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CI Capital Holding [CICH]
Egypt / Non-Banking Financials / Q4 2021 Results
12M PT: EGP6.00 (+46%)
set on 26 Jan 2022
Investment Rating: Overweight | Risk Rating: Medium
High flying IB performance boosts profitability
CI Capital Holding’s [CICH] 2021 results showed a bottom line of EGP681mn (+44% y/y). This robust growth was backed by a strong IB platform performance, thanks to (1) merchant banking gains amid Taaleem Management Services [TALM] exit and (2) advisory fees registered in Q3 for the conclusion of BLOM Bank Egypt’s sale to Bank ABC at a total value of USD425mn, and (3) Investment Banking Advisory concluding several high-profile transactions in Q4 2021, including e-finance [EFIH] IPO, Abu Qir Fertilizers [ABUK] follow-on offering, and Aldar-ADQ consortium’s acquisition of an 85.5% stake in SODIC [OCDI]. Meanwhile, NBFS platform growth in 2021 came a bit tamer, with a slight decline in leasing revenues of 4% y/y due to a recognition of losses from revaluation of legacy securitization portfolio. In our opinion, we think this is the blessing of diversification within the NBFS platform. CICH’s TTM ROAE stood at 20.7%, successfully restoring its pre-COVID-19 levels (i.e. 21% in 2019).
Investment banking was the star segment
CICH’s IB platform witnessed an exceptional year, driving the group’s bottom line to EGP681mn in 2021. IB platform contributed EGP187mn (27%) to the group’s bottom line. This was mainly due to investment banking activities with advisory fees jumping to EGP107mn in 2021 vs. EGP28mn in 2020 (+283% y/y) on various deals advised during the year. Additionally, the platform’s top line was bolstered with capital gains recognized on the merchant banking level on the TALM exit. Meanwhile, despite the state of Egypt’s capital market, CICH’s brokerage arms managed to grow their top line by 9% y/y to EGP246mn in 2021. Furthermore, CICH’s asset management closed the year with a 68% y/y growth in fees to EGP57mn, while its AUMs grew to EGP15.1bn (+44% y/y).
NBFS earnings growth continues
NBFS platform saw its earnings grow in 2021, driven by Corplease and Reefy. Combined, their earnings grew to EGP635mn (+18% y/y) on revenues of EGP2.0bn (+9% y/y):
· Corplease, CICH’s leasing arm, earnings upped only 5% y/y to EGP434mn in 2021 as a result of higher competition and margin compression, which pulled NIM to 4.2% in 2021 from 5.5% in 2020. Q4 2021 performance was nothing short of spectacular, with net earnings growing to EGP277mn (+28% y/y). Outstanding portfolio increased 2.4% y/y to EGP8.7bn in 2021.
· Reefy, CICH’s microfinance arm, outstanding performance resumed with a 2021 bottom line of EGP201mn (+60% y/y) on revenues of EGP614mn (+56% y/y). This was fueled by a strong loan book growth of 60% to EGP1.7bn, exceeding our 2021 expectations of EGP1.4bn.
· Souhoola, CICH consumer finance arm, remains a loss-making unit with EGP47mn in 2021, with revenue generation of EGP26mn on high expansion costs. We note that CICH is considering selling the unit to state-owned Banque Misr.
· CI Mortgage, CICH mortgage finance arm, more than doubled its outstanding portfolio to EGP338mn (+107% y/y). This is short of our more optimistic forecast and even management guidance of EGP500mn by end of 2021.
Overweight and 12M PT maintained
CICH is currently traded at a 2021 P/E and P/BV of 6.0x and 1.2x, respectively. In view of 2021 results, we maintain our 12MPT at EGP6.0/share (+46%). The company is one of the 15 stocks we picked in our STANDPoint 2022 strategy outlook published on 30 January 2022. We believe CICH could benefit from the EGP devaluation in the sense of improving turnover and liquidity in Egypt’s capital market. On the other hand, the current favorable atmosphere form M&As should provide a booster to the IB platform recovery. Meanwhile, First Abu Dhabi Bank’s attempted acquisition of EFG Hermes Holding [HRHO] should pull the attention towards other undervalued opportunities within the NBFS universe in Egypt, including CICH.
Research Team