Today’s Trading Playbook
KEY THEMES
e-finance (EFIN) is the state-owned largest e-payments company in Egypt and a developer of digital payments infrastructures. Established in 2005 to develop the Egyptian government’s financial network, EFIN will soon float 14.5% on the EGX in October 2021.
This brings in the comparison with the only e-payment company currently traded on the EGX: Fawry [FWRY]. FWRY, which saw its stock price surge 330% during 2020 amid a positive investor sentiment for the e-payments industry in Egypt, will now have a new industry peer listed on the EGX, providing investors more visibility on the industry and more options to invest in. However, we see EFIN having an edge, being the sole entity authorized exclusively to process and settle government payment and collection transactions.
EFIN’s indicative IPO price range of EGP12.5-13.98/share (a midpoint of EGP13.24/share) imply:
● EFIN’s market cap of EGP23.5bn is 415% higher than FWRY’s market value at its IPO debut (EGP4.6bn) and 3% below FWRY’s current market cap (EGP24.3bn).
● EFIN’s implied TTM P/E ratio of 52.1x is at a 29% discount to FWRY’s IPO TTM P/E ratio of 73.7x and a 51% discount to FWRY’s TTM P/E of 105.9x.
● EFIN’s implied forward P/E ratio of 42.6x is almost the same as FWRY’s IPO forward P/E ratio of 43.1x.
By end of H1 2021, we see EFIN leading in terms of operational KPIs with a number of POSs of 326,000 (40% higher than FWRY’s 232,600) and a transactions value of EGP1.05tn (1827% higher than FWRY’s EGP54.5bn). Moreover, financial KPIs are showing healthier margins with a net profit margin of 31% in H1 2021 (more than double FWRY’s 15%). Also in absolute figures, revenues reached EGP904mn in H1 2021 (22% higher than FWRY’s EGP743mn), while net profit amounted to EGP276mn (144% higher than FWRY’s EGP113mn).
While the multiples implied from EFIN’s indicative price range could question FWRY’s current valuation, we believe EFIN’s IPO is being priced at a discount to ensure its success. Also, in a sense, the IPO is being priced similarly to FWRY’s IPO more than two years ago.
Now, on to the top news and analysis for the day.