Egypt’s Supreme Council of Universities has reportedly decided to reduce the licenced (not operational) student capacity of universities in pharmacy and dentistry majors by 25% starting the academic year 2019/20. This is to control the number of graduates from these majors, which exceeds the number of available job opportunities in the market. With no official decision yet, it is still not clear whether the decision will be applied on both public and private universities and/or Egyptian and non-Egyptian students.    
 
If implemented, the decision should have a limited impact on CIRA, given that the current occupied capacity at the Faculty of Pharmacy (300 students per year) is below the licenced capacity (400). As for the dentistry major, which is operating at full-licenced capacity (300 students per year), the news implies a worst-case reduction in the major’s annual student intake of 75 students. This freed-up capacity will most likely be allocated to non-Egyptian students (c10% of CIRA’s total number of students), most probably at higher tuition fees.  
 
We are Buyers of CIRA, as the big room to ramp up utilisation at its existing university campus, in addition to capacity additions in an underserved market, will drive a c29% 5YR revenue CAGR (earnings c36%). We also like CIRA’s impressive profitability profile, negative cash conversion cycle (60-70% of tuition collected before start of academic year) and liquid balance sheet. 

Hatem Alaa, Nada Amin, Mirna Maher
 
Cairo Investment & Real Estate Development (CIRA): EGP9.81 as of 24 Jun. 2019, Rating: Buy, TP: EGP13.00/share, MCap: USD343mn, CIRA EY/CIRA.CA