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CIB's robust interim financial results in Q2 driven by resilient margins: report Investment income failed to support non-interest earnings as it fell by 61%
A recent report issued by Pharos Research has maintained their "Equalweight" recommendation for Commercial International Bank – Egypt (CIB) based on a fair value (FV) of EGP 105 per share. The bank is currently trading below the historical "good-times" average, Pharos said in a report last week. The CIB's robust interim financial results were driven by resilient margins, as CASA deposits leapt to 57% in the second quarter (Q2) of 2018; the cost-to-income ratio that fell by 200 basis points; improved asset quality; and a solid capital base with capital adequacy ratio registering 17.9%. On the other hand, "investment income failed to support non-interest income as it fell by 61% quarter-over-quarter, mainly on lower trading income," the research firm added. Pharos also noted that that the anticipated new banking act has overshadowed the sector's price performance. The CIB posted a 23.4% year-over-year rise in consolidated profits for the first half of 2018, recording a net profit of EGP 4.42bn, versus EGP 3.58bn. Standalone profits went up by 22% to reach EGP 4.41bn at the end of June, compared to EGP 3.6bn in H1 2017. Meanwhile, Pharos Research has reiterated the "Overweight" recommendation of Madinet Nasr for Housing and Development (MNHD), according to a research note. MNHD is planning to launch a new phase in SARAI, called Cavana Lakes, in the third quarter of the year, in an effort to get closer to its sales target of around EGP 5.5-6bn. The urban developer reported a 20% y-o-y surge in net profits in H1 2018 due to a growth in revenues. The Egyptian developer generated EGP 611.72m in profits in the six months ending in June, versus EGP 509.57m in H1 of 2017, according to a filing to the Egyptian Exchange (EGX). A separate research note issued by MAGNiTT said that the emerging ecosystem in the Middle East and North Africa (MENA) region registered a record number of transactions in the first six months of 2018, despite a drop in disclosed startup funding. A total of 141 investments were executed in H1 2018, registering a y-o-y rise of 12%, according to the report. Total disclosed funding shrank by 43% to $112m in H1 2018, compared to the year-ago period when stripping out Careem's $150m investment in H1 2017. "In the first six months of the year, 23% of investments were shared with undisclosed figures, up 6% from H1 2017," the MENA Venture Investment Report added. Total funding, including calculations for undisclosed deals, totalled $203m in H1 2018, which shows similar levels to H1 2017's calculation of $206m, excluding Careem's $150m investment. "The UAE continues to account for the lion's share of start-up deals (32%) and investment (59%); Egypt saw an increase of 12% and KSA a 9% increase in start-up funding in H1 2018, emerging into the top three countries across MENA," the report added. Meanwhile, Pharos Research has reiterated their "Overweight" recommendation on Palm Hills Development Co based on a FV of EGP 6.57 per share. The FV was supported by the real estate developer's portfolio, mainly the Badya project, which contributed EGP 1.43 per share to the total FV, Pharos added in a research note. The launch of Badya has boosted the company's sales by 125.5% y-o-y to EGP 5.7bn and raised sales in the first half of this year by 29.5% y-o-y to EGP 7.8bn, the research firm added. The board of Palm Hills has approved "an EGP1.5bn capital increase through tradable rights issue at par value that will be mainly used to develop Badya's infrastructure," according to the report. Earlier last week, Palm Hills reported a 25.9% y-o-y rise in consolidated profits for H1 2018 due to a growth in revenues. Net profit amounted to EGP 439.9m during H1 2018, versus EGP 349.3m in the previous year, including minority shareholders' rights. The company also posted that its board has approved boosting authorised capital to EGP 10bn from EGP 6bn. The board also agreed to raise issued capital by EGP 1.53bn, to EGP 6.15bn from EGP 4.6bn, by inviting major shareholders to a subscription through issuing 769.6 billion shares at par value of EGP 2, in addition to the expenses of issuance. Caption: The anticipated new banking act has overshadowed the sector's price performance
