The Ministry of Education issued a decision to have in place a 20% cap on foreign investor ownership in all private schools, according to a decree seen by the press. It turns out the decision is not new, as it was issued on the same day that a similar ownership cap was imposed on international schools in September, but was not circulated to the media because of the pushback and ongoing negotiations between the Ministry and industry players that are trying to suspend both decrees. 
 
If the decree is implemented (which we believe is a low probability event), impact on CIRA will be limited (CIRA’s free float of c49% is largely owned by foreigners) as the decision will not be applied retroactively, so existing schools should not be affected but only future expansions (CIRA was looking to open six new national schools over the next three years). We also note that the company’s main value driver is higher-education; we expect contribution of the K-12 segment to drop in five years to 31% of revenue (from c50% now) and 17% of EBITDA (from 30%+ now) and to decline even further in the longer term. (

Hatem Alaa, Nada Amin, Mirna Maher
 
Cairo Investment & Real Estate Development (CIRA): EGP12.82 as of 2 Oct. 2019, Rating: Buy, TP: EGP13.00/share, MCap: USD460mn, CIRA EY/CIRA.CA