Always a step ahead of peers; Set for a new path
Remain buyers, as Tasheel expands growth prospects. Offering a unique shopping experience, with different selling channels, payment options and easy access to finance, positions eXtra ahead of its peers. Tasheel Finance (launched in May-19) should enjoy high growth (80% over 2019-21e), capitalising on Saudi’s limited consumer finance offering by NBFCs and relatively low banking penetration (retail loans-to-GDP of 16.4%). We raise our 12M TP by 36% to SAR100/share, to factor the new consumer finance venture (27% of SoTP), expanding growth prospects. eXtra trades on a 2020e P/E of 12.2x, 5% below peers, despite its superior growth (2019-21e CAGR of c34% vs. peers c9%).
Favourable sales mix entails above-average NIMs. Tasheel’s unique offering should appeal to customers, given the easy and swift disbursement process, with no guarantor or salary assignment, providing leeway from banks and other NBFCs’ stringent requirements. This warrants premium pricing for cash loans (annual interest of 18%), coupled with the profitable instalment programme (80k client base), translating into average NIMs of 24%, well-above the market average of 20% (14% ex-American Express).
Expanding consolidated margins to new levels. Securing SAMA’s licence was well-timed, ahead of the MoCI’s decision to abolish instalment sales in May-19. As new instalment bookings shift to Tasheel, raising capital (+SAR200mn over 2019-21e) is key to maintain regulatory caps (portfolio-to-equity of 3x). We expect Tasheel to contribute 32% of eXtra’s earnings by 2021e, lifting EBITDA margin to a new level of 10.2%. Retail GPM should stabilise at 18%, supported by margin-accretive market share gains (appliances GPM 18%), as consolidation plays out, and profitable after-sales services (rebranded in 2Q19), despite the Tasheel programme shift.
Selective exposure ensures sound asset quality. Extending credit to public sector employees (>70% of instalments clientele) safeguards the company against potential macro headwinds. The solid asset quality, coupled with adequate provisions (8.5% over 2019-24e), should cushion against possible asset deterioration (NPLs of 3% for product loans and 6% for cash loans). Tasheel periodically reviews and updates its credit strategy, including the internally-set eligibility criteria for prospective clients, to limit credit risk.
United Electronics Company JSC is a Saudi Arabia-based joint stock company engaged in the retail of consumer electronics, appliances, communications and solutions. The Company distributes: Television and Audio, which includes plasma, Liquid Crystal Display (LCD), projectors, home theater, and Digital Video Disc (DVD) players; Computing, which includes laptops, net books, tablets, printers, data storage and accessories; Mobile Communications, which includes a range of mobile handsets and smart phones; Digital and Audio Imaging, which includes digital and professional cameras, photo smart printers, Global Positioning System (GPS) and accessories; Gaming, which includes consoles and gaming software; Home Appliances, which includes refrigerators, washing machines, air conditioners, cookers, dryers, and dish washers, as well as Small Appliances, which includes microwaves, vacuum cleaners, cooking appliances and personal care.
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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