reports
- Maryam Saleh
- Monsef Morsy
- Sherif Eletr
Egypt banks | Higher RRR: A manageable headwind; flag CAE
Higher RRR is negative, at face value, … On 22 September, the CBE hiked the reserve requirement ratio (RRR) on short-term LCY deposits by 4pp to 18.0% in effort to tighten liquidity and combat inflationary pressures. We calculate this should result in the absorption of cEGP150bn in excess liquidity from the system, which would be deposited at the CBE with no return. The RRR on FCY deposits was maintained at 10%. We expect banks will satisfy the higher liquidity requirement mainly through reducin...
- Marlene Milad
- Sara Boutros
The Pulse | Cityscape Egypt 2022: Positive vibes
This periodical aims to discuss on-the-ground themes influencing MENA property developers. In this edition: Cityscape Egypt 2022: Positive vibes The Cityscape Egypt annual exhibition took place between 21 and 24 September, hosting c80 developers, notably higher than last year’s c55 developers, marking an official return to pre-pandemic levels.Notable recovery in footfall, with more serious buyers than last year. The event seemed significantly crowded with visitors. The offerings were fairly div...
- Ahmed Soliman
EKHO EY | EGP listing offers ideal currency hedge
Maintain OW; Cut TP c18%. Our 12M TP cut reflects a 2% higher WACC assumption and 16% higher natural gas price at AlexFert following the latest gas price amendment. EKH trades on a 2023e EV/EBITDA of 3.0x (based on the EGP listing), a c40% discount to global peers, unjustified in our view, with its 2023-25e EBITDA CAGR of -1.7% being in line with global peers. EKH also offers a dividend yield of 11.5% in 2022e, paid in USD for all listings.Beyond a urea/gas story. On 15 September, the Egyptian g...
- Ahmed Mahmoud
- Alia El Mehelmy
ABUK EY | Maintaining our Overweight call
Value proposition holds. The government issued a new feedstock formula on 13 September that moves Abu Qir away from a fixed gas price of USD5.75/mmBtu to one that is linked to end-product prices. The decision raises the producer’s gas prices in the short term (by 30% in FY23e and 13% in FY24e), but reduces it beyond FY24e, based on our urea price outlook. With EGP weakness and a higher cost of capital assumption, the net effect is a 9.5% cut in our 12M TP to EGP38.0/share. Abu Qir trades on an E...
- Ahmed Mahmoud
- Alia El Mehelmy
MAHARAH AB | Growth prospects too appealing to ignore
Stock is mispriced, on a 2023e PEG of 0.2 vs. 1.2 for industry. The margin-dilution from Maharah’s new acquisitions that are in start-up negatively surprised us (and the market) in 1Q22. Closed and pending transactions, however, are profit-generating operating assets, with no further M&A on the table. Also, 2Q22 showed q-o-q margin improvement, which we expect will continue. New acquisitions will be below the line, providing clarity on Maharah’s core business. We believe Maharah offers an attrac...
- Enjy Heshmat
- Noha Baraka
EFIH EY | Risks skewed to the upside, a top Egypt pick
EPS recovery story continues to unfold. We flag e-finance’s attractive 2023e PEG of 0.66x (ESOP adjusted) among the lowest across peers. e-finance displays a unique play on the ongoing increases in the government’s social safety net spending, allowing for robust revenue growth (up c37% over 2022-24e vs. peers’ c12%). A pick-up in margins and more policy rate hikes should drive a 2022-24e EPS CAGR of c40%. A higher WACC assumption marginally offsets our increased operational forecasts, lowering o...
- Maryam Saleh
- Monsef Morsy
CIEB EY | Recent rally has more steam; Remain OW
Strong fundamentals coupled with a high yield. We continue to favour CAE and maintain our OW rating. CAE’s solid balance sheet and balanced credit exposure allow for the trickling down of the bulk of the impact from the potential margin expansion to total profitability. We expect RoE to stand at c23% over 2022-23e vs. 17.5%, as implied from the current market price. CAE offers a 2022e dividend yield of 12%, among the highest within our Egypt coverage. CAE trades on a 2022e P/BV of 0.83x and P/E ...
- Sara Boutros
- Sherif Eletr
Kuwait banks | Selectivity mode on; NBK – sole OW
Medium-term optimism holds. Pickup in GDP growth, policy rate hikes, and moderating CBK provisioning requirements are among the main factors shaping the outlook for Kuwait banks through end-2023e – together these translate into favourable growth and profitability prospects for banks. That said, Kuwait banks trade at, or close to, their all-time-high levels, implying these upside risks are already largely captured, rendering selectivity as the preferred approach.Single out NBK. We flag NBK as the...
- Alia El Mehelmy
- Passant Mohamed
RMDA EY | Flagging an outperformer on a PEG of 0.2x
Prominent among the crowd. Rameda trades on a deeply discounted 2023e PEG of 0.19x and is among our top picks in Egypt. We raise our operational forecasts to reflect product price hikes and rollover our DCF. This is offset by a higher cost of equity assumption, with our 12M TP unchanged at EGP3.90/share. The implied one-year FWD P/E is 10.8x, 39% below EM peers on Egypt market specifics. EGP weakness should not affect Rameda’s earnings outlook. Six of Rameda’s top ten products (c40% of revenue) ...
- Marlene Milad
- Sara Boutros
ORHD EY | Hedge against any EGP weakness; Triggers await
Merits of EGP weakness. The benefit comes in three forms: enhanced value of El Gouna’s pending collections, higher hotel revenue and profitability, and an upward revaluation of FCY assets. ODE’s FCY debt partially offsets the positivity, albeit with a delayed cash flow impact – in the absence of significant debt repayments until at least 2024e. Any EGP weakness, however, would be net income/valuation-neutral, in our view, considering the net negative balance sheet revaluation impact.Growing FCY ...
- Maryam Saleh
- Monsef Morsy
- Sherif Eletr
ADIB EY | A strong valuation call; Resume at OW
Trading at a deep discount. We resume coverage on ADIB-E with an OW recommendation and a TP of EGP22.0/share. ADIB-E trades on a 2022e P/BV of 0.5x (P/E of 2.8x), a 61% discount to its five-year average and 55.5% to the average valuation of tier-1 peers. Trading at a discount to CIB – the sector’s proxy – could be attributed to size and capitalisation, but the magnitude is not justified, given ADIB-E’s 2022e RoE of 22.7% and 2022-24e EPS CAGR of 18.7%, broadly in line with peers. Phase 1 of capi...
- Alia El Mehelmy
- Passant Mohamed
IDHC LN | Reduce to Neutral on currency weakness
Revisiting growth. PCR test prices fell sharply (EGP450 vs. cEGP2k last year) and COVID-19 business is no longer margin-accretive. But regardless, the fast dissipation of COVID-19 (51% of 2021 revenue) was in our model. EGP weakness and the ensuing impact this will have on affordability, however, has us reducing our 12M TP by 38% to USD1.17/share, warranting a rating downgrade to Neutral. Pricing of medical services in Egypt are contextually high and cost pressures are seen as deterring traffic....
- Hekmat Elmatbouly
- Sara Saada
Egypt: Monetary framework monitor | Inflation trajectory to prompt mon...
Expect 100bps hike in upcoming meeting. July’s inflation came in at 13.6% y-o-y vs. 13.2% in June, mainly on an average increase of 7.5% in petroleum products in mid-July, including diesel for the first time since 2020. We expect inflation will continue to gain traction until end-22, as the second round effect of energy price hikes transmit, and the government implements deeper monetary and fiscal reforms to secure a new IMF deal with more FX flexibility impacting prices. We see inflation to ave...
- Noha Baraka
QLMI QD | Strong proposition in untapped market; Initiate at OW
Initiate with QAR6.40/share TP, 21% upside. QLM, Qatar’s leading medical and life insurer, is well positioned to capitalise on the expected growth momentum as the Nov-21 mandatory health insurance law comes into effect. QLM’s ability to secure sizable contracts, expand into the underpenetrated life segment, and improve its investment utilisation should help enhance margins, operational efficiency, and profitability outlook. The stock trades on a 2022e P/BV of 2.9x, against a RoE of c19%, standin...
MNHD EY | Restricting equity research coverage
CI Capital is effective today restricting equity research coverage on MNHD. Restriction of coverage entails that our analyst(s) will no longer be giving any forward-looking statements or views on the stock until further notice.Our last published rating on MNHD was Overweight and target price was EGP5.85 per share.
- Alaa Tolba
JAHEZ AB | A speedy delivery of growth; Initiate at OW
A leader in the making, with upside from new avenues. Jahez, Saudi’s second largest online food aggregator, is on track to lead the food delivery market, with a 45% share by 2024e vs. 30-35%, currently. This is feasible as young digital-receptive consumers sustain the shift to delivery. The model is highly scalable due to the involvement of technology, with contained overheads and capex to ramp up. Management is taking further steps to expand into related verticals, capitalising on its know-how ...
- Maryam Saleh
- Sara Boutros
RJHI AB | Shines again post stock sell-off
Recent sell-off warrants an imminent rating upgrade to OW. RJHI offers by far the highest RoEs relative to top global, Islamic, and local peers. This arguably places it in a league of its own, lending more relevance to own-multiple comparisons than those vs. peers. Pending meaningful improvement starting 2024e, when the windfall from higher interest rates reflects on the bank’s margins, RJHI’s RoE will prove to be resilient, rendering its rich multiples as justifiable. 2022e RoE safe despite...
- Maryam Saleh
- Monsef Morsy
Maintain OW; Rerating awaits key macro events
Favourable risk-return profile. CIB currently trades on a significantly undemanding valuation – 2022e P/BV of 1.0x and P/E of 5.1x (40% discount to five-year average). This is unjustified given the bank’s profitability and growth outlook. The current market price implies a RoE of 17.5% vs. our forecast of 21.0% in 2022e and 24.0% as the sustainable level. Clearer visibility on closing the state’s FX funding gap through GCC investments and a potential IMF agreement (expected in July) is a prerequ...
- Hekmat Elmatbouly
- Sara Saada
Expect a pause to rate hikes, a breather to activity
CBE to hold rates temporarily, as inflation momentum stabilises. We see local food inflation to continue easing in June, as per market intel, after it decelerated in May (1.1% vs. 3.3% in April). We expect annual inflation in 2H22 to peak in August above c15%. Although we see up to 200bps hikes until end-2022 to maintain positive real yields, we anticipate the CBE to keep rates on hold in its upcoming meeting on 23 June. A pause to the hikes aims to strike a balance between curbing inflation and...
- Ahmed Soliman
Deep value with catalysts; Maintain OW
Steep discount to global peers unjustified. EKH trades on a 2023e EV/EBITDA of 3.5x, a 37% discount to global peers, which we believe is unjustified, since its 2022-24e EBITDA CAGR of -5.4% is in line with peers. Strong earnings, attractive dividends, and any potential value-accretive investment announcement, given that EKH is actively looking for opportunities, should act as a catalyst to the stock. We maintain our OW recommendation and raise our TP by 28.4%, mainly to reflect 56% higher urea p...
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