Cut to Underweight: Cheap multiples justified by bleak outlook
New capacity yields bleak price outlook; cut 12M TP by 49%. The Ministry of Defence’s 13.2mn tpa greenfield project reported on 12 June 2016 means that the industry’s oversupply will last for at least 5 more years, in our view. As a result, we cut our long term industry cement price forecasts. A higher average cost of capital assumption of 17.9% (up from 13.6%) and higher coal prices (up c35% y-t-d) also lead to our lower TP. ACC trades on P/Es of 9.3x in 2016e and 5.2x in 2017e, but we expect this to surge to 14.4x by 2019.
Arabian Cement Co is a Saudi Arabia-based company engaged in the construction materials industry sector. The Company produces and distributes cement and its derivatives. The Company products include ordinary Portland cement, sufate-resistant cement, Portland pozzolan cement and other types of cement. The Company has one wholly owned subsidiary, namely Bahrain Cement Holding Company, and also holds stake in Qatrana Cement Company, Jordan, which is engaged in the production of calcium carbonate and its derivatives, and black and white cement. Public Pension Agency holds 5.10% stake in the Company's capital.
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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