EUR 138.52 For Business Accounts Only

Obour Land - Initiation of Coverage

​We initiate our coverage for Obour Land for Food Industries - with a “Buy” rating driven from an upside potential of 38.1%; driven from our estimated Fair Value of EGP 12.43 /share. The company’s P/E Multiple for 2017 would stand at 7.44x.

The Egyptian Food & Beverage industry witnessed a lot of changes during 2016. Two main factors shaped the industry during the year; (1) The FX shortage / volatility and (2) The high rates of inflation. In the past, the F&B producers have always been able to secure the FX they needed from the official banking sector, even when the FX shortage started to affect other industries. By April 2016, the F&B companies started to resort to the parallel market to secure some of the required FX, where by June /July 2016, most of the F&B companies announced that they were securing c90-95% of their required FX from the parallel market. After the EGP floatation that took place in November 2016, the large F&B producers announced that they were largely back to securing most of their required FX through the official banking sector, where they only secured a small portion from the parallel market. As for the inflation, the Egyptian economy witnessed very high rates of inflation during 2016. In December 2016, the headline and core inflation recorded the highest rates since 2003, as they stood at 23.3% and 25.9% respectively. Such high rates for the headline inflation were mainly driven by the increase in food prices, the rise in the healthcare costs and the increase in the transportation costs. The high inflation has affected the purchasing power of consumers in many aspects, however, the severity has been different among many product categories; products that were perceived as cheap and essential were not as affected as products that were perceived to be relatively expensive and non-essential. Other factors that also affected the industry were the rise in the cost of debt, the rise in the cost of most of the utilities; such as water and electricity, the partial removal of the fuel subsidies and the application of the VAT.