Solid story in stable market; Initiate with OW
Kuwait provides more stability than other GCC markets. We initiate coverage on Mabanee with a TP of 950 fils/share, implying 23% upside, warranting an Overweight rating. We view Kuwait as a more stable market over the coming period vs. the GCC on: i) +ve inflation improving consumption activity (+3.6% in 2019), ii) the lack of austerity measures and progress on Kuwaitisation, positively impacting expat (70% of population) disposable income, and iii) favourable demographics (45% of population between 20-40 years) boding well for the retail market. We expect the Kuwaiti market to witness USD2bn on the MSCI EM inclusion, with Mabanee set to be a key beneficiary (USD71mn of inflows).
The Avenues holds the lion’s share. Mabanee owns The Avenues, one of the largest malls in the world. With 350k+ sqm of GLA, the mall comprises 95% of our valuation, with the balance coming from the Avenues Bahrain stake and the hotels under development. We expect Kuwait to continue to be the main driver, on the back of the new openings in Phase IV (23% of EV), along with organic growth in the form of higher rental rates as of 2022e, as occupancy in Phase IV ramps up, with rates currently at a premium to local peers. The occupancy rate stands at 95% for The Avenues as a whole, expected to normalise at 98% by 2022e. Mabanee trades at a 34% discount to NAV, roughly in line with the historical average of 30%, despite strongly improved micro (+18% y-o-y in 1H19 footfall) and macro (+7% y-o-y in 1H19 POS transactions) indicators.
Bahrain impact minimal; Hotels complimentary to core business. Despite being branded as The Avenues and managed by Mabanee, the company only holds a 35% stake in The Avenues Bahrain, limiting its impact on valuation (3% of EV). Additionally, the company plans to open three hotels linked to the malls in the coming years, which we believe will have little direct impact on valuation (2% of EV), but will improve the outlook on footfall in the malls.
The Avenues Riyadh main upside to our valuation. Mabanee is now looking to develop its next Avenues-branded mall in Riyadh, holding a 60% stake in the mall. Upon completion (earmarked for 2023), The Avenues Riyadh is expected to include c400k sqm of GLA. That said, the execution of this mall provides the biggest upside risk to our valuation, in our view.
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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