Today’s Trading Playbook
KEY THEMES
Yesterday, SODIC [OCDI] received a mandatory tender offer (MTO) from Aldar Properties [ADX: ALDAR] for a minimum stake of 51% at an offer price range of EGP18-19/share. ALDAR has requested access from OCDI’s BOD in order to conduct due diligence. By way of background, ALDAR is one of the UAE’s top real estate developers, only second to Emaar Properties [DFM: EMAAR] in terms of total assets, yet it’s the biggest in the UAE’s league in terms of market cap. ALDAR’s 2020 financials showed total assets of AED39bn, net profits of AED1.9bn, and a cash balance of AED5.5bn. ALDAR has expressed back in February 2021 its interest to enter the Egyptian market by investing AED2bn. As for OCDI’s MTO, a 51% stake would cost c.AED800mn. Depending on what stake ALDAR could end up with in OCDI, we could see further interest in other players, which is generally positive for the real estate sector. We note that ALDAR’s offer is still 9% higher than OCDI’s closing price yesterday after it rose some 4%. Moreover the MTO price is 18%, 28%, and 49% higher than OCDI’s 3-month, 6-month, and 12-month average, respectively. Also, the offer is 13% below OCDI’s 12M consensus price target, implying a forward 2021e P/E of 7x.
Elsewhere, with Taaleem's IPO around the corner, the educational platform valuation came in line with what we issued in CI Capital Holding [CICH] Core Coverage Report of EGP4.0bn. Our valuation was based on an EV/EBITDA multiple of 12.5x, compared to Cairo for Investment & Real Estate Development’s [CIRA] LTM EV/EBITDA of 15.1x. Taaleem’s press release stated a valuation of EGP4.0-4.4bn. Taleem’s revenues grew at a 2-year CAGR of 28% to EGP450mn by 2020. Simultaneously, CIRA’s revenues have jumped to EGP1bn in 2020, implying a 2-year CAGR of 45%. On the bottom line, Taaleem achieved a 2-year CAGR of 52%, beating CIRA’s 46%.
POSITIVE
Real Estate: ALDAR’s interest in OCDI is not only positive for OCDI (although we think the offer price undervalues the real estate developer) but also for the real estate sector overall. We could see further M&A activity down the road.
Now, on to the top news and analysis for the day.