EUR 22.22 For Business Accounts Only

EFIH EY | Silver lining of the current backdrop

Macro developments have positive spill over. Recent macro developments in Egypt solidify our investment thesis, triggering greater support to our positive outlook on the Group’s throughput, as it is the sole entity authorised to process government transactions. We maintain our 12M TP at EGP24.0/share and OW recommendation, and reiterate the name as one of our top Egypt picks for 2022. The stock trades on a 2022e EV/EBITDA of 24.9x and P/E of 40x, implying a PEG ratio of 0.96x, 42% below peers.

Fiscal measures pose upside. The addition of 450k new families under the umbrella of social safety net programmes, Takaful and Karama, could potentially grow e-finance’s fixed transactions by c11%, on our figures. We also see the company benefiting from the pension hikes via its card management business– e-cards’ higher margin revenue stream. This comes despite that the processing of the salary increases, bonuses, and pension hikes falls under the company’s fixed-fee type of transaction.

Variable-transaction throughput may benefit from EGP weakness. e-finance stands to benefit from the recent slide in EGP against the USD, alongside spiralling commodities. Variable-transaction throughput could potentially grow by c17%, on higher customs ().

Risk of rising cash conversion cycle contained. A tighter monetary framework could delay receivables of B&O contracts– c28% of 2021 total revenue. But we believe that the bundle of government reforms and management’s active strategy to shift towards transaction-based revenue (where cash collection is immediate) will cushion the impact.