x Abu Dhabi, UAEMonday 22 January 2018

GB Auto in driving seat as shares rise

What's Up: Ghabbour Auto's share price may have taken a bit of a tumble recently but under the bonnet the company's engine looks well oiled.

Ghabbour Auto's share price may have taken a bit of a tumble but under the bonnet the company's engine looks well maintained.

GB Auto, as the company is known, is an Egyptian car importer and distributor that leads the market in the Middle East and North Africa region, has had a decent year given poor market conditions after the country's revolution.

"Overall, 2011 was a solid year given events, especially in the first half of 2011," according to analysts at Naeem, an Egyptian brokerage, which maintains its "buy" recommendation on the stock.

Higher financing costs and provisions have hit GB Auto's top line, and supply constraints have limited sales in both Iraq and Egypt.

Yet the company posted fourth-quarter net profits of 43 million Egyptian pounds, compared with 40m for the same period a year earlier. Revenue was up 6.6 per cent to 1.8 billion pounds.

The company's sales of commercial vehicles in Egypt fell 26 per cent year-on-year in the fourth quarter, and 12 per cent compared with the previous quarter, which was attributed to the unsettled political environment in October and November.

However, with parliamentary elections taking place peacefully, consumer sentiment improved in December and sales bounced back 36 per cent month on month.

As a result, GB Auto's market share rose to 32.6 per cent in the fourth quarter, giving an overall market share of 32.2 per cent last year. By comparison, the next largest player has 18 per cent and the third-largest 8 per cent.

Management said it expected sales in Egypt this year to be "similar to 2010 levels". This is consistent with a forecast by the Naeem analysts, who continue to predict a strong recovery in vehicle sales in the second quarter of this year after the presidential elections.

Average selling prices rose 17 per cent last year, reflecting the popularity of new, more expensive models and GB Auto's ability to pass on some price increase to the market, according to the Naeem analysts.

GB Auto's management indicated after the revolution that it intended to lift prices to protect margins and it has delivered.

Even so, Raouf Ghabbour, the company's chief executive, has made a shrewd move to hedge his bets, saying GB Auto would reduce its reliance on its Egyptian operations, and its exposure to a potential currency crisis in the country.

GB Auto is firmly in the driving seat. With the share price up 4.17 per cent to 22.99 pounds yesterday, investors should see some mileage in this stock.


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