KEY THEMES
Continuing with the Q1 2021 earnings season, albeit this time focusing on a small cap name, Arabia Investments Holding’s [AIH] consolidated figures showed 66% higher bottom line of EGP15mn. Once again, a weak base causes Q1 2021 to prevail. When it comes to AIH, the curse last year was really a very sluggish Construction & Building Materials (CBM) segment, given the lockdown measures and the prohibition on construction activities. However, this year, it could be a different story. Also, Q1 2020 is not the weakest in 2020, which means there are other stronger base effects to be had this year, assuming performance stability. We note that H1 2020 was only 26% of last year’s bottom line. This is due to AIH booking securitization gains in Q4 2020. Applying the same seasonality, AIH could see its earnings grow in 2021 to approach a triple-digit figure (i.e. EGP85-95mn), which renders AIH trading at 2021 forward P/E of only 7x.
Furthermore, AIH had plans to partially exit some of its successful ventures related to its Non-Banking Financial Services (NBFS) segment, which includes both Rawaj and UE Finance. The company has mulled before to float a stake of the two NBFS vehicles on the EGX, yet market conditions were harsh to even consider listing. However, given that many IPOs plans have resurfaced once again, it is not entirely farfetched for AIH to reconsider such move once again.