Eastern Co.’s public offering starts Sunday

CAIRO – 3 March 2019: Eastern Company’s public offering will start Sunday, March 3, and will end on Tuesday, March 5, 2019, according to Minister of Public Enterprise Hesham Tawfik.

The private offering of the cigarette company was oversubscribed by 1.8 times at a price of LE 17 which exceeds the company’s share price on Thursday, Feb. 28, by 3 percent.

The flotation of the new stake of Eastern Company on the Egyptian Exchange (EGX) in March is considered the first to be offered in the government’s initial public offering program.

The floated stake is put up to about 4.5 percent of the company's shares in the stock market.

Chemical Industries Holding Co., one of the Ministry of Public Enterprise companies, announced to proceed with the public and private offerings in the secondary market on EGX with a maximum number of 101.25 million shares, up to 4.5 percent of the share capital of the Eastern Company issued by the shares owned by the Chemical Industries Company. These shares are for public and private secondary offerings.

A source at the public enterprise sector said earlier that this step came in light of the continuous rise of the company's shares and the stock market's gradual recovery.

In 2018, Egypt delayed listing shares of state-owned companies on the Egyptian Exchange, such as the 4.5 percent stake of Eastern Company slated for October. The government attributed the delay to volatility in the global market, noting that if the shares were floated, they would have failed to be covered at proper valuation.

Analysts agree that this delay contributed to the drop EGX witnessed. The delay in offering the program’s scheduled shares was also reportedly one of the reasons behind the decline of EGX.

Associate vice president of Equity Research at Beltone Financial Ali Afifi said the effect of the IPOs’ delay was not big because share prices had already downed. He also stated that the percentage of the free float is not enough.

Former Analyst in Institutional Equity Sales at NAEEM Holding for Investment Mohamed Sameh argued that the perfect timing for the offering was missed, stating that the price of Eastern Company fell to around LE 15 from LE 25, while the government plans to offer it at LE 21; as a listed company, its pricing is easily affected.

“The IPO program is an opportunity for investors,” Sameh said.

In 2016, Egypt announced the launch of the government’s IPO program offering shares over three to five years in several state-owned companies in fields such as petroleum, services, chemicals and real estate.

As part of the economic reform program, the government targets offering 15-30 percent of stakes in state-owned companies on the stock exchange (EGX) to increase funding to Egyptian companies, maximize the benefit from state assets, and attract local and foreign capital flows to Egypt.

Eastern Co. is a public company, listed on EGX since September 1995. It operates within the food, beverage and tobacco sector focusing on tobacco. It was established in July 1920.