Today’s Trading Playbook
Amr Hussein Elalfy CFA, Head of Research
KEY THEMES
It’s not often that we see the market cheering a company's capital increase. Yesterday, FWRY's market cap crossed intraday the EGP16bn mark for the first time. There are a lot of interesting points could be implied by FWRY's market cap. For a starter, except for CIB [COMI] and QNB Al Ahli [QNBA], all EGX-listed banks had market caps below FWRY's. The nearest bank is Credit Agricole Egypt [CIEB] with only EGP8.2bn in market cap—half FWRY’s today.
Meanwhile, FWRY could be in for a stellar earnings performance in the coming years. Recently, H1 2020 net earnings hit EGP86mn, which could promise a bottom line of EPG200mn for 2020. At yesterday’s market cap, FWRY would be trading at a forward P/E of 78x for 2020e. And yes, it’s fairly understandable that it’s all about the G (G being growth), but “To what extent?” is the question. If we assume that FWRY is trading at a forward 2025e P/E of 15x, the company would need to grow its earnings by a 5-year CAGR (2020-2025) of c.40%. On one hand, it could be challenging to quantify Egypt’s financial inclusion story. On the other hand, there are signs that FWRY could use an inorganic growth approach to be fueled by its upcoming capital increase which would double its paid-in capital but is less than 3% of FWRY’s market cap.