Today’s Trading Playbook
Amr Hussein Elalfy CFA, Head of Research
KEY THEMES
Talks of a potential acquisition of BLOM Bank Egypt by Emirates NBD underscores the overall M&A theme in Egyptian stocks in general and Egypt banks in specific. The news follows the expressed interest by EFG Hermes Holding [HRHO] end of June to acquire Arab Investment Bank (aiBank). Based on our back-of-the-envelope valuation for BLOM Bank Egypt, we think it could fetch a valuation of 1x its book equity of EGP4.2bn. We applied both justified price-to-book multiple of 1.03x (based on a sustainable ROE of 15.8%, a cost of equity (COE) of 15.5%, and a terminal growth rate of 5.0%) and a P/E ratio of 5x 2020e earnings.
POSITIVE
EXPA, CANA: We reiterate our view that small-cap banks stand to benefit off the overall consolidation trend in the market. Both Export Development Bank of Egypt [EXPA] and Suez Canal Bank [CANA] trade below book value, thus we think their valuations should re-rate in view of the news.
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