Since 2003 a lot has happened in Egypt. From the Egyptian Revolution to the devaluation of the Egyptian pound, Egyptian businesses have seen some turbulent years. Young companies in particular that did not have sufficient cash reserves to sustain their business operations during harsh times faced immense challenges. Nevertheless, there are some companies that have flourished and have shown a stellar performance since 2003. But what Egyptian company had the best performance since then? How is performance measured?
What companies are included?
The current paper focuses on listed companies only. Unlike publicly listed companies, private companies disclose far less information to the public. Although it is possible to find some information such as funding rounds, corporate news etc. of some private companies, it would be still very time-consuming to conduct a study that examines the performance of all private companies in Egypt. The mere volume of private companies which can include everything from a kiosk to an AI powered e-commerce platform makes it almost impossible to examine the performance of all private companies in Egypt. Public companies, on the other hand, are a handful. To abide by Egyptian regulations, they are forced to disclose financial information to the public and most importantly have a share price which specifically tells you how the company is doing. This study focuses in particular on the stocks within the EGX 30.
The data set which is collected from Thomson Reuters includes all stocks in the EGX 30 (as of November 2018) over the period from November 2003 until November 2018. I used adjusted closing prices to calculate stock returns. Adjusted stock returns take into consideration stock splits and dividend payments. As a result, they reflect the total return of the stock more accurately than the unadjusted stock price and enable me to compare the performance of different stocks on an apples to apples basis.
Total Shareholder Return = Capital Gain + Dividends
It is worth nothing, that the data were not adjusted on a monthly basis in such a way that they reflect the changes in the historical composition of the index. This simply means that I did not account for new entrants & exits over the study period due to the lack of time. As a result, there are several stocks that contain less than 180 months of data (seen in graph below). For example, Ibnsina Pharma has only 10 months of data as it had its IPO in December 2018. Nevertheless, the majority of stocks have over 100 months of data included in the study.
Which Egyptian Company Had The Best Performance?
There are several ways to look at performance including total return, risk-adjusted returns, benchmark-adjusted returns among others. In general, a company’s stock price underlines investor perception of its ability to earn and grow its profits. It is therefore one of the best ways to measure a companies performance. To keep things straight-forward and simple, this paper compares the total return of the 30 different companies selected. As noted earlier, the total return is the sum of the capital gains and the dividends paid by the company. Capital gains reflect the appreciation or depreciation in the stock price.
Here is a table with the 15 year performance of the largest companies in Egypt:
|Name/ Ticker Symbol||Cumulative 15-year Performance|
|EGYPT IRON & STEEL||1.85|
Exactly two thirds of the largest 30 companies in Egypt have had a positive return over the 15-year period, while 10 companies have had a negative performance. The company with the best performance over the entire study is Sixth of October Development and Investment Company (SODIC). It is one of Egypt’s leading real estate developers with a 25 year track record of developing compounds. SODIC which has the ticker symbol OCDI has recorded a staggering 38.6x return on investment which translates into an annual return of around 28%. The second best investment during the same period is CIB Egypt. It has recorded a 28.4x return on investment which represents an annual return of almost 25%.
Interestingly, the company with the lowest total shareholder return is Palm Hills Developments (stock ticker: PHDC) which is also a large real estate player in Egypt. During the 15 years the company has lost over 70% of its value.
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