Turning into a cash cow, remain Overweight
Capitalising on demand inelasticity. Eastern Tobacco raised prices in Jan and Feb 2017 for select SKUs, on top of Sep-16 price increases, yielding a FY14/15-FY17/18 20% CAGR in blended ex-factory price. We expect per capita consumption to ease a minor 50bps given historical demand inelasticity. During 2011-16 per capita consumption of tobacco was flattish while end-retail prices more than tripled vs cumulative retail price increases of c25-30% since Sep-16. We raise our TP by 45% to EGP240/share to reflect higher prices and an improved net cash position (15% of our TP upgrade, excluding cash needed to restock raw tobacco). We look for 67% clean EPS growth in 2016/17, putting the stock on 7x P/E, well below peers’ 16x.
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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