Play the cost restructuring story, upgrade to OW
Trimming fat. Management plans to lay off 20% of total workforce in 2H17, bringing headcount down to 4k employees. This would leave labour costs (9% of cash costs) at EGP28mn/month, down 20% and saving a total of EGP84mn p.a. The closure of an underutilised yogurt factory (planned in 2H17, c10% of yoghurt capacity) in southern Egypt will also reduce costs. Cost management is key to any revival in profitability (given that we expect sales volume recovery to be prolonged on pressures from a strained consumer and competition). We look for a 2018 EBITDA margin of 16.2% (+150bps y-o-y), as restructuring efforts start to bear fruit. We raise our TP by 9% to EGP8.7/share and upgrade our rating to Overweight from Neutral.
Juhayna Food Industries is a food products manufacturing company based in Egypt. Co. is primarily involved in the production, manufacture, packaging and packing of all types of dairy products and its derivative, all types of cheeses, fruit juices, drinks and frozen materials. Co. is also engaged in the perpaing, manufacturing, packaging and packing of all types of food materials, as well as the general manufacturing of agriculture products.
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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