MAHARAH AB | A play on Saudi labour market recovery; Initiate at OW
Initiate with a 12M TP of SAR96. Maharah is Saudi’s leading recruitment firm. We project its 2022 deployed resources – employees – represent 0.43% of the country’s corporate labour market and 0.36% of household labour, giving them 15-18% of HR-company sourced expats. The stock trades on a 2022e P/E of 17.9x, falling to 13.4x by 2023e vs. peers’ 14.3x, driven by a 2021-23e EPS CAGR of 29%. Maharah also offers an attractive 2022e dividend yield of 4.8%, compared to a Tadawul high of 5.9%.
Saudisation risk waived. Maharah’s resources were only comprised of expats until May-21, then MHRSD introduced the ESNAD initiative, allowing HR companies to provide brokerage services to Saudi citizens. We see this as potential to Maharah’s corporate segment, 72% of 2021 revenue, eliminating the risk of increased Saudisation and Saudi female employment efforts.
Case for profit reversal. We foresee above-trend growth for Maharah; a 2021-23e EBITDA CAGR of 20%, which saw a cumulative 32% decline in its 2020-21 EBITDA, mainly on the pandemic. Our growth outlook is based on oil price spill-over to corporate capex, amendments to the sponsorship system allowing for corporate job mobility, mega government projects, resumption of travel allowing the company to cater for pent-up demand for household labour, and resumption of its Khidmah services in full force. We expect the healthcare and hospitality sectors to continue to drive the corporate segment's growth.
High EBITDA retention rate. Maharah retained an 2014-21 average of 54% of its EBITDA as free cash flow, leading to a 2021 net cash of 0.7x EBITDA. This is a function of low capex needs (0.9% of sales, in 2021) and cash-generative working capital cycle (-12% of sales over 2014-21). The cash flow supported a generous 2014-21 average DPO of 78% and allowed for inorganic growth to better compete in supplying specialised healthcare resources.
Maharah Human Resources Company SJSC Formerly known as Maharah Huamn Resources Company SJSC. Maharah Human Resources Company SJSC is a Saudi Arabia-based company that provides human resources and sourcing services. The Company offers jobs in home services, medical, industrial, retail, and hospitality sectors. Maharah Huaman Resources Company SJSC serves customers in Saudi Arabia.
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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