Tags
activist investors, DiamondCorp, EIIB, Equity/Total Assets, HBG Holdings, Margin of Safety, Sharia'a, sukuk, value investing
European Islamic Investment Bank (EIIB:LN)
Mkt Price: GBP 3.625p
Mkt Cap: GBP 64.0 mio
Equity/Total Assets Ratio: 69.2%
P/B Ratio: 0.45 (adjusted)
P/C Ratio: 0.59 (adjusted)
Fair Value: GBP 8.09p
Upside Potential: 123%
Continuing from my previous EIIB post: Let’s not forget that EIIB is a bank. Why am I re-stating the obvious? Well, I know it seems like banks are ten a penny (actually true in the US, with a recent count of 6,500 banks, if you can believe it!), but a new banking licence in the UK is a pretty rare thing. Especially an Islamic banking licence. I’ve no real idea of how much that’s worth, but it’s certainly a valuable intangible that isn’t listed anywhere on the B/S. EIIB presents a cheap entry to any financial institution who’s contemplating entering (or bulking up) in the UK and/or the Islamic finance market. When you consider the strength of EIIB’s B/S, the FSA licence (which would otherwise take at least a year to obtain) and the potential business contacts/opportunities gained, why not pay a premium to Book in a takeover situation? One should also consider the leverage potential implied – EIIB could almost quadruple its B/S, still be considered a very safe bank (with a near 20% Equity/Total Assets Ratio) and presumably achieve a radical transformation of its P&L and Return on Equity. Nobody’s cup of tea right now, and not a strategy that is being signaled by the company, but still something to consider…
