Pricing outlook holds many variables; downgrade to Neutral
Inevitable price hike but variables need to be considered. The FY17/18 state budget implies 29% higher tobacco revenue, but this does not necessarily elude to another hike in Eastern Tobacco’s ex-factory prices. Unknowns are: i) whether the MoF will also raise tobacco tax, and ii) to what extent the ceiling for the first tax bracket will change. We take the view that the tax bracket ceiling will be raised to EGP18/pack from EGP13/pack, in line with more recent company guidance, and assume a fixed tax increase of EGP0.5/pack. This yields a FY17-21 ex-factory price CAGR of 17% (vs. 6% previously), assuming Eastern will hike its retail-price to the new ceiling gradually over 3 years, raising our TP by 47% to EGP352/share.
Eastern Company SAE is an Egypt-based company, which is engaged in manufacturing tobacco products. The Company's product portfolio includes cigarettes, cigars, pipe tobacco, and molasses tobacco (Moassels), as well as other related products such as cigarettes' filter rods and homogenized tobacco. Its products are divided into two segments: Export and Local products. Its Export cigarette, cigar and molasses products include such brands as Cleopatra, Taba, Golden West, President and Delta. Its Local segment offers brands, including Cleopatra, Mondial, Corona, Jose Bartolo and Legation, among others. In addition, The Company is also active in the investment, financial, commercial, industrial, agricultural, real estate and services sectors.
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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