Cut TP 29%; buy after overhangs in Egypt clear
Our Overweight is for long-term investors as the stock lacks catalysts. GB Auto trades at 9.7x 2016e EPS, a 54% discount to its historical average 12- month forward P/E of 21x. While the stock is down 49% from a y-t-d high of EGP6.25/share, there is now, in our view, two key overhangs that need to be cleared before the stock rerates. The first is access to FX in Egypt and the second, clarity on whether or not proposed VAT will be offset by tariff reductions. Our EBITDA forecasts are on average 27% lower than before as we reduce PC sales assumptions in core markets by 28%.
GB Auto is a player in the MENA region's automotive industry. Co. operates at all levels of the value chain, including assembling, distributing and selling passenger cars and commercial vehicles, manufacturing semi-trailers and superstructures for trucks and buses, selling automotive components, motorcycles and three-wheelers, tires, and construction equipment, as well as providing after-sales service through an aftersales service network and consumer finance and microfinancing. Co. also provides private freight transport services in governorates throughout Egypt. Co.'s operations can be divided into two segments: Passenger Cars, and Commercial Vehicles and Construction Equipment.
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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