Recovery doable, but valuation rich; initiate at Neutral
FX pressures leave valuation stretched. We initiate on Domty, Egypt’s leading white cheese player, at Neutral on a 12M TP of EGP7.10/share. The rising FX shortage from 2Q16 led Domty to source the bulk of its FCY needs at the parallel rate (now a c45% premium vs. the official rate), with exports at only 5% of top line. c60% of CoGS is in FCY (80% indirectly); that said, we expect short-term EBITDA margins to remain pressured (9.9% in 2017e vs. 15.5% in 2015a) as price increases are unlikely to cover cost inflation. Domty trades on a 2017e P/E of 17x (20x implied) on par with MENA peers.
Arabian Food Industries Company (Domty) is a food and beverage company based in Egypt. Co. is engaged in the manufacturing, marketing and distribution of a range of branded white and processed cheeses and juice products, with a portfolio of nearly 200 stock keeping units (SKUs). Co.'s brand portfolio includes the flagship Domty brands as well as Bravo and Slim, covering four key segments: white cheese, mozzarella, processed cheese and juice. Co. maintains a distribution fleet of over 600 trucks operating from 27 sub strategically located distribution hubs across the country.
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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