Does Amazon’s rating reflect the strength of the Valeo brand?

Investment bank analysts have confirmed that the valuation of the Valeo consumer finance company, according to the two Amazon global agreements with the financial group Hermes, is $ 235 million – equivalent to about 4.3 billion pounds – which is the strength of the brand and the financial solvency of Valeo, in addition to the high activity and volume of demand in the consumer finance sector in Egypt.

And Valeo, which is owned by financial group “Hermes” Holding, on Thursday announced the signing of two joint venture agreements with Amazon, the first “commercial” that includes providing Valeo consumer financing as a payment method for qualifying consumers on Amazon. -website.

The commercial agreement involves the signing of a parallel investment agreement that includes Amazon’s purchase of $ 10 million worth of GDRs in Hermes Holding, and the agreement includes the option to replace that investment in the future with a share equal to 4.255% in the issued capital of Valeo based on a current valuation of Valeo about $ 235 million, equivalent to 4.3 billion pounds.

Amr El-Alfy, head of the research sector at Prime Investment Bank, initially said Amazon’s valuation is higher than the market’s valuations, proving that the Hermes share trades at a cheap and attractive price to buy, and the strength reflect. of Valeo’s solvency and unique business model compared to competitors in the consumer finance market.

He added that Amazon would benefit in two ways, as it would allow the availability of Amazon products on the Valeo platforms, in addition to accessing a future stock with several options, including partial or total withdrawal, listing on the stock exchange, increase capital, or others.

Al-Alfi said that Amazon sees the great development that Valeo has seen during the recent period, and its evaluation differs from the market’s vision due to the large returns expected from Valeo in the future, and the similarities of activities. between the two parties strongly. support this vision.

Hisham El-Shibiny, head of research unit at “Mubasher” Securities Brokerage Company, in turn said that the valuation of the prepaid company, that is, before the injection of new funds from new shareholders will be taken into account. less than $ 235 million, other than what was announced in the valuation item -money, (ie after taking into account the injection of new funds from new shareholders in the future).

El-Shibiny added that the pre-currency valuation means that it represents approximately EGP 4.20 per share of the total valuation of the Hermes share, according to the exchange rate of EGP 18.30 against the dollar, taking into account that this estimate is preliminary and is subject to further reduction by Mubasher Research Unit.

He stated that the consumer finance sector in the financial group had a significant increase in revenue of around 171% to reach £ 302 million in 2021, compared to £ 111 million in 2022, and thus Valeo’s contribution to total annual revenue of Hermes increased from 2% in 2020 to 5% in 2021.

The deal raises the valuation of “Hermes” to more than 20 pounds .. and confirms that the price of the screen is attractive to buy

He stressed that the value of Valeo represents only 27% of the current market price of the entire Hermes share, while Valeo contributed about 5% of Hermes’ annual revenue in 2021, and therefore it implicitly indicates that the current market price of Hermes Hermes on display are considered low and far from its fair value, This is a great buying opportunity.

He explained that Amazon’s high valuation of Valeo means that it expects strong growth in consumer finance activity in Egypt and Valeo, and on the other hand means that the current market price of the Hermes share, which is £ 15.50, if low is considered by a considerable distance from the fair value.

Abanob Magdy, vice president of research for the banking and financial institutions sector at Beltone Financial Holding, said that the Beltone research unit valued Valeo at around EGP 1.2 billion, at a price of around EGP 1.20 per share, compared to with Amazon’s valuation of EGP 4.3 billion. By analogy, the share price is £ 4.40.

He added that compared to Amazon’s valuation, the fair value of the Hermes share was supposed to rise from around 18 to 21 pounds.

He explained that Amazon’s evaluation was first officially announced in the framework of an agreement, and it is likely that this will depend on the strength of recent financial technology activity compared to any other sector, in addition to the fact that Valeo is remarkable growth. in terms of the number of users and the size of operations.

Analysts: Valeo differs from competitors due to its wide dependence on technology and the installment of various product packages

Magdy pointed out that Value’s business model differs from that of competing companies, although the volume of business in some of them is equal or close.

He explained that Valeo differs from competing companies in that its transactions are largely dependent on smart applications and financial technology.

He said Amazon’s rating differs from the market view due to Valeo’s expected returns in the future.

He pointed out that the size of the financial performance and the size of the present value qualify it to be listed on the stock exchange, especially with the significant growth over the past two years, which significantly contributes to the overall performance of EFG Hermes. affected. .

He ruled out that EFG-Hermes would abandon Valeo in the near future or sell a controlling or influential stake due to the group’s expansion and its need for that arm.

He pointed out that the exit decision is unlikely because it is far from the general strategy of Hermes, as it is one of the entities that maintains a long-term strategy that does not change constantly.

It is noteworthy that the investment agreement, which includes the purchase of a stake in Valeo, can be activated before the implementation of or at the occurrence of a qualified presentation opportunity at the level of the Valeo company, in the form of an independent investment of other investors, or the sale of shares, or an initial public offering or listing on the stock exchange, in accordance with the terms and conditions of the investment transaction agreement.

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