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 Suez Cement GDR (SZCD-London)
Egypt has been a dead market over the last two years. It didn't crash during the Asian Crisis. But it didn't participate in the subsequent emerging market rebound. The government abandoned its privatization program, which kept new money from flowing into the market. Institutional investors avoided Egypt, preferring to jump on Greek, Asian, and Latin American stocks.
The new government in Egypt is pro-privatization. This should give a big boost to Egyptian capital markets. I am very bullish on the Egyptian stock market in 2000. At 8x earnings, the market is extremely cheap.
Suez Cement (SZCD-London) is an incredible bargain at current prices. The stock pays a 10% dividend yield. At just over 8x earnings, you can't go wrong. SZCD released outstanding earnings in 1H FY99. Sales and earnings per share were both up 23%. Gross profit margin remains an obscene 52%. In 1999, SZCD increased capacity by 50%.
Western oil companies are muscling into the booming Egyptian cement market--a sign that there remains tremendous growth potential for high-quality cement manufacturers like SZCD. Economists forecast that the supply/demand imbalance in Egyptian cement will remain for at least three years.
Since SZCD pays a generous dividend, you can afford to wait for the stock to appreciate. I believe that 1999 will be a good year for SZCD shareholders. My twelve-month target is US$25.
 Aramex (ARMX-NASDAQ)
Aramex (ARMX-NASDAQ) is one of the leading providers of express package delivery and freight forwarding in the Middle East. Since the IPO in 1997, ARMX has grown sales to over US$22 million per quarter, expanded into the Indian Sub-Continent and other regions, and generated a cumulative US$10.3 million in net profits.
Despite the company's sales momentum, ARMX has maintained a super-clean balance sheet. ARMX has almost zero debt and is sitting on a US$10 cash pile. Management's conservative financial controls and aggressive growth strategies have yielded consistently strong top and bottom line results.
ARMX has a paltry market cap of just US$40 million. The valuation is insanely cheap: ARMX has a p/e ratio of 11 and price/sales ratio of 0.4! With an 18% return on equity (ROE) and a book value that has grown every year, I find the market's low assessment of ARMX to be incomprehensible.
In fact, ARMX (as far as I am aware) is the only pure play on the Middle East listed on any U.S. stock market. If retail investors want to play the Middle East, they have to buy ARMX. Given the tight 2 million share float, ARMX could be vulnerable to an explosive rally at any time.
Wall Street analysts are touting UPS and FedEx as indirect Internet plays. If you order merchandise online, it has to be physically delivered. ARMX should become the de facto Internet-shipping play on the Middle East.
ARMX is also developing its Internet strategy. Aramex.com accepts Arabic-language orders. The logistical package delivery infrastructure has been "online" for years. There's a natural synergy between aramex.com and the direct mail business, Shopping the World Direct. I anticipate that ARMX will monetize the value of its unique Internet-related business through concrete corporate action. An aramex.com spin off would be worth more than the entire US$40 million market cap...
ARMX's India business has not met expectations. However, over the long term, I am very bullish on the Indian economy. ARMX only has a 5% market share--so there's plenty of room for growth.
ARMX remains extremely undervalued. My two-year target is US$30.
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