Thndr has partnered with Hany Genena, Adjunct Faculty at AUC, to identify the potential hot investment opportunities in the Egyptian stock market.
The market has been quite challenging, with the EGX 30 being down by more than 20% year to date. Yet, as the saying goes, with every challenge, there is an opportunity hidden that will lead you towards the path of wealth.
Last year, we shared a similar exercise identifying opportunities to look out for and if you have invested equally in all opportunities, you would have outperformed the market by 12%, which went down by -18% during that period.
Our assessment is based on identifying profitable companies that are trading at a discount. Profitability is measured by looking at Return on Equity (ROE > 20%) and valuation discount is assessed by comparing the current market capitalization of the company to the book value of their shareholder’s equity (Price to Book < 1).
The exercise is simple; companies generating healthy profits yet trading at a discount to the book value of their shareholder’s equity might represent good investment opportunities.
This year we decided to take a step further by looking at the quality of generated profits and the book value of their shareholder’s equity.
- Quality of Profits:
- Last 3 years’ average ROE is greater than 10%
- Net Income growth is positive
- Quality of Book Value:
- Net debt to equity ratio is not higher than 2.0
Below is the list of companies that have been identified
