Reiterate Overweight raising TP by 25% on lower capex guidance
Impressive 4Q results on higher ARPU, but maintain the view that competition and maturity would not allow the trend to continue. 4Q results showed 22% y-o-y growth in revenue, 28% in EBITDA adjusted for handset subsidy amortization, and a 17% rise in net profit. The numbers beat our estimates across the P&L on 8% higher revenue thanks to an increase in ARPU with the same magnitude as subscribers came exactly in line. Net profit came in 67% higher than our estimate on a 31% lower-than-expected depreciation as the company has spent very little on capex this quarter. It is worth highlighting that handset subsidy spending, which the company amortizes on the tenure of customers’ contracts, came in 7% south of our numbers, yet amortization was 11% higher. The main driver of the results was ARPU appreciation which led Viva’s revenue share to grow by 110bps q-o-q. While we acknowledge that Viva in fact already has a track record of increasing ARPU since launch, we maintain the view that ARPU going forward should remain flat as Ooredoo [Ooredoo KD | NR] is stepping up its game, earning 76% of market net adds in the quarter and growing its revenue share—at the expense of Zain’s [ZAIN KK | NR]—as well as its EBITDA margin by 50bps and 400bps q-o-q.
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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