Orascom Telecom shares rise after Algerian unit Djezzy valued at $7bn
Orascom Telecom has received a boost from reports that suggested its Algerian Djezzy unit may be worth US$7 billion. Its shares traded up 7 per cent for a second consecutive day yesterday.
Djezzy, the Egyptian operator's biggest revenue source, has come under increasing financial pressure after a dispute in taxes dating back to 2009 caused relations to sour between Orascom's chairman Naguib Sawiris and Algeria. But some traders say the share increases may be over-exaggerated.
"We suspect Orascom's gains could be temporary," said a note from Naeem, an Egyptian brokerage. The question for investors is whether the $7bn valuation is accurate.
"While we agree Djezzy may be worth $7 billion, we think it is highly unlikely that the Algerian government would actually pay this," the note said.
Separately, Orascom also gained from reports that Mobinil may be acquired by France Telecom. Orascom is the largest shareholder in Mobinil, which has been underperforming, according to AlembicHC, an Egyptian investment bank.
"Continuing speculation regarding this deal will serve as a catalyst for the stock, diverting investors' attention from the third-quarter results, which will most likely be hit harder than the second quarter," the bank said.
The Egyptian Exchange 30 Index rose 1.2 per cent to 4,463.74 points. Egyptian shares were hurt after a civil uprising in January that culminated with the departure of the president Hosni Mubarak.
"The markets have been longing for good news for too long to loosen sentiment," said Wafik Dawood, the head of institutional trading at Mega Investment Securities in Cairo.
"Investors are getting too excited about media reports on both names even though no official filings or statements from the sources have been made.
"So far, this is only investors, institutional and foreign acting on news."