Cairo-based digital payments firm Fawry has seen its value quadruple since the beginning of the Covid-19 pandemic.

Fawry is a major Egyptian e-payment platform that offers financial services to consumers and businesses through more than 166,500 locations and a variety of channels.

The four-fold increase in the price of the company’s stock from a mid-March low has boosted its market value to 20 billion Egyptian pounds ($1.3bn). Fawry debuted on Cairo’s exchange just over a year ago.

The company’s stock market performance has earned it a place among Egypt’s 10 most valuable companies, alongside firms such as Telecom Egypt Co. and Elswedy Electric Co., which generate many times more revenue and profit.

Spurred by government’s efforts to digitise payments

Digital payments firms have been helped along by the Caro government’s drive to reduce Egyptians’ heavy reliance on cash.

The government has urged lenders to set a strategy to ensure all citizens have access to financial services, focusing on digital payments and mobile wallets. The financial regulator is also pushing consumers to use payment platforms such as Fawry in an attempt to curb the spread of the new coronavirus.

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By GlobalData

Meanwhile, cash remains king in Egypt, where many local restaurants, shops, and tour operators do not even have card processing facilities.

About a third of Egyptians 15 years and older have accounts with financial institutions, a relatively low proportion, according to data compiled by the World Bank in 2017.

Virtually all utility payments are done in cash in the country of 100 million people, the World Bank said.

A rally that may not be sustainable

Some have argued that Fawry’s current valuation is not entirely unsupported by fundamentals.

Amr Elalfy, head of research at brokerage house Prime Securities in Cairo, believes the stock has been overhyped, especially considering its earnings. Fawry posted a revenue of 549m Egyptian pounds for the first half of 2020, a 47% rise on the same period last year.

The shares have rallied on “hopes of exponential growth from the digital payments sector in Egypt, which until now is still significantly under-penetrated,” said Allen Sandeep, director of research at Cairo-based Naeem Holding.

The Egyptian firm’s trailing 12-month price-to-sales ratio is 20, about the same as credit-card giant Mastercard, whose revenue is significantly greater and recent profit margin four times higher, according to data compiled by Bloomberg.

Fawry’s 14-day relative strength index has remained above 70 for the past two weeks, suggesting it may have risen too far, too fast.