Yesterday, our banking analyst Shihab M. Helmy published a Core Coverage Report on Crédit Agricole Egypt (CAE) [CIEB]. Valuing CIEB using a residual income method, he reached a fair value of EGP36.3/share and a 12-month price target of EGP33/share (+47%) based on a terminal justified price-to-book value multiple of 1.52x. Hence, CIEB is rated Overweight / Medium Risk. In this equity note, Shihab laid down his 2021 outlook for CIEB and the banking sector as a whole. He is very upbeat on CIEB's outlook based on its high lending capability and its highly generous dividend policy. However, the bank lost both advantages in 2020 due to market conditions and a decision by the CBE. Still, he believes 2021 bodes well for the bank in view of the lucrative lending rates for borrowers and the expected resumption of dividend distribution, subject to the CBE’s approval. Despite the expected pullback in CIEB's net interest margin (NIM) and ROAE throughout the forecast horizon to settle at 5.2% and 17.5%, respectively, CIEB is still attractive as a medium- to long-term investment, given its current low P/BV of 0.9x vs. its historical average of 1.5x. For more details, please read the Core Coverage Report.
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