Egypt’s Digital Payments giant shares may be overvalued: Bloomberg

Bloomberg is speculating about Fawry shares, wondering if  its valuation is “over-hyped,” as the company has appreciated by 300 percent.

Fawry’s rally has taken its share price to over EGP 27 a share, nearly four times its EGP 7 price in mid-March, leading it to become the first Egyptian tech company to exceed a market cap of $1 bn.

The company is looking expensive when considering “the Egyptian firm’s trailing 12-month price-to-sales ratio is 20, about the same as credit-card giant Mastercard, whose revenue is significantly greater and recent profit margin four times higher.”

The pandemic has been a boon for the wide-ranging e-payments firm, with profits surging 166% to EGP 70.5 mn and revenues up 47% to 549.3 mn Egyptian pounds in 1H2020 compared to the year before.

Yet, Bloomberg says some analysts don’t see that as enough to justify its 20 billion pounds market value ($1.3 bn), which places it among Egypt’s 10 largest companies in terms of market cap.

The company shares have increased on “hopes of exponential growth from the digital payments sector in Egypt, which until now is still significantly under-penetrated,” Allen Sandeep, director of research at Cairo-based Naeem Holding told Bloomberg.

However, Bloomberg says that Fawry’s performance may encourage more investment in the e-payments sector,  according to Azimut Egypt Asset Management managing director Ahmed Abou El Saad says.

Already, the National Bank of Egypt is in the process of purchasing a 20-25% stake in Raya e-payments arm Aman and consumer electronics distributor MM Group could soon be the first company to launch a post-pandemic IPO in Egypt when it sells shares in its fintech investment arm as early as 1Q2021.

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