First Read: Q2: Numbers ok; Focus on deleveraging; EBITDA guidance upgraded

Research evidence excerpt

First Read: Q2: Numbers ok; Focus on deleveraging; EBITDA guidance upgraded

Forecast returns

Forecast price appreciation 1.2%

Forecast dividend yield 2.4%

Forecast stock return 3.6%

Market return assumption 9.3%

Forecast excess return -5.6%

Company Description

e& provides telecommunication services, media and related equipment. e& operates in 16

countries across MENA and has recently gained exposure to eastern Europe via investments in

PPF Telecom. The company was founded in 1976 and is headquartered in Abu Dhabi, United

Arab Emirates.

Valuation Method and Risk Statement

We use a SOTP valuation for e& with a blended WACC of 8.3% and Terminal growth rate of

1.4%. We also apply a 9.6x EV/EBITDA multiple to Enterprise and 1.6x EV/Sales on eLife units.

Key risks that we'd flag to our estimates and rating on e&:: 1) macroeconomic and political

uncertainty across its markets, particularly Egypt and Pakistan. Both countries faced 40-70%

currency devaluation in the last 3 years and inflation remains at elevated levels of >20%. And

these have negatively impacted both revenue growth and EBITDA margins through reported

revenues and increased costs. We look for signs of this easing. 2) e& faces an unfavourable

regulatory environment which favours challenger brands and this could have negative

implications on future growth. There have been no signs yet that this will change. 3) As such,

competition has been intensifying in Morocco with market shares now relatively equal. And

regulatory changes remain in place.4) Careem, its online delivery business, remains loss-

making as the company invests to build scale. It is uncertain when the losses will turn around

and this is a key focus area for investors. 5) e& recently announced two Telco acquisitions and