Today’s Trading Playbook
The M&A theme goes on: Yesterday morning, SODIC [OCDI]—now 85.5%-owned by Aldar Properties [ADX: ALDAR]—submitted a non-binding offer to acquire up to 100% of Madinet Nasr Housing & Development [MNHD] at a price range of EGP3.20-3.40 a share. The mid-point of the price range or EGP3.30/share, values MNHD at EGP6.18bn and represents a 32% premium to MNHD’s closing price on 4 July 2022 as well as a premium of 45%, 45%, and 40% to its 3M, 6M, and 12M average closing prices, respectively. Obviously, this is positive for MNHD, reflecting how undervalued the stock is. This also confirms the M&A theme that we have reiterated several times here and elsewhere since the start of this year.
BINV, another beneficiary: That said, the offer does not only impact OCDI and MNHD but also another EGX-listed stock, namely B Investments Holding [BINV] which has a 7.5% direct stake in MNHD. Apparently, the market was late in appreciating the connection as BINV was down as much as 8.4% in early trading yesterday, albeit on thin volumes! According to our calculation, the mid-point of the price range is 2.5x the cost basis of BINV's 7.5% stake in MNHD (EGP1.3/share), which means:
- On the earnings side, if BINV were to accept the OCDI offer, it would report a capital gain of EGP225mn (net of tax), given a cost basis of EGP182mn.
- On the cash flow side, BINV would cash in some EGP407mn in proceeds (net of tax). This is equivalent to c.EGP2.5/BINV share or c.30% of BINV's market price in early Tuesday trading.
MTIE, a bet on the wrong horse: Elsewhere, the market may have incorrectly linked another EGX-listed name to the story, namely MM Group [MTIE] which owns a 43% stake in BPE Capital Ltd. which—according to MTIE’s management—is not operational and hence MTIE has nothing to do with MNHD’s offer. Ironically, MTIE rose as high as 8.4% intraday before slipping to end the day up only 5.2%.
We thus reiterate our positive view on BINV, one of our top 15 picks for 2022, with the MNHD offer translating into a 12MPT of c.EGP16/BINV share, still 1.5x BINV's closing price yesterday even post rising 20% by end of the day as the market finally began to appreciate the connection.
Now, on to the top news and analysis for the day.