Clouded visibility; downgrade to Underweight
Repeated feedstock price revisions cloud margin visibility. 3Q16 is the second time Sidpec’s feedstock contract gets revised after industry-wide price hikes took place in 2014. This comes despite the company’s contract stipulating a review every 3 years, and the next one should have been due in 2017. We cut our 2017 EPS and EBITDA estimates by 10% and 6% on higher feedstock prices, and our 12- month target price by 23% to EGP11.5/share. The revised TP implies 11% downside and we therefore downgrade our rating to Underweight from Overweight. Our 2016 DPS estimate of EGP1.4 implies a yield of 10.8% (assumes 100% pay-out), which is no longer as attractive given Egypt’s after-tax t-bill rate of 13.5%.
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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