Today’s Trading Playbook
Mohamed Saad | Equity Analyst
Sherif El Etr | Equity Analyst
KEY THEMES
Raya Holding [RAYA] has seen on a big rally since the start of the year. The stock went up by some 78% ytd to EGP13.03/share by Tuesday’s close. Now a company like RAYA, possessing such a diversified portfolio, still suffers from incoordination between its pieces. To put it all into perspective, RAYA currently operates in nearly 12 business lines of businesses! These include (1) information technology, (2) consumer electronics & home appliances trading, (3) contact center outsourcing services (CCO), (4) smart buildings, (5) food and beverage manufacture and trade, and (6) e-payments and NBFS.
Relating RAYA valuation to its current earnings performance could be a bit of an understatement, given the potential growth, and the current obstacles facing its operations against the backdrop of the COVID-19 pandemic. We think that the current market hype regarding the name was driven in part by RAYA’s actions to divest certain portions of its portfolio holdings. For example, recently National Bank of Egypt (NBE) acquired a 24% stake in Aman Holding, valuing the company at EGP2bn. Even more recently, there have been talks of divesting of 100% of RAYA’s subsidiary’s Bariq.
We believe that in light of Raya’s current portfolio actions, and the growth potential foreseen from current line of businesses, we believe it could fetch a valuation of as much as EGP12.8/share, which is c.1.5% below yesterday’s close. According to our back-of-the-envelope valuation, RAYA is traded at 2020e EV/EBIT and EV/EBITDA of 9x and 6x, respectively.
NEUTRAL
RAYA: While we still think RAYA possesses a nicely diversified portfolio, the recent stock rally has relatively left no upside. Buying at this stage should be justified by an even higher growth.