EXECUTIVE SUMMARY
Following the acquisition of Crédit Du Maroc by Holmarcom Group in 2022, from Crédit Agricole France, the new main Shareholder is launching a Secondary Public Offering of 11.3% of the capital.
This represents a significant transaction amounting to MAD 1.0 Bn.
Based on our own analysis and our discussions with Top Management and the main Shareholder, we recommend investors SUBSCRIBE to this SPV. According to our projections, the stock offer an upside of 30% compared to the SPO price of MAD 850. This is equivalent to a target price of MAD 1,100 based on a normative banking sector’s P/E(x) of 14.8x observed over the last 3 years and the new earning power of CDM from 2026E.
Our opinion is based on the following arguments:
(1) This SPO would allow CDM to overcome a historical constraint, relating to its stock “illiquidity”.
This has considerably reduced its attractiveness on the market. With the doubling of its floating capital from 11% to 22%, CDM stock would now display an "acceptable" liquidity levels in the eyes of investors;
(2) This transaction represents a real opportunity for CDM to mark a break with the past. Indeed, the Group has disclosed a new vision which consists of revitalizing its activities. For example, over the period 2024E-2026E we expect a visible catch-up effect in terms of credit growth. In fact, the bank’s market share remains relatively low around 4.0% in 2023 ;
(3) Taking into account an AAGR of +8.8% over 2023-2026E in NBI, CDM would be able to achieve a growth rate twice as fast in its profit, i.e. +17.2% over the same period. To this end, the bank's profit capacity would cross the MAD 800 Mn threshold by 2026E against a historical average of MAD 378 Mn(1). This scenario takes into account an improvement in the Cost-to-Income ratio in line with the trend of the Moroccan banking sector and a normative Cost of Risk between 60 and
70 BPS over the forecast period;
(4) Due to its “illiquidity”, the historical valuation multiples of the stock seem insignificant to us.
Consequently, they cannot constitute a reference for the future. Based on our projections in 2026E, the induced P/E of the stock comes to 11.4x compared to 14.6x for the banking sector in 2024E. Also, CDM should get closer to the Moroccan banking sector’s ROE, i.e. between 11 and 12%. This statement confirms the upside potential of CDM stock;
(5) The dividend is a real competitive advantage of the CDM stock. With a target payout of 62% versus 75% for the sector, CDM has an interesting leeway to positively surprise the market in the future. As an indication, an increase in the payout to 70% or 80% would lead to respective D/Y 26E of 6.1% and 7.1%;
(6) The Human Resources component remains crucial, especially for a bank which aims to mark a break with the past by embarking on a new growth dynamic. In these conditions, CDM’s Top Management confirmed to us that in-depth work has been carried out since 2022. The objective is to set up a new organization and a system to effectively carry out this vision.
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