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Dave Nadig
ETF.com Analyst Blogs

Is EGPT Going To Pop 60%, 20% Or Not At All?

Related ETFs: EGPT
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After yesterday’s webinar on emerging markets, I got a note from someone who’d been poking at the premium/discount issue with everyone’s favorite broken ETF, the Market Vectors Egypt Index ETF (NYSEArca: EGPT). Closed for creations since Jan. 29, EGPT is now trading at a notional 22 percent premium. That premium is notional because the gap will be closed when one of two things happens after the market reopens in Cairo: Either the price of EGPT will plummet back toward the NAV where it stood in late January, or the Cairo Stock Exchange will open and the prices of the underlying stocks will soar.

Here’s a quick chart to show how EGPT and its underlying holdings have diverged.



But how far does the gap have to be? Answer: Not 22 percent.

Here were the holdings going into yesterday in the fund, with yesterday’s closing prices. The securities in bold are actually still trading, on London and Canadian exchanges.

Holding

Ticker

Shares

Price

Market Value

% of net assets

Net Other Assets / Cash

 

0

$1.00

$ 9,536,874.14

41.14%

Orascom Construction Industries

ORSD LI

52,884

32.74

$ 1,731,422.16

7.47%

Orascom Telecom Holding SAE

OTLD LI

557,227

3.245

$ 1,808,201.62

7.80%

TRANSGLOBE ENERGY CORP

TGL CN

77,331

13.5

$ 1,062,022.89

4.58%

Commercial International Bank Egypt SAE

COMI EY

160,224

36.49

$ 993,386.08

4.29%

Centamin Egypt Ltd

CEY LN

477,174

1.253

$ 964,769.86

4.16%

YeTalaat Moustafa Group

TMGH EY

685,124

6.53

$ 760,149.47

3.28%

Telecom Egypt

ETEL EY

238,577

16.03

$ 649,798.54

2.80%

Egyptian Financial Group-Hermes Holding

HRHO EY

151,426

26.42

$ 679,751.07

2.93%

Juhayna Food Industries

JUFO EY

631,632

5.47

$ 587,040.53

2.53%

ElSwedy Cables Holding Co

SWDY EY

69,322

45.74

$ 538,745.78

2.32%

Egyptian Kuwaiti Holding Co

EKHO EY

470,748

1.26

$ 100,780.30

0.43%

Egyptian Co for Mobile Services

EMOB EY

22,589

133.21

$ 511,270.19

2.21%

Ezz Steel

ESRS EY

202,446

15.93

$ 547,950.86

2.36%

Citadel Capital Corp/Cairo

CCAP EY

378,528

7.14

$ 459,211.61

1.98%

Palm Hills Developments SAE

PHDC EY

456,343

4.87

$ 377,604.35

1.63%

Six of October Development & Investment

OCDI EY

27,065

80.63

$ 370,784.29

1.60%

Maridive & Oil Services SAE

MOIL EY

118,444

3.06

$ 61,581.62

0.27%

Sidi Kerir Petrochemicals Co

SKPC EY

143,652

12.82

$ 312,907.76

1.35%

Medinet Nasr Housing

MNHD EY

57,211

23.81

$ 231,449.14

1.00%

Egyptian Financial & Industrial Co

EFIC EY

55,164

15.62

$ 146,404.16

0.63%

Egyptian for Tourism Resorts

EGTS EY

561,548

1.52

$ 145,026.41

0.63%

Arab Cotton Ginning

ACGC EY

229,041

3.08

$ 119,861.74

0.52%

Heliopolis Housing

HELI EY

37,361

18.34

$ 116,421.84

0.50%

Naeem Holding

NAHO EY

265,469

0.4

$ 18,042.24

0.08%

Pioneers Holding

PIOH EY

236,311

2.46

$ 98,772.42

0.43%

South Valley Cement

SVCE EY

153,197

3.79

$ 98,652.05

0.43%

Nile Cotton Ginning

NCGC EY

47,455

11.25

$ 90,709.16

0.39%

Cairo Housing & Development Co SAE

ELKA EY

74,624

4.7

$ 59,592.69

0.26%


We reported previously on that big cash number, a result of taking in a big creation order when the fund couldn’t go buy enough underlying securities. But how that skews the premium/discount number is nonintuitive. Effectively, 41 percent of the premium in EGPT is linked to the cash, an asset that should never have a premium of any kind since it’s completely fungible.

So here’s how to really think about the math:

EGPT has 1.550 million shares outstanding at a price of $18.34. That puts the market value of the ETF at $28,427,000. Based on the above table, we know the actual value of the holdings is quite a bit less than that:

Cash/Trading Holdings: $15,136,019
Egyptian Holdings (stale): $8,076,580
NAV: $23,212,600

 

 

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