CI Capital keeps Mobinil at Underweight recommendation

CI Capital reiterated view on Mobinil (EMOB) fundamentals which have been negatively affected over the past period as a result of stiff competition in Egypt’s mobile market which led to a loss in subscriber market share and lower profitability and set Underweight recommendation.

CI Capital said that rumors that Eng. Naguib Sawiris will sell his stake in Mobinil has pushed the price of EMOB higher over the past couple of trading sessions by more than 10%.

It revived scenarios concerning the “amended” shareholder agreement between Orascom Telecom (OT) (ORTE) and FT which was inked back in April 2010. As a reminder, that “amended” shareholder agreement gave ORTE a window of two months (September 15 to November 15) in 2012 and 2013 and anytime until November 15, 2013 in a limited number of deadlock situations on some material decisions to exercise a put option to sell its direct and indirect stakes in EMOB at an opening price of EGP221.7/share as of June 30, 2010 increased by 3% per annum, payable in Euros at a fixed rate corresponding on the EGP:EUR rate as at the date of signing of the agreement.

In other words, the price of the put option does not express the parties’ view of the long-term valuation of EMOB. Whether through an option exercise or a outright sale, there will have to be a mandatory buyout offer submitted by FT to EMOB’s free float minorities or around 28.97% of EMOB, which explains the recent rally in EMOB’s stock price.