Investment banks recommend ‘buy’ for MTI share, fair value estimated at EGP 7.02-9.86

  • Prime Holding: “MTI to post EGP 6.4 bln in profits in 2017 36% YOY”
  • MubasherTrade: “Company’s precaution against exchange rate fluctuation, exports revenues promote shares’ evaluation”

Research centers at Prime Holding and MubasherTrade have raised the fair value of the share of MM Group for Industry and International Trade (MTI) from EGP 6.06 to EGP 7.02-9.86, and given a “buy” recommendation.

Trading screens of the Egyptian Exchange (EGX) have recorded buy orders of 1.257 million shares, which is 7% stake of the initial public offering (IPO) of MTI, which extends till Thursday. The IPO constitutes 15% of the total offering, 4.5% of the company’s shares, which is around 17.8 million shares.

Mohamed Magdy, financial analyst at prime Holding, estimated the share’s fair value at EGP 7.02, with 16% opportunity for growth, with “buy” recommendation. In addition, he highlighted the quality of the investment opportunity in the company despite of the industry’s challenges.

Based on the estimation of EGP 6.06 per share, the price-earnings ratio (P/E Ratio) will reach 12.3, added Magdy.

Moreover, he forecast revenues to hit EGP 6.4 billion in 2017 and EGP 7.03 billion in 2018. According to Prime Holding forecasts, MTI’s profits will record EGP 195 million in 2017, and EGP 213 million in 2018.

According to MubasherTrade’s research unit, the fair value of MTI’s share is estimated at EGP 9.86, which is higher than the indicative price range set for the IPO, which is EGP 5.56-6.06 per share, after floating 30% of its paid-up capital, estimated at 118.8 million shares.

85% of the offering, 25.5% of the capital, were allotted to institutions and individuals with strong financial solvency, and the rest are allotted for the IPO.

It is worth mentioning that MTI targets boosting the number of Vodafone branches from 39 to 52 branches by 2020. Furthermore, MTI is the sole dealer of Land Rover, Jaguar, Maserati, Ferrari and Bentley vehicles, and Bosch motorcycles, which include Ducati, Victory and Polaris.

Revenues are expected to inch up 17.1% in 2017 and 18.8% in 2018. Meanwhile, net profits are expected to plummet by 14.8% in 2017 and inch back up in 2018 to record 18.5% hike, MubasherTrade reports.

The company estimated MTI share’s fair value at EGP 9.86, which is 46% higher than the financial advisor’s estimation and 63% higher than the IPO’s maximum price estimate per share.

MubasherTrade attributed this high estimate, which is 63% higher than the IPO’s maximum price estimate per share, to MTI’s precautions against the fluctuation in exchange rates and the support of the export revenues, which represent 20% of the total revenues even in the darkest years, in addition to the negative cash conversion cycle, which reflects the company’s prompt recovery of balances and extending their suppliers’ payment cycles, in addition to its debt-free financial position, which shields the company against growing interest rates.

The share’s stability level is calculated based on the IPO’s subscribers only. The purchase price is set at the offering price and accounts are to be opened in the Arab African International Bank.