50%
600
400 40%
500
300 30%
400
300 200 20%
200
100 10%
100
0 0%
-
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08*
M1 Quasi Money Loans and Discount Balances Deposits Loans to Deposits

*provisional
Source: Central Bank of Egypt
Source: Central Bank of Egypt


The Banking Sector

» Extremely low loans/deposits ratio of around 54%, compared to a rough estimate of 80% worldwide,
providing enough room for extending loans.

» Pressure exerted on banks by the CBE to extend loans to SMEs, as prospective stimulant for economic
growth.

» Banks with international parent lenders are not likely to be negatively affected by global turmoil due to
independent operations.

» Investments by Egyptian banks, not covering risky instruments like derivatives and securitized bonds,
have saved them from the world’s financial turmoil.

» Still a lot of unexploited segments in the banking sector, i.e. mortgage and SMEs lending .

» Huge unfulfilled demand from the retail sector, with a low penetration rate of approximately 30%.

» Ample liquidity characterizing the banking sector in contrast to the credit crunch prevailing in USA.


Market Players

Sector/ Company RIC FYE # Shares Free Float CMP MC FC PE PBV DY%
000s as of 20/11/08 LE 000s LE 000s Trailing Forward
30/06/08 LE 2007 2008
Banks
Egyptian Gulf Bank ($) EGBE Dec. 50,92 5.3% .95 292,875 49,747 22.7 8.8 2.0 7.69%
CIB COMI Dec. 292,500 9.35% 29.94 8,757,450 7,999,93 7.68 6.4 .64 3.34%
Credit Agricole Bank CIEB Dec. 287,000 20.98% 8.60 2,468,200 57,828 4.7 4.92 .30 .63%
Housing and Development Bank HDBK Dec. 67,000 2.47% 22.50 ,507,500 323,660 7.99 6.42 .70 6.67%
NSGB NSGB Dec. 302,94 22.83% 5.60 4,725,879 ,078,98 7.0 5.6 0.93 .60%
Export Development Bank of Egypt EXPA June 00,000 23.29% 8.02 802,000 86,786 2.58 6.0 0.63 2.47%
Sector Average 7.60 6.22 1.54

Source: EGX and Global Research

Global Investment House Egypt Economic Review - December 2008

Real Estate
» Robust economic growth in Egypt reaching 7.2% stimulated the growth in the real estate sector.
» Increasing FDI injected in the real estate sector, reaching US$400mn in 2007/08, compared to US$39mn
in the previous year.
» The recent decline in raw materials prices could fuel more growth in the sector.
» The real estate market is characterized by a chronic gap because:
• Over-supply in the high-end residential segment.
• Low supply of middle and economic properties, where the majority of demand exists.

8.0% 7.2%
7.1%
6.9%
7.0%
6.0%
4.6%
4.2%
5.0%
4.0% 3.1%
4.3%
3.9%
3.0% 3.8% 3.7%
3.0%
2.0%
1.0%
0.0% 0.8%
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
GDP growth Real Estate growth
Source: CBE


Real Estate
Residential

Segments Estimated% of population Supply/Demand Outlook

Ú
High-End 0% High supply/saturated demand

Ò
Upper-Middle 5% Good supply/high demand

Ò
Middle 35% Moderate supply/very high demand

Ò
Economy 40% Low supply/great demand

» Favorable demographic composition with 44% and 36% of population falling in the age-groups of 0-20
and 20-45, respectively.


Real Estate
Residential

» Activation of the mortgage law no.48, which was issued in 200, mainly through :

• Establishing the Egyptian Mortgage Refinance Company (EMRC) to be the mortgage market
maker.

• Reduction of property registration fees from 2% to 3% with a cap of LE2,000.

• Slash property tax rate from 46% to 0%.

• Establishing credit bureau to better assess borrowers credit worthiness.

• Establishing “Iskan”, to be the first insurance company concerned with mortgage finance risks.


Real Estate
Residential

» Very low Mortgage lending standing below % of GDP, compared to 65% in USA, 45% in Europe and
4% in UAE.

3,500
3,109
3,000

2,500
2,097
2,000

1,369
1,500
1,014 1,012
1,000
714
500
355
500
214
14 16
2
-
June 2005 June 2006 June 2007 June 2008
Mortgage Co. Banks Total

Source: Ministry of Investment


Real Estate
Residential

» Egypt compares favorable to other countries in the region, in terms of residential sqm prices.

500 14.0%
7,000
Abu Dhabi 450
12.0%
6,000
400
Dubai

Avg. sqm price US$
10.0%
5,000 350
Avg. sqm price US$

Doha
300
8.0%
4,000
250
Damascus 6.0%
3,000 200
Khartoum
150 4.0%
2,000 Muscat
100
Tripoli
Cairo 2.0%
1,000
50
Riyadh
Amman
0 0.0%
-

Cairo

Khartoum
Doha
Amman

Tripoli

Riyadh

Damascus

Dubai

Abu Dhabi
Muscat
0 20,000 40,000 60,000 80,000 100,000 120,000

GDP per Capita US$
Annual avg. rent/sqm (US$) Rentail yield
Source: Colliers International


Real Estate
Commercial Segment (Retail)

» Higher GDP per capita, on the back of economic growth, leading to growing upper-middle class.

» Reduction in import duties on various items, reaching an average of 6.9%, leading to lower prices in the
local market.

» Entrance of international brand names to Egypt.

» Shortage of supply in class “A” retail spaces.
Annual avg. rent/sqm (US$)
1,400
1,200
1,200
950
1,000 867 850
765
800
660
528
600 486 470
440
400

200

-
ro

an

i

t

a

h

s

ai

bi

um
ol

ca

cu
oh

ad

ub

ha
i

m

ip
Ca

us

rto
as
D

y
m

D

D
Tr

Ri
M

am

ha
A

bu

K
D

A


Real Estate
Commercial Segment (Office)

» Economic growth encouraged inflows of foreign and private sector investments.

» Supply shortage in grade “A” office spaces.

Avg. selling price/sqm (US$)
14,000
1,200 14%
12,000
12%
1,000 10,000
10%
800 8,000
8%
600 6,000
6%
400 4,000
4%
200 2,000
2%
- 0% -
Cairo

Amman

Tripoli*

Muscat*

Doha

Riyadh

Damascus

Dubai

Abu Dhabi

Khartoum

Cairo

Amman

Tripoli*

Muscat*

Doha

Riyadh

Damascus

Dubai

Abu Dhabi

Khartoum
Annual avg. rent/sqm (US$) Rental yield

*Countries with non-freehold model


Real Estate
Tourism

» The tourism sector witnessed a strong growth at a CAGR of 6.6% over the past 6 years.

» No. of tourists arrivals reached mn in 2007, compared to 9mn in 2006.

» Investment in hotels reached LE5.5bn, against LE3.8bn in 2006/07, growing by 45%.

» The government targets to increase the no. of tourists arrivals to 4mn by the end of 202.

» Airports expansions and renovations to accommodate for the increasing no. of arrivals.

» Diversity of touristic activities (historical, recreational, religious).

» Egypt possesses one third of the world’s ancient monuments.


Real Estate

» Great potential for growth as Egypt is a relatively cheap touristic destination with one of the highest
occupancy rate in the region.

US$

100% 350

90%
300
80%
250
70%

60%
200
50%
150
40%

30% 100
20%
50
10%

0% -
Dubai

Cairo Heliopolis

Hurghada

Abu Dhadi

Damascus

Manama

Sharm El-Sheikh

Average

Jeddah

Doha

Riyadh

Aman

Kuwait city

Beirut
Cairo-City Center
Cairo Pyramids

Occupancy Avg. Daily room rate 2007

Source: HVS


Real Estate
Outlook

» Generally, positive outlook but at a lower magnitude because of weak expected global economic growth,
resulting from the global financial crisis.

Segment Outlook Explanation
Residential
Ò • Good potential for growth, especially in the middle and lower income classes.
• Mortgage lending is still in its infancy stage
• Expected reduction in inflation will relief upward pressure on interest rates, lowering mortgage
rate
Retail
Ò • The existing supply shortage will out-weight reduced activity following the global economic
expected slowdown.
Office
Ò • Under-served segment
• Egypt above average expected economic growth at 6%, compared to the average global
economic growth rate of 3%.
Tourism
Ò • Low cost destination to European tourists
• Proximity to Europe, reducing travel cost
• Expected average annual growth of 5.8%, according to World Travel and Tourism Council
(WTTC).


Market Players

30/06/08 LE 2007 2008
Housing Real Estate
Cairo Housing ELKA Dec. 93,750 95.08% 4.50 42,875 40,9 67.32 55.94 0.86 4.44%
Egyptian Resorts Company EGTS Dec. ,050,000 39.72% .74 ,827,000 725,684 6.40 6.56 .72 .49%
Nasr City Housing MNHD June 00,000 42.66% 25.84 2,584,000 ,02,334 29.8 24.62 9.72 3.0%
Orascom Hotels Development ORHD Dec. 22,962 2.00% 20.00 4,439,246 88,785 .09 48.49 .49 0.00%
SODIC OCDI Dec. 28,43 62.28% 4.0 ,67,79 727,300 3.52 7.75 0.67 0.00%
United Housing UNIT Dec. 42,207 64.2% 5.6 27,789 39,647 4.32 2.59 4.46 0.00%
Heliopolis Housing HELI June 74,7 22.29% 24.00 ,780,4 396,787 5.79 3.36 5.09 5.2%
Development Engineering Consultants DAPH Dec. 8,57 46.82% 3.40 4,857 53,776 2.28 5.25 0.83 0.00%
Remco for Touristic Villages Construction RTVC Dec. 04,024 26.40% 5.47 569,00 50,29 3.99 2.74 0.58 0.00%
Upper Egypt General Contracting UEGC June 50,000 96.69% 2.7 08,500 04,909 50.97 7.43 0.34 0.00%
Egyptians Housing Development
EHDR Dec. 75,000 48.26% 3.6 270,750 30,664 236.82 27.2 .68 0.00%
Reconstruction
Talaat Mostafa Group Holding TMGH Dec. 2,030,204 4.90% 3.6 6,45,443 2,688,07 24.2 4. 0.30 0.00%


Steel Sector

» Construction and building activities in Egypt have been growing at a 9.9% CAGR from 2004/05 to
2007/08.

» Sales by main Egyptian companies have grown at a CAGR of 2.5% between 2004/05 and 2007/08.

Steel Sales Volume By Main Egyptian Companies
3,500

Construction and Building Activities
3,000
40 4.6%
4.5%
35 4.6% 2,500
4.4%
30
4.3%
2,000

000 tons
25 4.2%
LE bn

4.2%
20 4.1%
1,500
4.0%
4.1%
15
3.9% 1,000
4.0%
10
3.8%
5 500
3.7%
- 3.6%
-
2004/05 2005/06 2006/07 2007/08
2001 2002 2003 2004 2005 2006 2007 Jun-08
Construction and Building Construction and Building % of GDP

Source: CBE, Global Research


Steel Sector
» Forecasts for world steel production indicate a growth of 5.3% in 2008 and 5.4% in 2009, driven by
developing economies.

» Even though steel prices decreased from highs of LE7,000/ton to LE5,000/ton in mid-September, profit
margins will remain strong as billet prices declined from LE6,000/ton to LE4,000/ton.

» Sustainable growth in construction and mainly infrastructural spending, especially in Upper Egypt.

Egypt Steel Prices
7,000

6,000

5,000
LE/ton

4,000

3,000

2,000

1,000
Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08

Scraps Billets Steel Rebars
Source: IDA and Global Research


Market Players

30/06/08 LE 2007 2008
Iron Steel
Ezz Steel ESRS Dec. 543,265 34.75% 9.64 5,237,075 ,89,884 4.67 2.80 .22 0.37%
Ezz - Dekhila Steel - Alex IRAX Dec. 3,364 7.4% 723.00 9,662,47 75,603 4.28 2.68 2.55 20.06%


Cement Sector

» Egypt has a comparative advantage in the production and exportation of cement due to the availability of
raw materials, relatively cheap energy and Egypt’s strategic location enabling it to be a major exporter
in the region.

» These promising features of the industry has always made Egypt an attractive investment destination for
foreign suppliers.

» The majority of cement companies in Egypt are dominated by international companies represented by
Holcim, Ciment Francais, Cemex, Vicat, Cimpor and Lafarge.


Cement Sector
» Strong performance in line with GDP growth.

» The growth in local construction activities ensures demand on cement.

45,000 8%
6.8%
40,000 7.1% 7%
35,000
6%
4.5%
30,000
5%
4.1%
25,000
4%
000 tons

3.2%
20,000
3%
15,000
2%

5,838
5,173
10,000
4,661

4,132
3,299
25,704

28,763

23,550

33,565

28,527

30,225

38,469

34,462
29,104

36,215
1%
5,000

- 0%
2003 2004 2005 2006 2007
Supply Demand Exports Egypt GDP Growth Rate

Source: Global Research


Cement Sector

» On November 2007, new cement licenses worth LE,38mn were granted to meet the expected demand
from the infrastructure projects, especially in Upper Egypt, where the government announced a mega
project worth LE3,2bn over the period between 2007 to 202.

» The new licenses will bring Egypt’s total cement capacities to 55.2mn tons by 200, from the current
4.7mn tons, which reflects the inherent growth in the sector.

» Still the cost per ton is considered low compared to regional and international peers, despite the recent
local increases in energy costs.

» The continuous need for housing in Egypt ensures considerable demand on cement, especially as the
prices will ease, to benefit from low materials costs.


Market Players

Free
Sector/ Company RIC FYE # Shares CMP MC FC PE PBV DY%
Float
30/06/08 LE 2007 2008
Cement
South Valley Cement SVCE Dec. 44,055 20.06% 5.2 2,9,960 425,264 3.64 3.52 0.90 0.00%
Misr Beni Suef Cement MBSC Dec. 20,000 50.53% 45.60 92,000 460,834 4.72 4.59 .6 6.58%
Misr Cement - Qena MCQE Dec. 30,000 2.80% 80.00 2,400,000 307,52 8.68 7.67 3.0 6.25%
National Cement Company NCEM June 03,200 .73% 8.55 ,94,360 33,22 7.57 2.4 2.76 9.97%
Sinai Cement SCEM Dec. 35,000 25.5% 3.40 ,099,000 280,345 3.22 3.02 0.82 3.98%
Suez Cement SUCE Dec. 8,857 4.00% 20.40 3,709,873 59,399 3.78 3.7 0.64 9.80%


Fertilizers Sectors

Fertilizers demand is secured by robust growth in the agriculture sector in Egypt.

» The agriculture sector is considered one of the significant sectors in Egypt, where it has accounted for
4% of the country’s GDP in FY 2007/08.

» The local demand on fertilizers is highly strengthened by the continuous growth in the agriculture sector,
which is supported by the following pillars:

• Rapidly growing population.
• Scarcity of arable land.
• Enhanced irrigation systems.
• Providing subsidized fertilizers.
• Adding around 50,000 acres annually to Egypt’s arable land.
• Government awareness campaigns for using the appropriate types and quantities of fertilizers in
order to raise crop yields.


Fertilizers Sectors
16
Urea Prices Vs. Natural Gas Prices
900
14
» Though the world’s financial crisis has 800
700 12

US$/MMBtu
significantly forced fertilizers prices

US$/M.Ton
600 10

downward, squeezing producers margins, 500
8
400
the low cash cost of the fertilizers production 6
300
200 4
in Egypt ensures strong and sustainable Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08

profit margins. Granular Urea Basket Price (RHS) Middle East Granular Urea (RHS)
Natural Gas Henry Hub Spot Price (LHS)
Source: Fertilizerworks and Global Research

» Catering to the availability of relatively 13.00
14
World Natural Gas Cost (2008 Estimates)
11.00
12
cheap raw materials, natural gas and 9.95
10

US$/MMBtu
phosphate rock, more investments are 8.25
8

injected in the fertilizers sector, where local 6
3.75 3.50
producers are raising their capacities, and 4
2.30 2.00
1.00
2 0.80
new joint ventures between local and foreign 0.60

0

fertilizers producers are being established.

USA

China

Russia
Canada

Ukraine

Indonesia
Argentina

Venezuela

Middle East

North Africa
West Europe

Source: PotashCorp and Global Research


Ammonia/Urea Average Cash Cost

Urea
Ammonia 800
900
800 700
700 600
600
500
US$/mt

US$/mt
500
400
400
300
300
200
200
100
100
-
-

USA
West Europe

Canada

Ukraine

China

Argentina

Russia

Indonesia

Venezuela

North Africa
Egypt

Middle East
West Europe

USA

Canada

Ukraine

Russia
China

Argentina

Indonesia

Venezuela

North Africa
Egypt

Middle East

Ammonia Cash Cost
Urea Cash Cost
Average Ammonia Cash Cost
Average Urea Cash Cost
Ammonia Current Price (October 2008)
Urea Current Price (October 2008)
Ammonia Peak Price (August 2008)
Urea Peak Price (August 2008)

Source: PotashCorp, Yara Fertilizers and Global Research


Market Players

Free
Sector/ Company RIC FYE # Shares CMP MC FC PE PBV DY%
Float
000s as of 20/11/08 LE 000s LE 000sTrailing Forward
30/06/08 LE 2007 2008
Fertilizers
Abu Kir Fertilizers ABUK June 45,886 3.00% 66.89 7,657,980 995,537 7.73 8.34 4.3 6.74%
Egyptian Financial Industrial Co. EFIC Dec. 69,302 5.47% 24.7 ,675,020 862,33 4.38 5.93 2.66 4.37%


Telecom Sector
LE bn Communications Sector
14.2%
14.1%
30 16%
14%
» The Communications sector achieved a 25
10.3% 12%
9.4%
growth rate of 4.2% in FY2007/08, on the 20
10%
15 8%
back of improved economic conditions. 6%
10
4%
5
2%
» Egypt’s expected economic growth of 6% 0 0%
will ensure the growth of the sector. 2004/05 2005/06 2006/07 2007/08
Communications (LEbn) Growth %

» The world financial crisis will have no Communicatons Sector Contribution to GDP
4.5%
effect on the Telecom Sector, due to its 3.46%
3.25%
4.0%
unique nature. 3.5%
2.23%
3.0% 2.16%
2.5%
» The low penetration rate in the Egyptian
2.0%
market will act as a catalyst for the growth 1.5%

in the sector over the coming years. 1.0%
0.0%
2004/05 2005/06 2006/07 2007/08

Source: CBE and Global Research


Telecom Sector
Fixed Line Fixed Line Subscribers and Penetration Rate
Mn
14 18%
12 15.1%
15.0% 16%
14.7%
» Telecom Egypt is currently the sole fixed line 14.5%
13.5%
10
14%
12.6%
provider in Egypt. 11.4%
8
12%
6
10%
4

» Fixed line subscribers grew at a CAGR of 7.7% 8%
2
- 6%
over the past five years, reaching .23mn in 2002 2003 2004 2005 2006 2007 Sep-08

2007. Fixed Line Subscribers (mn) Fixed Line Penetration %

» Fixed line penetration rate stood at 5.0% Teleocm Egypt ARPU
70
in 2007 and 5.% by the end of September 58.9
55.3
60 54.2
53.5 52.7 51.1
2008. 50

40

LE
» The ARPU of Telecom Egypt reached LE5. 30

in September 2008. 20

10

» The government postponed a second fixed line -
2003 2004 2005 2006 2007 Sep-08
license auction to 2009, due to unfavorable
market conditions. Source: Telecom Egypt and Global Research


Telecom Sector
Mobile

» Total mobile subscribers reached 38mn in September 2008, up by 40% compared to September 2007.

» The mobile market has been gradually de-regulated, but NTRA continues to have a major role in
controlling competition.

Mobile Operators Market Share
(September 2008)
Mobile Subscribers and Penetration Rate
Mn
Etisalat
40 60%
50.7% Misr
35 7.5%
50%
40.7%
30
40%
25
24.8%
20 30%
19.1% Mobinil
15
20% 49.6%
10.8%
8.3%
10
3.4% 10%
5
- 0%
2002 2003 2004 2005 2006 2007 Sep-08
Vodafone
43.0%
Mobile Subscribers (mn) Mobile Penetration %

Source: Mobinil, Vodafone and Global Research Source: NTRA and Global Research


Egypt Economy Survives Global Financial Turmoil

Egypt Economy Survives Global Financial Turmoil

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