Quest for value
The tables have turned for Qalaa Holdings (QH)—top-down, Egypt started reforming energy subsidies, the premise for its core investments. Bottom-up, transformation is in progress with QH closing an EGP3.64bn capital increase, raising its ownership in holdings via a series of swaps, in addition to delivering on its strategy to exit non-core holdings. We expect 2016 EBITDA to stand 2.5x higher than 2014e, driven by full operations at its strategically located 2mn tpa Egyptian cement plant, due for coal conversion by May 2015 and for brownfield expansion by 2017. We also expect integrated energy investments to pay-off strongly. By 2016, QH will have emerged into a holding company that consists of two main business lines: cement (57% of 2016e EBITDA) and energy (24%)—together representing c90% of our SoTP value. QH’s 4.7mn tpa greenfield refinery, Egyptian Refinery Company (ERC), is slated to begin operations in 2017 and alone boost EBITDA by a further EGP3.7bn, and an even higher EGP5.4bn once fully operational in 2018 to a consolidated figure of EGP8.2bn, implying a sustainable yearly free cash flow of EGP1/share, a yield of c30% on current share price levels. Announcement of a partnership agreement at Mashreq (30-year concession for fuel storage and bunkering services at the Suez Canal) could add EGP500mn in annual EBITDA to our forecasts.
Qalaa Holdings SAE, formerly Citadel Capital SAE, is an Egypt-based company engaged in the private equity investment activities. The Company manages an investment portfolio that consist of 19 Opportunity-Specific Funds (OSFs), which controls entities platform distributed across 12 countries in the Middle Eastern and North African markets, and span 14 industrial sector such as energy, cement manufacturing, solid waste management, real estate, mining, agricultural, glass manufacturing, transportation and metallurgy. Its OSFs entities include Asec Holding, Ascom Geology and Mining SAE, Nile Logistics, Rift Valley Railways, Gozour, Wafra, Nopc / Rally Energy Group, Nile Valley Petroleum Ltd, Egyptian Refining Company, Taqua Arabia, GlassWorks and Finance Unlimited, among others. On December 9, 2012, the Company announced that it has sold 100% of its interest in National Petroleum Company Egypt Limited (NPC Egypt), a wholly owned portfolio company, to Sea Dragon Energy Inc.
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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