Deutche Bank cuts EFG-Hermes target price to L.E 23

The main drivers of the cut is a more restrained assessment of items in cash and cash equivalents (including T-bills and the stake in SODIC) on EFG’s
balance sheet that should be valued. We base this new assessment on guidance from management as well as backing out the numbers from the consolidated financial statements.

The new value per share of this component is EGP7 vs. EGP12 previously. We have increased our consolidated EPS targets for 2011E by 3%, primarily due to better performance at Credit Libanais. This is not fully reflected in our valuation of Credit Libanais, however, as we use a peer-based multiples approach to benchmark it against other Lebanese banks, and these banks’ forward earnings multiples are now slightly lower than they were in March (5.8x now vs. 6x then).

So the value per share of Credit Libanais does increase relative to where it was at our last update, but the gain is capped by the lower earnings multiples. We now value Credit Libanais at EGP5 per share, vs. EGP4 previously.