KEY THEMES
After years of tiny trading value (only EGP24mn since the beginning of 2021), National Bank of Kuwait - Egypt [NBKE] may be on the brink of going private. The bank’s shareholders will meet on 10 August to discuss a voluntary delisting. NBKE is currently trading at P/BV of 0.74x, unjustifiably low given its high ROAE of c.18% recorded in Q1 2021.
Historically, NBKE delivered a solid performance, having achieved:
1. An earnings 3-year CAGR (2016–2019) of 37%.
2. A super-high ROAE exceeding 30% (36.3% in 2018 and 30.2% in 2019).
3. A high loans-to-deposit ratio of 67% (as of Q1 2021).
4. Outstanding asset quality justified by an impressive NPL ratio of 1.6% in Q1 2021.
5. A comfortable CAR of 26%, giving the bank more room to grow in the Egyptian market. NBKE already increased its paid-in capital to EGP5bn to meet the minimum requirement by the CBE.
Our back-of-the-envelope valuation for NBKE using a justified P/BV multiple suggests a justified P/BV multiple of 1.2x and a PT of EGP22.3/share, implying an upside of 68%. This is based on a cost of equity (COE) of 15%, a terminal growth rate of 5%, and a long-term ROAE of 17.1%.