A recent technical report issued by Markets Chimp said that EFG Hermes’ current stock price could still have an uptrend despite current correction in the share’s price.
“The weekly chart of EFG Hermes Holding reveals that even though the stock is in a severe correction or retracement phase since the beginning of the current year, the long or major trend is still up,” the research firm said in a note.
“The recent correction move from EGP 29 to 20 considers just a 38.2% Fibonacci Retracement of the 2016 parabolic up-trend (not shown on the chart)! Historically speaking, this is a healthy, natural and needed correction phase that must precede any spectacular major up-trend,” it added.
In September, the investment bank announced the opening of a new headquarters in New York under the name EFG Hermes USA Inc.
The Egyptian financial services firm received the necessary licenses to conduct its business operations in the US as of 1 September, the company said in a filing to the Egyptian Exchange (EGX).
The report added that during most of 2017, the price movement has been confined between two medium-term falling trendlines. However, the bears were not able to force stock down decisively below the two major horizontal support levels (20.00 & 17.00).
“Moreover, the trading activity dried up noticeably during this secondary correction phase. This confirms our first conclusion that the stock is just experiencing a natural, medium-term secondary correction phase that is materialising in the context of an intact major bull market,” it added.
Last month, EFG Hermes’ co-head of investment banking, Mostafa Gad, revealed that the group had completed 10 investment deals exceeding $870m in value since the start of 2017.
“The daily chart shows that the stock might be building a medium-term base. A decisive breakout over the key resistance level at 22.50 would force the stock up to the first target at 27.50,” the report concluded.
Meanwhile, a separate research note issued by Pharos Research has maintained its target fair value (FV) for Eastern Co. at EGP 390 per share, with an equal weight recommendation.
Eastern Co.’s gross profit margin rose 1% quarter-on-quarter and 10% year-on-year to reach 39% in the first quarter (Q1) of fiscal year (FY) 2017/2018, beating Pharos’ estimates of 25%.
The tobacco company reported an 18% quarter-on-quarter and 66% year-on-year surge in revenues in Q1 FY 2017/2018 to EGP 3.2bn.
Cost of goods sold (COGS) stood at EGP 1.9bn in Q1 FY 2017/2018, with an increase of 17% quarter-on-quarter and 44% year-on-year.
Net profit after tax amounted to EGP 1.04bn from EGP 435m in Q4 FY 2016/2017.
“Results show that the company is still benefitting from low-cost dollar inventory,” Pharos added.
Despite Eastern Co. not having revealed full details, Pharos claims that the company’s bottom-line growth was driven by a “one-off reversal of provisions.”