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Performance of Egypt’s largest IPOs raises questions as government mulls ambitious listings plan - Daily News Egypt

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Performance of Egypt’s largest IPOs raises questions as government mulls ambitious listings plan

Programme is expected to lure in fresh inflows, boost market’s turnover

As Egypt’s government announced plans to list 10 state-owned companies in initial public offerings (IPOs), questions are being raised about the outlook for these companies after going public.

The ministry also revealed a list of 10 companies that will have additional shares listed.

With the state offering 15-20% of each of the companies to be listed over the next 24 to 30 months, the cumulative value of the listings is expected to rise to EGP 80bn, raising the collective market capitalisation to EGP 450bn, according to a statement from the Ministry of Finance.

Minister of Finance Amr El-Garhy revealed that the first stake sales will be taking place within three months, although he did not specify which companies will be included.

Despite El-Garhy not stating the companies, it is expected that Enppi, a state-owned energy firm, will be piloting the programme. The first state-owned bank planned to be listed, Banqu du Caire, will be offered after the fourth quarter (Q4) of 2018.

A recent report issued by Frontera has tracked the performance of Egypt’s largest IPOs since their listing up until now.

The largest Egyptian IPOs by deal size since 2004 have been Telecom Egypt, Citadel Capital, Talaat Moustafa Group, and Emaar Misr for Development. The IPOs of these companies generated investments of $890m, $605m, $592m, and $298m respectively.

Shares of these companies have lost 20%, 79%, 30%, and 34% respectively since their public issuances. Apart from these, Palm Hills Developments listed its shares on the London Stock Exchange. Since its public listing in May 2008, shares of the company have plunged nearly 93%.

Telecom Egypt

Telecom Egypt raised nearly $892m through an IPO in 2005. Shares of the company were listed on the London and Egyptian stock exchanges, making it the largest international IPO from the Middle East and North Africa during that calendar year.

Telecom Egypt offered 340m shares through the IPO, of which half were reserved for institutional investors. Demand for the IPO hit nearly 1.45bn shares, almost 4.2 times the number of shares on offer.

Shares of Telecom Egypt were priced at EGP 15.56 for investment institutions and EGP 14.80 for retail investors. Credit Suisse First Boston (CSFB) and EFG Hermes were lead managers for Telecom Egypt’s public issuance.

Telecom Egypt trades with the stock ticker ETEL.CA on the Egyptian Stock Exchange and TEEG.LI on the London Stock Exchange. Shares of the company have dropped 19% since its public listing on the Cairo Stock Exchange in 2005.

Citadel Capital

Citadel Capital, now known as Qalaa Holdings, is the leading private equity firm in the Middle East and Africa. The company listed its shares on the Egyptian Exchange in 2009. Citadel’s IPO generated $605m as per Bloomberg data, making it the second largest Egyptian IPO in the last 10 years.

The company offered 660m shares at EGP 5 per share. Citadel Capital Chairperson and Founder Ahmed Heikal saidm about the IPO, “listing on the EGX will make it easier for Citadel Capital to raise its own capital in the future, thereby enhancing our ability to be significant principal investors in our own transactions. This is a key component of our business model that ensures Citadel Capital’s interests are fully aligned with the interests of our limited partners in each and every one of our investments.”

“Instead of relying on leverage to generate returns, Citadel Capital has always focused on deploying equity capital and smart levels of debt to create value for shareholders and limited partners alike through the patient building of platform companies with regional scope, allowing us to generate superior returns at exit,” said Citadel Capital Managing Director and Co-Founder Hisham El-Khazindar.

Citadel Capital has plunged 78% since its public listing in June 2009.

Talaat Moustafa

Talaat Moustafa Group, the largest Egyptian real estate developer, raised $592m in an IPO in November 2007. The company offered 330m shares to institutional investors at EGP 11.6 per share and 65m shares to retail investors at EGP 11 per share. The company’s private placement to institutional investors was 17 times oversubscribed. Overall, the company received applications for $5.4bn worth of shares, and the IPO was 41.4 times oversubscribed. Proceeds of the IPO were used to finance current and future projects in Egypt and the region.

Mohamed Ebeid, head of western institutional sales at EFG Hermes, said, “the company represents the macroeconomic story in Egypt, which is the rise of the middle class. There are not many real estate companies listed and there is a lot of interest in the real estate market.” EFG Hermes acted as joint coordinator and bookrunner on the issuance with HSBC.

Talaat Moustafa Group has fallen 30% since its public listing in November 2007.

Emaar Misr for Development

Emaar Misr for Development is the Egyptian unit of the UAE’s largest real estate developer, Emaar Properties. The company offered a 13% stake (or 600m shares) in Emaar Misr at EGP 3.8 per share. The IPO was 11 times oversubscribed and traded nearly 4% higher than its issuance price on its first day of trading.

The company used proceeds from the IPO to buy land. It offered 510m shares to international institutional investors, and 90m shares to retail investors based in Egypt. The Egyptian investment bank EFG Hermes and JP Morgan were the joint bookrunners for the issuance.

Emaar Misr has declined by 34% since its public listing in 2015.

The report also noted that high borrowing costs make IPOs attractive for companies as they search new avenues for their financing requirements.

Further, a rising equity market also lures these companies to consider public issuances of their shares, as they can generate attractive valuations on their shares.

Topics: IPOs listings

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