KEY THEMES
Telecom Egypt [ETEL] has risen c.20% since the beginning of December 2021. Yesterday, ETEL hit its best levels since May 2018. ETEL’s price has long been unfazed by the company's bold value drivers which include: (1) strong earnings generation, (2) holding a strategic stake at Egypt's number one mobile operator, Vodafone Egypt [VODE], and (3) being the sole telecom infrastructure player within the country.
Recently, Ebtikar Holding for Financial Investments (company owned jointly between B Investment [BINV], BPE Partners, and MM Group for Industry & International Trade [MTIE]) raised its stake in TBE Egypt for Payment Solutions & Services (Bee) from 60% to 99.9% through a share swap into Ebtikar shares. Such a deal means that VODE, previously one of Bee’s minority shareholders, now holds some stake in Ebtikar. Moreover, given ETEL’s 45% stake in VODE, we could expect ETEL to benefit indirectly from Ebtikar’s IPO which is planned for this year.
We note that we had picked ETEL in our TAKEStock dated 8 June 2021. Since then ETEL has soared c.29%. ETEL’s consensus PT for ETEL stands at EGP19.1/share, which implies an upside potential of 13% off yesterday’s close. However, given our assessment of ETEL’s value drivers, we believe ETEL could be worth some EGP22.5/share, still leaving another 33% upside despite its recent notable rally.