IPOs Shake Up the EGX

CAIRO - 18 March 2018: With the aim of finding new financing sources and raising
capital at an economically challenging time, many private and public sector companies launched initial public offerings (IPOs) over the past four years, listing their shares for public trading on the Egyptian Exchange (EGX).

The trend is expected to further leap in 2018 as at least six companies announced intentions to float their shares this year, causing the highest market activity in Egypt since the plummet following the uprising of 2011.

The government has also set a plan to float several ailing state-owned companies on the EGX under a five-year program announced in 2016 to attract indirect investment. The plan includes companies in various sectors, including petroleum, services, chemicals and real estate.

The EGX’s plan includes diversifying investment options for all types of investors
by introducing and activating more financial products. Egypt’s public offering of state-owned companies is the second since 2005, when the government offered shares in Telecom Egypt, Alexandria Mineral Oils (AMOC) and Sidi Kerir
Petrochemicals (Sidepic).

The IPOs of state-owned companies will increase attractiveness of the stock market and hike trading volumes, Chairman of the Egyptian Exchange (EGX) Mohamed Farid said last December. The move comes under an EGX vision to deepen the stock market and increase trading volumes, “the higher trading volumes achieved, the more guarantees we have for success of new IPOs,” he added.

“The IPOs will also boost the capabilities of these companies to commit to governance regulations, and also allow the government to monitor their performance.”

Minister of Investment and International Cooperation Sahar Nasr said that the IPOs of companies would reflect investor confidence in the Egyptian economy. Delays challenge the state program Since the start of the program, the Ministry of Petroleum has been eyeing the lion’s share in the program.

Managed by state-owned consultancy NI Capital, there are five companies the ministry intends to list. The companies are Misr Oil Processing and Fertilisers Company (MOPCO), the Engineering Company for the Petroleum and Process Industries (ENPPI), the Egyptian Ethylene and Derivatives Company (ETHYDCO), Alexandria Minerals Oil Company (AMOC), and Middle East Oil Refinery (MIDOR).

MOPCO was the first oil sector company to have its share listed in the stock market, as it started trading in September 2016 at a price of LE 10 per share.

The second petroleum sector company to launch its IPO was supposed to be ENPPI, but Executive Director of NI Capital Ashraf Ghazaly said in December that the offering will not take place in the first quarter of 2018.

“NI Capital still needs more time as this process takes time,” Ghazaly said, adding that around 24% of ENPPI’s shares will be offered for listing. In the banking sector, IPOs will be offered in the second half of 2018, a delay from the original date, said Central Bank of Egypt (CBE) Governor Tarek Amer last November.

The IPO of Egypt’s second state-owned bank, Banque du Caire, was initially slated for the first half of 2017. However, it was later delayed to 2018, with investment bank EFG Hermes taking over the deal.

Mostafa Gad, the Co-Head of EFG Hermes’ Investment Banking Division, said that the actual timing of the IPO has yet to be determined, adding that the bank’s public offering was delayed due to the changes in Egypt’s monetary policy in 2017.

Private sector IPOs December was a busy month for the Egyptian
Exchange as two major private sector companies listed their shares on the stock market.

Egypt’s second-largest distributor of pharmaceuticals, Ibnsina Pharma, listed its shares on December 7. It was oversubscribed 14.5 times.

The share price was set at LE 5.8 due to heavy demand for both the private offering and the IPO. The company offered 269.3 million ordinary shares, splitting them to allocate 85% of these shares to institutional investors and 15% to retail
investors.

In the private offering of the same month, Ibnsina Pharma witnessed an over subscription of 17 times. The volume of orders amounted to LE 22.5 billion ($1.3 billion), with 500 orders coming from local companies, in addition to investors from the US, Europe, the UK and Gulf investment.

tries, according to a report by Beltone Financial, the IPO manager. Listing the sources of orders, Beltone said that 60% of orders came from foreign investors. Gulf institutions constituted 23%, while 6% from Gulf-based, high-net worth family offices, 13% from South African institutions, 7% from European institutions and 6% from American institutions.

The same month also witnessed the listing of financial lease firm Al-Tawfeek Leasing Company, making it the 222nd company to be floated, the EGX said in a statement.

Al-Tawfeek is the first financial leasing company to float in the stock market, “which supports the EGX vision to attract companies from different sectors to achieve economic growth,”

Vice Chairman of the EGX Mohsen Adel said. The company’s IPO was 28 times oversubscribed and the initial buying demands of Al-Tawfeek shares were 134.45 million shares, the EGX added.

The final price set for the 4.8 million shares’ public offering, which accounts for
25% of the total offering, is LE 6.6 per share. Several other companies are expected to
launch their IPOs this year.

Beltone Financial targets organizing listings of new firms on the EGX, in addition to mergers and acquisitions of 15 firms at LE 10 billion ($5.7 billion), Beltone Chairman Sameh El Torgoman told Business Today Egypt.

Torgoman added that the company will participate in all the offerings, even if it is not responsible for managing them, and will help attract investors. Major investment bank EFG Hermes is also planning to launch the IPOs of two other companies working in the industrial sector.

The bank managed 10 stock market offerings and six mergers in the Arab region during 2017.