Back in January, we had discussed Raya Financial Holding [RAYA], citing its diversified investment portfolio. Yet, we note that RAYA tends to suffers from lack of coordination between its pieces. That said, RAYA has been on a big rally since the start of the year, triggered by its divestitures of certain holdings of its investment portfolio. These holdings included selling a 24% stake in Aman Holding to National Bank of Egypt, valuing the target company at EGP2bn. RAYA was also in talks to divest 100% of its subsidiary Bariq, the recycling business. More recently, RAYA managed to divest its 62% stake in its subsidiary Ostool, the logistics business, valuing the stake at EGP266mn. Our view is that the deal is in line with our valuation for RAYA which we had valued the company on 20 January 2021 at EGP2.7bn, with Ostool standing at EGP239mn. We believe divestiture news will be the main catalyst for RAYA’s stock movements in the near future. However, while we still think RAYA possesses a nicely diversified portfolio, the recent stock rally left the stock pricier than ever.
Elsewhere, continuing with the mergers and acquisitions (M&A) theme that we referred to yesterday, we have a few in the banking sector. First Abu Dhabi Bank is moving ahead with its acquisition of Bank Audi Egypt which is expected to be completed in 2022. Meanwhile, media reports have indicated that Bank ABC was going to finalize its acquisition of BLOM Bank Egypt after Ramadan. More recently, EFG Hermes Holding [HRHO] approved its acquisition of a 51% stake in Arab Investment Bank (aiBank). Our takeaway from this is two-fold: (1) The banking sector is undergoing some sort of consolidation, which has been long coming after the Central Bank of Egypt (CBE) raised its minimum capital requirement. (2) Other Egyptian banks, most notably the ones listed on EGX, should eventually see their valuation re-rate. We remind you that we have an Overweight rating on both CIB [COMI] and Credit Agricole Egypt [CIEB].