QEWS QD | Relatively safe amid global turbulence; Maintain Overweight
Share price drop unjustified; Maintain Overweight. QEWC’s share price fell 11% y-t-d, outperforming the Qatari index by 9.6%, amid the global panic sell-off. The company’s operations are not impacted by COVID-19, rendering the share price drop unjustified, from a fundamental perspective. QEWC trades on a 2020e P/E of 11.1x, 20.7% below the industry’s normalised levels of 14.0x, yielding 5.9%, in line with global peers and vs. 4.9% for the Qatari index.
Operations relatively stable amid COVID-19. As a pure utility play, QEWC’s sales of electricity and desalinated water are not impacted by the COVID-19 outbreak, although the company is subject to other operational risks, mainly related to its contracts with the Qatari government. This means that a further turn of events, positive or negative, is irrelevant to the company’s operations. Nevertheless, we cut our TP by 4.5% to QAR21.1. This is driven by a 14% lower net income estimate over 2020-29e, on the back of higher natural gas costs, similar to the levels seen in 2019 (natural gas cost increased by c30% in 2019, on our estimate, likely to match global prices), which is mostly offset by DCF rollover.
Further contract downgrades main downside risk. QEWC’s fixed terms with the Qatari government for the sale of electricity and desalinated water and purchase of natural gas were downgraded multiple times over the last two years. Further contract downgrades are the main upside risk, in our view, with every 5% lower-than-expected electricity and/or desalinated water price eating 8.1 and/or 5.7% off our TP, respectively. Meanwhile, every 5% higher-than-anticipated natural gas price should reduce our TP by 2.8%, all else constant.
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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.