EUR 118.82 For Business Accounts Only

Uncovered play on Egypt themes; Initiate with OW

A well-diversified, debt free PE firm. B Investments’ portfolio offers exposure to: i) the real estate market, via MNHD* (EGP3.85/share), ii) IT integration, via Giza Systems (GS) (EGP1.90/share), iii) downstream oil and gas, via Total Egypt (EGP1.74/share), vi) non-banking financial services (NBFS), via Ebtikar (EGP0.82/share), and, recently, v) FMCG, via Gourmet Group (EGP0.78/share). The firm plans to deploy its net cash position of EGP491mn (EGP3.07/share) within the: i) NBFS, ii) renewable energy, iii) FMCG, and iv) healthcare sectors. Our estimated P/NAV stands at 0.70x, with MNHD’s stake at market price, and after stripping PE’s management and performance fees.

SODIC, MNHD potential deal likely to trigger an exceptional dividend. On 14 October, the two realtors announced the potential acquisition of MNHD by SODIC in a 2:1 share swap deal. Assuming the deal materialises, at SODIC’s last closing price (EGP20/share), an exit of B Investments’ stake in MNHD could translate into a DPS of EGP4.00 (as per B Investments’ dividend policy), yielding 45%, on our figures. We calculate that every EGP2.00 increase/decrease in MNHD’s share price would add/deduct EGP1.00 to/from B Investments’ TP, all else constant.

A play on Egypt’s growing sectors. GS and Total Egypt should witness their 2018-20e EBITDA growing at a c13% CAGR, mirroring the growth seen in their respective sectors. Giza Systems should capitalise on Egypt’s IT revenues and construction activity pick-up. As for Total, the fuel retailer should benefit from: i) further upward revisions of the segment’s margins, following each round of subsidy cuts, and ii) a growing vehicle penetration.

NBFS pose major upside risk. Ebtikar is exposed to: i) e-payment platforms via Bee and Masary, ii) microfinance via Vitas Misr, and iii) leasing via Tamweel. We value Tamweel and Vitas at book and acquisition price, given the latter is a greenfield and the former’s acquisition was recently concluded at 1.43x its BV. We note the recent 15% stake sale in GB Auto’s Tasaheel was transacted at a P/BV of c6-7x, offering upside to our numbers.

(*) Disclaimer: CI Capital has restricted research coverage on MNHD EY since 06 May 2018. B Investments’ 7.5% stake in MNHD is valued at market price.