Uber-Careem deal complete; Upgrade to OW
Completion of Uber-Careem deal adds SAR6.00/share to our TP. We raise our TP by SAR6.00/share (c29%) and upgrade our rating to OW from N, as we account for the recent acquisition of Careem Inc. by Uber for USD3.1bn on 2 January (our operating assumptions and FCFF remain unchanged). The deal was completed directly upon obtaining regulatory approval in Egypt, which was a long time pending (and, as such, was not taken into account in our previous valuation). Seera Group owns 15.3% of Careem Inc., equivalent to SAR1.8bn at the deal price, carried at nearly nil book value. We expect the deal execution and receipt of proceeds to likely materialise in 1H20e.
Streamlining its operations. In 2018, Seera Group decided to venture into a strategic transformation, with the aim of focusing on core travel operations and becoming an integrated travel and hospitality service provider in the MENA region. This is in addition to offloading non-core investments. Seera’s exit of Careem comes in line with the company’s strategic transformation, and could pre-empt further successful exits (namely Seera’s 33% stake in the online retailer, Wadi Middle East).
Deal completion could lead to special dividend. We expect Seera Group’s balance sheet to improve substantially upon the receipt of the deal proceeds, leaving the company with 2020e net cash and cash equivalents of SAR1.4bn (up from a net debt of SAR0.6bn in 2019e). With limited capex needs (based on announced projects), and steady operations, Seera Group has room to pay a special dividend, with a yield of up to 27% in the short-term (assuming full distribution of the proceeds), in addition to our base case DPS estimate of SAR0.50 in 2020e and SAR1.00 in 2021e.
Risks. The USD1.7bn convertible notes were priced in Mar-19, to be convertible into Uber shares at a price of USD55.0/share vs. the current price of USD34.0/share. We expect repricing of the notes to account for Uber’s share price change. If this does not materialise, it would knock SAR1.00/share (3.7%) off our TP, all else constant. Otherwise, every 5% higher/lower-than-expected gross bookings would raise /lower our TP by 4%, all else constant. Additionally, every 5% higher/lower-than-expected service costs and SG&A expenses would reduce/raise our TP by 4% and 8%.
Seera Group Holding, formerly Al Tayyar Travel Group Holding Company SJSC, is a Saudi Arabia-based company engaged in the travel, tourism and transportation sector. The Company's services include reservation, ticketing for domestic, regional and international flights, follow-up and confirmation of reservation, ticketing for land, sea and train transportation facilities, hotel booking, furnished apartments and hotel rooms. In addition, the Company organizes tourism services, such as incentive trips, Hajj and Umrah programs, honey-moon trips, medical and educational programs, as well as conference and meeting services. The Company also provides land, sea and air transportations means to a range of Saudi Arabian urban and rural centers, along with land, marine and air cargo services, issuance of (Triptick) customs pass, international driving licenses, customs clearance for goods and commodities, as well as packing and insurance, among others.
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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