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Shares in Telecom Egypt (TE) are forecast to rise by 32 per cent if the company chooses to pay a bumper dividend to shareholders this year.
17.01.12 | Interesting article at The National

Egypt's incumbent fixed-line telephone monopoly has more than 5 billion Egyptian pounds in cash, and analysts say it is under pressure from the government to issue a high dividend this year.

In a research note, HC Securities & Investment said it expected TE to issue a dividend of 0.39 pounds at the end of this month.

This could be followed by an additional dividend issued in March that is forecast to prompt a share-price boost, HC Securities said in a note. "TE can increase [its dividend per share] to 2 pounds … while maintaining cash balance at 5.9bn pounds, in our view," the note said.

This would give the company a share price target of 18.5 pounds, according to HC Securities.

"If the company announces a dividend today of 2 pounds per share, we think the stock price can go up to around 18 pounds," said Karim Khadr, the regional head of research and senior telecoms analyst at HC Securities.

Mr Khadr cited "pressure" from the government, which owns 80 per cent of TE, on the company to pay a high dividend

He added the markets could react negatively if a significant dividend was not paid. "If it happens, buy the stock," Mr Khadr said. "If it doesn't, the stock will not move. In fact, the stock may come under pressure."

Ibrahim Masood, a senior investment officer for asset management at Mashreq, said TEwas a potential source of cash for the Egyptian government. "It's not rocket science that the Egyptian government is in greater need for cash than normal at the moment," he said.