Cairo For Investment & Real Estate Development (CIRA)

Initiation of Coverage A Promising Decade Ahead

Sunday, 26 January 2020

Recommendation Reuters Code Bloomberg Code Stock Performance

BUY CIRA.CA CIRA EY CIRA Vol. ('000) CIRA EGX30

Fair Value MCAP 16.00 12,000

14.00
10,000
EGP 16.68 EGPmn 7,868 12.00
8,000
Last Price* 52-Week High/Low 10.00
8.00 6,000
EGP 13.25 EGP 13.90 – 8.30 / share
6.00
4,000
Upside 1-Month Av. Daily Turnover 4.00
2,000
26% EGPmn 9.34 2.00
0.00 0
Sector No. of Ordinary Shares

Feb-19

Sep-19
Jan-19

Jul-19
Jul-19
Aug-19

Jan-20
Oct-19
Oct-19
Mar-19
Mar-19

May-19
May-19

Dec-19
Dec-19
Nov-19
Apr-19

Jun-19
Consumer 582mn
*As of 23 Jan 2020 Source: Bloomberg

Initiate coverage with a Buy rating: We initiate coverage on Key Financial Indicators
Cairo For Investment & Real Estate Development (CIRA.CA), one in EGPmn, otherwise stated 2018a 2019a 2020f 2021f
of the largest educational provider in the Egyptian market, with
Revenues 517 705 876 1,144
a Buy recommendation and a fair value per share of EGP 16.68,
implying an upside potential of 26% from the stock’s current EBITDA 219 303 378 495

market price. Major risks to our valuation are any delay in the Net profi t 120 188 253 261

roll-out of the company’s expansions, unfavorable changes in EPS (EGP) 0.5 0.3 0.4 0.4
CIRA’s cash conversion cycle, and higher capex than expected. P/E (x) 20x 49x 42x 40x
Based on our numbers, CIRA is currently trading at a Forward P/B (x) 10x 9x 9x 7x
P/E of 42x compared to a global median forward P/E of 20x. This ROE (%) 24% 21% 22% 19%
can be justified by lush projected growth in CIRA’s earnings, Di vi dend yi el d (%) 1% 0% 0% 1%
with a 5-year CAGR at 28%.
Source: Company Disclosure
Supportive industry dynamics: CIRA benefits from Egypt’s high
population, and the company focuses on the middle income
segment, which represents around 40% of the total population.
Additionally, the quality of learning in public educational Shareholder Structure
institutions is poor, and CIRA capitalizes on that by offering a
high quality education at affordable prices.

Strong expansion plan to fuel revenue growth…: We forecast a 38.74%

10-year CAGR of 19% in CIRA’s revenue, to reach EGP 4.2bn by
51.21%
2029, given the company’s ambitious expansion plan and our
expectations about tuition fees and utilization rates in the
future. 5.00%
5.05%

…..and to widen margins: CIRA is planning to direct most of its

Social Impact capital limited Kingsway fund
investments towards the higher-education segment, which Ibrahim ElSaidi Free Float
enjoys higher margins than the K-12 segment. As a result, we
Source: Company Disclosure
expect an improvement in the company’s margins compared to
its historical averages margins. We see GPM (excluding
deprecation) & EBITDA margin will settle at 61% and 43%,
Mohamed Sobol
respectively by 2029. [email protected]

SIGMA Research Page 1 of 14

 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Table of Contents

I. Valuation & Risks Page 3

II. Investment Thesis Page 4
III. Operating Model Page 9
IV. Company Profile Page 10
V. Financials Statements Page 11

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Valuation

We value CIRA using a 10-year DCF model given the company’s long-term expansion plan. Our 10-year DCF model
consists of three stages of growth. The first stage is a high growth period through 2027, whereby we assumed that
CIRA will roll out most of its expansion projects. While the second stage is a moderate growth period through 2029,
whereby we foresee that the company’s expansions will taper off. Then, the third stage is a stable growth terminal
period, whereby we assumed that CIRA will reach maturity at this stage, growing at a terminal growth rate of 5%.
We used an average WACC of 13.8% over our forecast horizon.

Fig. 1: Summary of DCF valuation

In EGPmn, otherwise stated 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f

NOPAT 249 322 445 579 732 854 990 1,104 1,175 1,262
Depreciation & amortization 57 79 89 104 120 131 145 154 158 160
Change in working capital (37) 79 66 82 90 89 112 118 105 119
CapEx (460) (1,050) (500) (700) (760) (540) (660) (420) (195) (100)
Appropriations (31) (32) (47) (62) (80) (98) (117) (137) (149) (158)
FCFF (223) (602) 54 3 101 436 469 819 1,094 1,283
PV of FCFF (204) (489) 38 2 58 219 206 311 363 374
Sum of PV of FCFF 879
PV of terminal value 8,831
Fig. 2: CIRA’s FV sensitivity to terminal WACC & TGR
Enterprise value 9,710
Terminal Growth Rate
Net Cash (1Q20) 42
Terminal WACC

16.68 3% 4% 5% 6% 7%
Minority interest (1Q20) (100)
12% 16.39 18.48 21.20 24.88 30.12
Investments (1Q20) 67
13% 14.86 16.53 18.65 21.39 25.10
Equity value 9,720
14% 13.61 14.99 16.68 18.81 21.58
No. of Shares (mn) 583 15% 12.58 13.73 15.12 16.82 18.97
FV/share (EGP) 16.68 16% 11.71 12.68 13.84 15.24 16.97
Source: Company disclosure, Sigma Research Source: Sigma Research

Upside Triggers: Downside Risks:

• Higher utilization rate than expected. • Lower utilization rate than expected.
• Higher growth in tuition fees than expected. • Unfavorable regulations that may hinder CIRA’s
• Favorable changes on revenue mix compared to our expansion plan & growth.
forecasts. • Delay in the roll-out of the company’s expansions.
• Faster roll-out of the company’s expansions. • Lower growth in tuition fees than expected.
• Lower capex than expected • Unfavorable changes in CIRA’s working capital
dynamics.
• Higher capex than expected.
• Pressure from new entrants in the market.

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Investment Thesis

I. Attractive and poorly serviced sector with significant potential for growth

The State is the main responsible for funding the Education sector: As Egypt is a highly populated country, there’s a
huge increase in demand for education, and the State is responsible for the majority of the spending in the education
sector as learning is considered to be free or with small fees in public schools and public universities. Moreover, the
majority of the population depend on the state for learning given the high poverty rates in the country, which cripple
the Egyptians' ability to afford attending private educational institutions. Consequently, this has led to a poor quality of
learning in public educational institutions, which is reflected in high-density classes, multiple shift schools, inefficient
teaching methods and programs, dependence on rote learning, and absence of practical learning and critical thinking.
As a result, the current situation in Egypt’s education sector demands to introduce high-quality learning with affordable
fees, a task which the State can not afford to do it on its own. And this is where CIRA entered the scene by offering
inexpensive high-quality education, as the majority of the company’s schools and universities are catered for middle-
income.

Fig. 3: Population in selected MENA countries as of 2018 (in mn) Fig. 4: Poverty rate in Egypt

35% 33%

98 30% 28%
26%
25%
25%
22%
20%
20%

15%

42 10%
34
5%

10 12 0%
4 7
2 3 FY2004/05 FY2008/09 FY2010/11 FY2012/13 FY2015 FY2017/18

Poverty rate
Egypt Algeria Bahrain Kuwait UAE KSA Tunisia Qatar Libya

Source: World bank Source: CAPMAS

Fig. 5: CIRA focuses on the middle income segment, which represents Fig. 6: …….39% of Egypt’s population is within the educational age
a large portion of Egypt’s population. Additionally……….
60 +, 7% 0 to 4, 14%
Upper-middle, High-income,
9% 1%

40 to 59, 18%

Low-income ,
50%

Middle-
income, 40%
5 to 24, 39%
25 to 39, 23%

Source: AfrAsia Wealth Report Source: CAPMAS

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Investment Thesis (Cont.’d)

Fig. 7: Egyptians rely heavily on the government for learning in both Fig. 8: …….and higher-education segment (in mn)
K-12 segment (in mn)………………
25.00
2.50
2.33
20.00 2.03 2.16
1.83 1.94 0.15
2.00 0.14 0.17
15.00 0.11
1.50 0.11
10.00 18.61 19.28 20.12
17.45 17.99 1.00 1.93 1.96 1.87
1.64
5.00 1.39
0.50

0.00
2015 2016 2017 2018 2019
0.00
2014 2015 2016 2017 2018
Students enrolled in K-12 Private Schools Students enrolled in K-12 Public Schools Students enrolled in private universities Students enrolled in public universities

Source: CAPMAS, MoE Source: CAPMAS

Developing the education sector through PPP frameworks: In order to improve the education sector, the government
is currently putting a strong emphasis on adopting public-private partnership (PPP) frameworks. For instance, in the K-
12 segment, a PPP framework was introduced in 2016 which would witness the government providing private sector
operators with land and required licenses, while the operators will build and operate the schools. The government
plans to build 1,000 schools under this framework by 2030. We see CIRA is well positioned to capitalize on this
partnership given its successful track record as a school operator.

Cancelation of experimental schools bodes well for CIRA: The MoE announced in 2018 to cancel the experimental
school system when all currently enrolled students under this system graduate. Experimental schools are governmental
schools, catered for middle-income who wants to take an advantage of the advanced level of foreign language
education taught in these schools at affordable fees. Egypt has more than 700 experimental schools, canceling these
schools will offer a good opportunity for private school operators as such CIRA.

Annual tuition fees increase in K-12 segment is capped by the MoE…..: Annual tuition fees increase in private and
international schools is regulated by the MoE. The MoE set the limit for annual tuition fees increase in 2019/20 for
international schools to be at 7%, while for private schools to be as follows:
• A limit of 25% on annual increase for schools with tuition fees less than EGP 2,000
• A limit of 20% on annual increase for schools with tuition fees ranging between EGP 2,000 - 3000.
• A limit of 15% on annual increase for schools with tuition fees ranging between EGP 2,000 - 3000.
• A limit of 10% on annual increase for schools with tuition fees ranging between EGP 3,000 - 5,000.
• A limit of 10% on annual increase for schools with tuition fees ranging between EGP 5,000 - 10,000.
• A limit of 7% on annual increase for schools with tuition fees higher than EGP 10,000.

….while it’s not the case in private universities: Tuition fees and any annual increases in private universities are
determined by the university itself but are subject to approval by the Supreme Council of Private Universities. This gives
private universities the ability to set their tuition fees based on their strategy as well as costs, recording higher margins

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Investment Thesis (Cont.’d)

Private educational institutions are gaining momentum: Although, as we mentioned later in the report, most of the
Egyptians rely on the government for education, the growth in the number of students enrolled in private educational
institutions is growing at a faster rate than in the public educational institutions, especially in the higher-education
segment, signaling that Egyptians are now more concerned with the quality of education they receive.
Fig. 9: Growth in number of students enrolled in public schools. vs Fig. 10: Growth in number of students enrolled in public universities.
private schools vs private universities
10%
30%
8% 25%
20%
6% 15%
10%
4%
5%
2% 0%
-5%
0%
-10%
2016 2017 2018 2019
2015 2016 2017 2018

y-o-y growth in number of students enrolled in public schools. y-o-y growth in number of students enrolled in public uni.
y-o-y growth in number of students enrolled in private schools. y-o-y growth in number of students enrolled in private uni.

Source: MoE Source: CAPMAS

II.A strong expansion plan to continue fueling robust revenue growth & widening margins going forward

An ambitious expansion plan: Following the successful introduction of CIRA’s flagship university, BUC, back in 2014 the
company is set to replicate the same model but in another governorate other than Cairo, which is Assuit. We are
modeling a total capex of EGP 2.5bn over the next 10 years for the said project. Moreover, many announcements have
been made by the company after its IPO to further expand its business. First, CIRA plans to add 1 to 2 schools every
year for the next 5 years. Second, the company is about to open 7 new faculties in its existing BUC branch in 2021.
Third, CIRA has acquired land near its existing BUC branch, which considered to be an extension to the university,
whereby CIRA aims to open 4 new faculties as well as a number of international branch campuses in it. In total, we see
CIRA investing around EGP 5.5bn over our forecast horizon, with the bulk of the investments to take place over the next
7-8 years. Accordingly we opted to extend our forecast period for 10 years from 2020 to 2029.

Historical strong revenue growth, which we expect to continue down the road: CIRA’s revenues grew at CAGR of 34%
over FY2015-19 from EGP 221mn to EGP 705mn. This strong growth was mainly driven by (1) the growth in CIRA’s K-12
segment revenues (48% of total revenues), which showed a 4-year CAGR of 17% on higher enrollments of students as
well as higher tuition fees, and (2) the establishment of the company’s flagship university, Badr University in Cairo
(BUC) (52% of total revenues), which delivered a strong performance since its inception in 2014, exceeding the K-12
segment revenues’ contribution to total revenues, growing at a 4-year CAGR of 71%. Going forward, given CIRA’s
expansion plan and the favorable industry dynamics, we expect that CIRA will continue to deliver double-digit growth
rates in its revenues over 2020-2027 with less intense revenue growth in the last 2years of our forecast horizon. Our
estimates about the company’s revenues lead to a 10-year CAGR of 19% to EGP 4.1bn by 2029. We also see that the
contribution of the higher-education segment to total revenues will increase from 52% to 79%.

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Investment Thesis (Cont.’d)

Expansion in higher-ed to widen CIRA’s margins: As CIRA’s investments are more directed towards the higher-ed
segment and the higher-ed segment enjoys higher margins than the K-12 segment, we forecast that the company’s
margins will improve as compared to historical averages margins. We see GPM (excluding deprecation) & EBITDA
margin will settle at 61% and 43%, respectively by 2029.
Fig. 11: CapEx & capex to revenues Fig. 12: Revenues & revenue growth rate

1,250 100% 2,100 60%

90% 1,900
1,050 1,700 50%
80%
850 70% 1,500 40%
1,300
60%
650 1,100 30%
50%
900
450 40% 20%
700
30% 500
250 10%
20% 300
50 10% 100 0%
2017 2018 2019 2020e 2021e 2022e 2023e 2017 2018 2019 2020e 2021e 2022e 2023e
CapEx (EGPmn) CapEx to Revenues (RHS) Revenues (EGPmn) Growth Y-o-Y (RHS)

Source: Company disclosure, Sigma Research Source: Company disclosure, Sigma Research

Fig. 13: Number of schools & faculties

80

60
40 43 44 44
31 35
40 26
20 22
8 8 8 9 9
20
20 22 24 26 27 27 27 27 27 27
18 19 19 19
0
2016 2017 2018 2019 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e 2029e
No. of Schools No. of Faculties

Source: Company disclosure, Sigma Research

Fig. 14: GPM in K-12 vs. GPM in Higher-ed Fig. 15: Evolution of margins

85%
65% 61%
75% 60% 56%
65% 55%
55% 50%
45% 43%
45% 39%
40%
35%
35%
25%
30%
2015 2016 2017 2018 2019
GPM EBITDA Margin
GPM in K-12 GPM in Higher-ed
5-year Historical Average 2029e

Source: Company disclosure, Sigma Research Source: Company disclosure, Sigma Research

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Investment Thesis (Cont.’d)

III.Benefiting from the nature of the education business

A negative cash conversion cycle business: CIRA enjoys a negative cash conversion cycle mainly stemmed from the
nature of the education business. CIRA collects more than 70% of the tuition fees before the beginning of the academic
year in Q4 of previous fiscal year and in Q1 of the current fiscal year and collects the remaining portion in Q2 of the
same fiscal year. Needless to say, a negative cash conversion cycle means that the company finances its operations
without relying on credit facilities but through borrowing from its suppliers or in that regard from its students without
paying interest. This is confirmed by CIRA’s very low credit facilities of EGP 1.62mn as of FY2018/19. Moreover, the
company’s long-term debt levels are not alarming either. Debt to equity ratio is currently at 0.19x with a net cash
position of EGP 42mn as of 1Q FY2019/20.

Expansion spree is expected to pressure balance sheet: As CIRA is on an expansion spree (started in FY2018/19), we
believe its balance sheet alongside its cash flow will be slightly under pressure from higher debts and higher capex in
the upcoming period. CIRA’s policy about obtaining loans is that its total debts don’t exceed 2x EBITDA on any given
year. We model a peak in the company’s debts till 2026 and a cool down is expected in the last three years of our
forecast horizon. We also see CIRA’s favorable working capital dynamics will minimize the negative effect of higher
capex on cash flow.
Fig. 16: Working capital cash conversion cycle Fig. 17: Debt to Equity & Debt to EBITDA

100 days 100 days 2.10

1.85
0 days 0 days
1.60
1.35
-100 days -100 days
1.10
-200 days -200 days 0.85
0.60
-300 days -300 days 0.35
0.10
-400 days -400 days 2017 2018 2019 2020e 2021e 2022e 2023e
2017 2018 2019 2020e 2021e 2022e 2023e
Accounts Receivable Inventory Debt to Equity Debt to EBITDA
Accounts Payable CCC (RHS)

Source: Company disclosure, Sigma Research Source: Company disclosure, Sigma Research
Fig. 19: FCFF pressured by higher capex, but a recovery is expected
Fig. 18: Healthy return profile
going forward

30%
100 40%
25%
-
20% 20%
(100)
15% (200) 0%

10% (300) -20%

(400)
5% -40%
(500)
0% (600) -60%
2017 2018 2019 2020e 2021e 2022e 2023e 2017 2018 2019 2020e 2021e 2022e 2023e
RoE RoA FCFF FCFF Margin (RHS)

Source: Company disclosure, Sigma Research Source: Company disclosure, Sigma Research

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Operating Model
2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f
K-12 Segment
No. of s chool s 20 22 24 26 27 27 27 27 27 27
Ca pa ci ty 28,300 30,900 33,500 36,100 37,400 37,400 37,400 37,400 37,400 37,400
No. of s tudents enrol l ed 26,830 28,119 30,485 32,851 34,408 34,782 35,156 35,530 36,278 36,278
Utilization rate 95% 91% 91% 91% 92% 93% 94% 95% 97% 97%
Avera ge revenue/s tudent (EGP) 12,940 14,105 15,092 16,149 16,956 17,804 18,694 19,535 20,414 21,129
Y-o-Y growth 9% 9% 7% 7% 5% 5% 5% 4% 4% 3%
Tui ti ons fees (EGPmn) 347 397 460 530 583 619 657 694 741 767
Y-o-Y growth 21% 14% 16% 15% 10% 6% 6% 6% 7% 3%
Bus revenue (EGPmn) 30 33 36 40 44 45 47 49 51 52
Y-o-Y growth 17% 8% 12% 11% 8% 4% 4% 3% 4% 2%
Admi s s i ons revenue (EGPmn) 3 4 6 7 9 11 12 12 13 13
Y-o-Y growth 28% 28% 28% 28% 28% 15% 10% 5% 5% 5%
Other revenues (EGPmn) 14 13 13 15 16 18 19 21 23 26
Y-o-Y growth -33% -5% 3% 10% 10% 10% 10% 10% 10% 10%
Total K-12 revenues (EGPmn) 394 446 515 593 652 693 735 776 828 857
Y-o-Y growth 17% 13% 15% 15% 10% 6% 6% 6% 7% 4%
K-12 gross profit (EGPmn) 171 190 218 251 269 277 284 286 297 295
Y-o-Y growth 13% 11% 15% 15% 7% 3% 2% 1% 4% -1%
GPM 43% 43% 42% 42% 41% 40% 39% 37% 36% 34%

Higher-ed Segment
No. of fa cul ti es 9 20 22 26 31 35 40 43 44 44
Ca pa ci ty 13,030 29,030 31,430 36,230 42,230 47,030 53,030 56,630 57,830 57,830
No. of s tudents enrol l ed 10,424 14,527 18,990 24,053 29,464 34,031 39,496 44,002 46,776 50,621
Utilization rate 80% 50% 60% 66% 70% 72% 74% 78% 81% 88%
Avera ge revenue/s tudent (EGP) 48,000 50,400 52,920 55,566 61,678 64,011 65,832 67,707 68,994 70,307
Y-o-Y growth 5% 5% 5% 5% 11% 4% 3% 3% 2% 2%
Fi na nci a l a i ds (EGPmn) (45) (66) (90) (120) (157) (189) (226) (261) (283) (313)
Y-o-Y growth 31% 46% 37% 33% 30% 20% 20% 15% 9% 11%
Tui ti ons fees (EGPmn) 455 666 914 1,216 1,584 1,906 2,288 2,637 2,866 3,167
Y-o-Y growth 31% 46% 37% 33% 30% 20% 20% 15% 9% 11%
Bus revenue (EGPmn) 13 16 21 26 32 40 50 63 78 98
Y-o-Y growth 35% 25% 25% 25% 25% 25% 25% 25% 25% 25%
Admi s s i ons revenue (EGPmn) 6 7 8 9 11 12 14 16 18 21
Y-o-Y growth 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
Other revenues (EGPmn) 8 8 9 10 11 12 13 15 16 18
Y-o-Y growth 20% 10% 10% 10% 10% 10% 10% 10% 10% 10%
Total Higher-ed revenues (EGPmn) 482 698 952 1,261 1,638 1,971 2,366 2,730 2,979 3,304
Y-o-Y growth 31% 45% 36% 32% 30% 20% 20% 15% 9% 11%
Higher-ed gross profit (EGPmn) 372 520 706 930 1,203 1,430 1,690 1,916 2,054 2,235
Y-o-Y growth 33% 40% 36% 32% 29% 19% 18% 13% 7% 9%
GPM 77% 74% 74% 74% 73% 73% 71% 70% 69% 68%

Total revenues (EGPmn) 876 1,144 1,467 1,854 2,290 2,663 3,101 3,506 3,806 4,161
Y-o-Y growth 24% 31% 28% 26% 24% 16% 16% 13% 9% 9%
Total gross profit (EGPmn) 544 710 925 1,181 1,472 1,707 1,974 2,202 2,351 2,529
Y-o-Y growth 26% 31% 30% 28% 25% 16% 16% 12% 7% 8%
GPM 62% 62% 63% 64% 64% 64% 64% 63% 62% 61%
Source: Sigma Research

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Company Profile

Cairo for Investments & Real Estate Developments (CIRA.CA), Fig. 20: CIRA’s BoD
established in 1992, is a leading private-sector education provider in Name Designation Status
Egypt, targeting both; K-12 schools (primary and secondary Dr. Hassan El Kalla Chairman Non-excutive

education) and higher education (owns one university); targeting Mohamed El Kalla
Ahmed El Kalla
Managing Director
Board Member
Executive
Non-excutive
the middle income class in six governorates. CIRA owns a network of Dr. Mohamed Yehia Board Member Non-excutive
19 k-12 private schools and in 2014 tapped the higher-education Prf. Dr. Amr Salama Board Member Non-excutive

segment by launching Badr University in Cairo (BUC) with 9 current Dr. Mohamed Soliman
Dr. Sherif Samy
Board Member
Board Member
Non-excutive
Non-excutive
faculties. The BUC’s campus lies on a 45-feddan land plot (fully Dr. Asmaa Hosney Board Member Non-excutive
owned) and is located at East Cairo. The Group’s institutions offer a Source: Company disclosure
range of curricula and are supported by a centralized and integrated
management platform that addresses all aspects of the educational
value chain, including venue selection, school construction and
maintenance, content development and delivery, teacher training,
technology support services and transportation.

Fig. 21: CIRA’S timeline

Expanding Futures • Entering the higher-

schools by introducing education segment
international schools through establishing
providing French Expanding into Badr University in Cairo Further expansion in
Curriculum. Followed by new governorates • Abraaj Group enters its higher-education
German & British other than Cairo into a credit facility Acquiring Rising segment by adding 1
curriculums in 2004 and Giza agreement with CIRA Stars School more faculty

2003 2008 2014 2016 2019

1993 2006 2011 2015 2018

The establishment of Introduction of IFC enters into a Transforming into a • Expanding its K-12 and
first Futures schools Education Systems credit facility corporation from a Higher-education
with a capacity of 100 International, a agreement with family business segments
students and 30 company that develops CIRA • IPO of 37.84% of its
teachers and trains teachers shares on the EGX

Source: Company disclosure

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 Cairo For Investment & Real Estate Development (CIRA)
Initiation of Coverage | Consumer| Egypt Sunday, 26 January 2020

Financials Statements
Income Statement (in EGPmn) 2018a 2019a 2020f 2021f 2022f 2023f

Revenues 517.49 704.68 876.31 1,144.28 1,467.38 1,853.65

CoGS (248.60) (328.48) (387.84) (511.07) (629.41) (773.75)
Gross profit 268.89 376.19 488.47 633.21 837.97 1,079.90
SG&A (92.27) (125.66) (159.45) (208.34) (252.13) (318.24)
Provisions (2.75) (6.54) (7.89) (9.15) (11.74) (14.83)
EBIT 173.86 244.00 321.14 415.72 574.10 746.83
Depreciation & amortization (45.63) (58.58) (57.00) (78.92) (89.35) (103.96)
EBITDA 219.49 302.58 378.14 494.64 663.45 850.80
Net financing income / (expenses) (15.51) 13.79 9.11 (76.99) (83.82) (94.86)
Other income 7.21 4.91 6.13 8.01 10.27 12.98
Other expenses - (5.13) - - - -
EBT 165.56 257.57 336.38 346.74 500.55 664.94
Taxes (39.19) (64.99) (75.69) (78.02) (112.62) (149.61)
Net profit 126.37 192.57 260.69 268.73 387.93 515.33
Minority interests (6.64) (4.31) (7.82) (8.06) (11.64) (15.46)
Attributable net profit 119.73 188.26 252.87 260.66 376.29 499.87

Balance Sheet (in EGPmn) 2018a 2019a 2020f 2021f 2022f 2023f

Cash & cash equivalents 91.50 163.03 587.59 182.83 156.98 58.49
Accounts receivables 57.34 93.08 127.25 166.16 213.07 269.16
Inventory 2.53 0.66 2.13 2.80 3.45 4.24
Other current assets 8.48 109.22 109.22 109.22 109.22 109.22
Fixed assets (net) 743.34 747.30 897.30 1,290.88 1,426.53 1,637.56
Other non-current assets 70.12 358.65 611.65 1,189.15 1,464.15 1,849.15
Total assets 973.32 1,471.94 2,335.13 2,941.04 3,373.40 3,927.82
Accounts payables 80.97 162.71 160.38 211.33 260.26 319.95
Credit facilities 4.87 1.62 - - - -
CPLTD 85.03 21.00 179.62 247.32 248.79 248.86
Other current liabilities 269.49 325.77 326.63 394.17 459.04 538.16
LTD 24.99 66.88 538.85 741.96 746.38 746.57
Other non-current liabilities 3.59 3.93 3.93 3.93 3.93 3.93
Total liabilities 468.94 581.90 1,209.40 1,598.71 1,718.41 1,857.47
Shareholders equity 443.21 833.67 1,061.54 1,270.07 1,571.10 1,971.00
Minority interests 61.17 56.37 64.19 72.25 83.89 99.35
Total liabilities & equity 973.32 1,471.94 2,335.13 2,941.04 3,373.40 3,927.82

Cash Flow Statement (in EGPmn) 2018a 2019a 2020f 2021f 2022f 2023f

Cash flow from operations 233.24 253.94 272.77 418.50 531.88 685.76
Cash flow from investing (115.66) (346.56) (460.00) (1,050.00) (500.00) (700.00)
Cash flow from financing (83.15) 166.58 611.79 226.74 (57.72) (84.26)
Net change in cash 34.42 73.96 424.56 (404.76) (25.85) (98.49)

Valuation Indicators 2018a 2019a 2020f 2021f 2022f 2023f

P/E 43.81x 42.97x 38.20x 37.06x 25.67x 19.33x

P/B 10.40x 9.09x 8.58x 7.20x 5.84x 4.67x
EV/EBITDA 2.40x 2.70x 3.32x 4.34x 3.76x 3.53x
EV/Sales 1.02x 1.16x 1.43x 1.88x 1.70x 1.62x

Profitability & Growth Ratios 2018a 2019a 2020f 2021f 2022f 2023f

Revenue growth 48% 36% 24% 31% 28% 26%

EBITDA growth 63% 38% 25% 31% 34% 28%
GPM 52% 53% 56% 55% 57% 58%
EBITDA margin 42% 43% 43% 43% 45% 46%
Net margin 23% 27% 29% 23% 26% 27%
ROE 24% 21% 22% 19% 23% 24%
ROA 12% 13% 11% 9% 11% 13%
Source: Company disclosure, Sigma Research

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Sigma Capital Sales and Trading

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Mohandseen, Giza, 12411, Egypt Head of Institutional Sales
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