Aggressive growth in Egypt not fully priced in; Upgrade to OW from N
Raise TP by 30% to MAD576/share. We upgrade our valuation of ATW, primarily on: i) valuation rollover, ii) factoring in ATW Egypt’s aggressive growth strategy, with loans market share growing by 90bps to 1.6% by 2022, translating into a loan growth CAGR of 45.6% during 2018-21e, and iii) lower CoR (-20bps in 2018e) amid signals of improvement in Morocco’s asset quality metrics. ATW currently trades on a 2018e P/BV of 2.1x (vs. sustainable RoE of 15.5%) – a 29% premium to Moroccan peers, justified by size, profitability, and exposure to Egypt’s potentially growing market.
ATW Egypt is the alpha, coming from a low base. Strongly growing the Egyptian operations (c20% of bottom line, 12-15% of valuation) is at the top of management’s agenda during 2018-20e. The Group plans to introduce new products to the significantly underbanked retail segment, and strengthen the corporate business. We expect ATW Egypt to represent 5.8% of the parent’s 2022e total loans, from the current 2.0%, driving RoE up by >100bps.
Stable Moroccan operations. BAM’s Jan-18 decision to widen the MAD fluctuation band to a total of 5.0% from 2.5% aims to stabilise economic growth, in the face of the volatile agricultural output. ATW Morocco’s loans (75% of loans) are projected to grow at a 2018-21e CAGR of 5.5% vs. 2.0% in 2014-17. Improvement in ATW Morocco’s asset quality in 2017 (-30bps in NPLs to 6.5%), the bank’s main market, is comforting. Weaker macro dynamics in Tunisia (7% of loans) pose a key downside risk.
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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