reports
- Mohammad Kamal
Arqaam Capital - Fawaz Alhokair Q1 18A prelim results
Domestic LFL sales decline y/y on weak overall consumer spending – Ramadan period sales fall short of expectations Rent and other cost savings support gross margins which expanded 60bps y/y Finance cost weigh down on EPS as adjusted net income decline 14% y/y. We tweak our FY 18/19e assumptions and update our WACC parameters. This produces a new TP of SAR 48 in line with CMP. Downgrade to Hold
- Jaap Meijer
Kuwaiti Banks – Improved outlook as liquidity pressures ease
We have increased our forecasts for NBK by 2% and Burgan by 8-12% post stronger than expected Q2 results, driven by better margin trend and robust credit demand. We have lowered our estimates for KIB by 7-10% as asset yields reset slower than we expected and increased costs of strategic initiatives. Meanwhile, we have cut our estimates sharply for Kipco on persistent losses in pay TV and disappointing performance of other associates. NIM evolution of conventional banks outperformed the Isl...
- Jaap Meijer
MENA Core Portfolio Update - Churning our portfolio – selective oppo...
We increase RAKBANK (RoE expansion to 13%+) and include DIB (best growth story in the UAE) but make room by removing FAB (FY 17e to be a transitional year).Remain OW on the Saudi banking sector and double Al Rajhi’s weight to 5.0% (best play on NIMs and credit growth) while also adding Riyad Bank at 2.5% (deep value).Include the laggards within the Egyptian banking space, namely ADIB-E, NBKE, and SAUD while halving our position in HDBK to 2.5% and removing CIEB (fully valued) and EFG.Core Buys...
- Sarah Shabayek
MEA Telecoms Q2 17e earnings preview
ï‚· In the GCC, we pick STC as sentiment turns positive on i) the reinstatement of public sector benefits and ii) the potential MSCI inclusion. We avoid ORDS QD in the short-term following the political spat, in spite of expecting strong earnings growth. ï‚· In Africa, we expect top-line growth on operator specific factors, but not for Maroc Tel, which is facing a setback domestically.
- Jaap Meijer
MENA banks Outlook
We are updating our models for the expected impact of IFRS 9. We use a 3 stage model ─ 12 month expected losses, assume that >30 days past due 50% will migrate to NPLs and use blended LGD for existing NPLs. Most Egyptian, Kuwaiti (except BURG) and KSA banks (except SIBC) hold more balance sheet provisions than required under IFRS 9. However, the picture is mixed for Qatar and the UAE (ENBD, DIB are well positioned, most negatively affected should be RAKBANK). NIMs should start to improve ...
- Mohammad Kamal
Arabtec Holding recapitalization
ï‚· Arabtec completes recapitalization program, including the AED 1.5bn rights offering with the subsequent capital reduction of AED 4.6bn which swipe cleaned c.100% of accumulated losses. Ex-date (post share number and price restatement) is set for June 28, 2017 ï‚· Share cancellation acts as a reverse stock split- we expect ARTC to open trading at AED 2.97/share ï‚· We adjust our TP to AED 0.47/share (AED 1.90/share when adjusted for share cancellation), reiterate Sell
- Jaap Meijer
MyBucks - Changing the Lending Landscape
We initiate on MyBucks with a BUY rating and TP of EUR 16.9, providing low double digit upside. MyBucks is one of the leading micro lenders in a number of African countries thanks to its innovative approach to lending (i.e. app-based and AI technology). RoE/RoRWA profile is set to improve due to the scalability of the business model and drop in funding costs, while listing should allow it to bolster capital and grow inorganically, reducing the very high valuation multiples.
- Michael Malkoun
How to play KSA index inclusion? – Uncharted territory
​Index inclusion to be a strong catalyst for the Saudi market, and should result in substantially improved valuations, liquidity, and foreign inflows, as illustrated by 4 recent examples.June 2018 index inclusion remains our base case, with a watch list announcement potentially coming on the evening of June 20.We remain OW on the Saudi market (32.5% weight in our MENA portfolio), and play index inclusion through stocks that will likely be constituents while also offering strong fundamentals at...
- Victor Dima
SNH GR: Reiterate Buy, but lower our TP by 2.0% on a softer Mattress F...
​ Re-iterate Buy, but lower our TP by 2.0% to EUR 5.8/share (implying a 25.5% upside) after H1 17A results.  Solid organic growth, 20bps y/y improvement in EBIT margin in H1 17A and 12.8%/10.2% DHEPS growth in FY 18/19e, support our Buy case.  Benefits from acquisition likely to take longer to materialise. We take a more conservative view on Mattress Firm (MFRM) margin recovery due to supply disruption and store rebranding; and lower MFRM EBIT margin by 130bps/170bps in FY 17e/FY 18e....
- Victor Dima
Zambeef LN (under-review) - H1 17A: Poor results amid major drop in so...
​Sales growth was muted y/y with low commodity prices impacting cropping and stock feed operations.Retailing business delivered strong revenue growth and cold chain business delivered double digit volume growth, but margins decline.EBIT declines were mainly driven by a sharp fall in soya prices (-32% y/y) impacting stock feed and cropping profitability. Reported EPS misses ACe. Stock under review.
- Victor Dima
Spar Group Ltd (Hold, TP ZAR 187/share) H1 17A result: Sales and EBIT ...
​Spar Group’s H1 17A revenue grew by 12.6% y/y to ZAR 47.4bn in H1 17A; slowing from 16.9% y/y in Q1 17A and 2.1% below ACe. Sales growth was mainly aided by consolidation of Spar Switzerland revenues. Spar SA (68% of SPP revenues) sales growth remains muted at 4.9% y/y (ACe: +5.6% y/y) and BWG revenues declined by 13.1% y/y in ZAR (+1.6% y/y in EUR) due to a ZAR appreciation vs. EUR.Group EBIT declined by 4.6% y/y to ZAR 1.21bn, 6% below ACe. 40bps decline in Spar SA margin together with op...
- Victor Dima
Mr Price Group (Sell, TP ZAR 144/share) FY 17A result review: FY 17A s...
​FY 17A MRP reported group revenue at ZAR 19.7bn; -1.2% y/y and -1.7% below ACe. On a 52 week comparable basis, sales increased 0.7% y/y in FY 17A, implying flat sales growth in H2 17A (vs. H1 17A at +1.6% y/y). MRP Apparel and Milady’s underperformed with comparable sales growth of -4.7% y/y and -6.9% y/y respectively in FY 17A.FY 17A EBIT declined 15% y/y to ZAR 3bn; 3% below ACe. EBIT margin declined 260bps y/y to 15.5%, 20bps below ACe. HEPS at ZAR 9.1/share was slightly above our estima...
- Victor Dima
Tongaat Hulett (HOLD, TP ZAR 140/share) - FY 17A result: 300 bps y/y E...
​TON FY 17A sales estimate 5% below ACe and 8% below consensus driven by lower than expected sugar operation revenues.300bps y/y improvement in EBIT margin with strong sugar operations margin despite weak operating performance by starch division. Muted performance from Land conversion and development division, with only 75 hectare land development vs. 121 hectare in FY 16A.Strong guidance for sugar production: +44% over 2 years from FY 17A level of 1.05m tons. Land development guidance healthy...
- Victor Dima
Famous Brands (HOLD, TP ZAR 167/share) - H2 17A result review: EBIT ma...
​Solid double digit sales growth for FY 17A and H2 17A aided by GBK acquisition.GBK consolidation weights on operating margins driving miss to AC est. A hike in financing costs and an increase in the effective tax rate added to the margin pressure caused by the GBK consolidation seeing HEPS miss ACe.Outlook remains glum: limited catalysts for local market while the outcome of Brexit creates uncertainty for international operations. Maintain Hold.
- Victor Dima
Tiger Brands (HOLD, TP ZAR 415/share) - H1 17A result review: Sales gr...
​TBS targets an increase in gross profit margin of 150 to 180 bps over five years and plans to make “significant savings†to provide funding for reinvestment and to take advantage of future growth opportunities. An increase in operating margin of between 100 to 160bps is expected over the same 5- year period to 2022.TBS reported H1 17A sales at ZAR 16.4bn; +7% y/y (from continued operations). Sales were c.7% below ACe (c.4% lower adjusted for disc ops), but were significantly weaker than ...
- Victor Dima
Pioneer Foods (HOLD, TP ZAR 162/share) - One step forward, two steps b...
​Self-help story of margin improvement takes a back seat in FY 17e post weak H1 17A as EBIT margin is down to 2012 levels.FY 18e to show improvements, but EBIT margin will likely re-set at a lower level (ACe +340bps y/y to 11.7% in FY 18e). Downgrade to HOLD on lower estimates and lack of short term catalysts. New TP ZAR 162/share (-11%). Weak FY 17e sets a low base. FY 17-20e HEPS CAGR at 27% looks strong, but confidence needs to be restored to re-rate.
- Victor Dima
Pioneer Foods (Buy, TP ZAR 183/share) - H1 17A result review: Muted sa...
​PFG reported H1 17A sales at ZAR 10.2bn, +1.7% y/y but 3.5% below ACe at ZAR 10.5bn. The South African business (85% of group sales) increased by only 4% y/y, while the International business (15% of group sales) declined by 11% y/y, impacted by a raisin crop shortfall, weaker African exports and a stronger ZAR.EBIT margin dropped to 6.9%, levels last seen in FY 12A, driven by unfavourable maize procurement positions taken in 2016, coupled with a significant decline in the International divis...
- Jaap Meijer
Egypt – Rate hike good for banks and portfolio investors
​The CBE hiked interest rates last night by 200bps, in a move contrary to consensus, but not totally unexpected, in order to anchor inflation expectations. The IMF had also earlier called for the move.Inflation will remain high in 2017, despite the hike, due to our expectation of energy price and VAT increases. We believe the rate hike targeted portfolio investments ahead of high debt payments and energy price hikes. Still it could help the EGP/USD rate, reduce imported inflation, anchor infla...
- Sarah Shabayek
Vodacom FY 17A results: Largely in line with estimates – FX headwind...
FY 17A revenues slightly miss our estimates and the street (-2%) on i) FX devaluation in subsidiaries, and ii) decline in handset sales. EBITDA margin of 38.4% in FY 17A is aligned with market expectations as weak international performance was offset by solid domestic results. Overall decent set of numbers when adjusting for FX impact. Maintain Hold on expensive valuation multiples (FY 18e EV/EBITDA of 6.5x, at a c.20% premium to sector average).
- Victor Dima
Astral Foods (Sell, TP ZAR 130/share) - H1 17A result review: Higher E...
ARL reported H1 17A sales at ZAR 5.8bn, slightly below y/y and 4% below ACe (ZAR 6.0bn), driven by very weak volumes in poultry (-10.5% y/y vs. -2.5% ACe) after reduction in IQF brining limits to 15%. EBIT decreased 51% y/y to ZAR 212mn, 8% above ACe (ZAR 196m). Astral’s increased poultry selling prices by c. 11%, aiding the Poultry division to post slight operating profit (+0.5% margin vs. -1% expected), driving a 4% HEPS beat. Overall, the results look neutral given Astral was able to pass ...
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