Yesterday, the market cashed in on the opportunities spouted from MSCI SAIR announcement. Elsewedy Electric's [SWDY], after hitting an intraday low of EGP7.8/share, before recovering some of its losses, closing the day at EGP8.18/share, as investors cheered a set of pretty strong Q1 2021 figures. As of yesterday’s close, SWDY currently trades at a TTM P/E of 5.6x, while the name is traded at 2021 P/E and EV/EBITDA of 6.7x and 4.5x respectively. We believe such trading multiples are good enough to stimulate buying potential over the course of 2021. We remind you that we have an overweight recommendation on the name, with a 12M PT of EGP12.7/share (ETR 55%).
Elsewhere, with Q1 2021 results season continue, we’re starting to get a clearer idea on how stiff the avalanche in banking stocks was in 2020. For example, Faisal Islamic Bank of Egypt's [FAIT] standalone figures in the first quarter points to NIM improving by around 70bps, with annualized ROAE settling in the mid-teens, yet the bank P/BV is a slim 0.3x. We note that the current P/BV that FAIT is trading on is 16% below its 5-year average (since 18 May 2016) of 0.47x. The bank always erred on the side of caution in the past, the thing which dented profitability as interest rates fell down in 2020. However, FAIT’s very low funding cost has always allowed the bank to generate acceptable returns despite the bank’s overly risk off mode.
POSITIVE
SWDY: Good chances of rerating after overcoming the negative effect of MSCI SAIR announcement.
FAIT: Q1 2021 results showcases repressed trading multiples compared to historical levels.