Today’s Trading Playbook
KEY THEMES
After yesterday's trading session, Arabia Investments Holding [AIH] said that the lawsuit filed by its subsidiary CDCM has been rejected for reasons related to the Egyptian judiciary not having jurisdiction to consider the case. The statement is likely to be met with resent from investors long AIH stock, albeit the probability of a lawsuit win was not high. At this stage, what is more noteworthy is AIH's earnings performance. The company had generated a bottom line of EGP44mn in 9M 2020, most of which was driven by its NBFS segment through its UE Finance and Rawaj, whereas the construction and building materials segment contributed losses. We expect AIH to end 2020 with recurring earnings after minority of EGP70-75mn, depending on how far Rawaj's securitization has been. This puts AIH at a 2020e P/E within the range of 11.8-12.7x, an ROE of 14%, and a P/BV of 1.6x—which we see as somewhat rich. The hopes in 2021 for AIH's management are to resolve the construction and building materials segment legacy issues and to generate a near triple-digit bottom line figure. But until this happens, you’re welcome to try out all sorts of prophylactic moves.
negative
AIH: The rejection of the lawsuit could dent the positive sentiment towards the stock in the short term, especially that—at current levels—AIH's valuation (at least based on our estimates for 2020) is not that attractive.