Upgrade to Overweight on improved risk/reward
2016 EPS seen as bottom. We upgrade our rating to Overweight from Neutral as we believe Aldrees’ valuation is attractive, trading on a 2017e P/E of 11.7x, 37% below peers. We factor in the SAR597mn Ma’aden contract signed in Oct-16, which should help mitigate Aldrees’ struggle to pass on higher diesel costs in existing contracts. We cut our TP by 5% on higher capex for revamping all fuel stations over 2017-19, plus lower transport margins. The government raising station operators’ absolute margins could act as a catalyst if another round of fuel price hikes occurs. But 2016 EPS pressure and capex ahead (2017e reinvestment rate of 112%) leads us to reduce 2016-17e DPS (4.7% yield) and this could disappoint the market.
Aldrees Petroleum & Transport is engaged in the selling of petroleum and transportation of goods. Co.'s objectives include retail and wholesale trading of fuel, lubricants, catering services and the transportation of goods. Co. also is engaged in the establishment of vehicle workshops and car washes, acquisition of land to construct buildings for sale and lease, and the construction, managing, operating and renting of take away centers for hot and cold beverages and food.
CI Capital is a diversified financial services group and Egypt’s leading provider of leasing, microfinance, and investment banking products and services.
Through its headquarters in Cairo and presence in New York and Dubai, CI Capital offers a wide range of financial solutions to a diversified client base that include global and regional institutions and family offices, large corporates, SMEs, and high net worth and individual investors.
CI Capital leverages its full-fledged investment banking platform to provide market leading capital raising and M&A advisory, asset management, securities brokerage, custody and research. Through its subsidiary Corplease, CI Capital offers comprehensive leasing solutions, including finance and operating leases, and sale and leaseback, serving a wide range of corporate clients and SMEs. In addition, CI Capital offers microfinance lending through Egypt’s first licensed MFI, Reefy.
The Group has over 1,700 employees, led by a team of professionals who are among the most experienced in the industry, with complementary backgrounds and skill sets and a deep understanding of local market dynamics.
CI Capital has been recognized as the “Best Investment Bank in Egypt” by EMEA Finance for four years running from 2013-2016, and by Global Finance in 2014 and 2015.
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