Confidence rebound for Egypt as Dubai bank plans IPO

The move by Al Mal Capital comes as a slew of Egyptian companies – along with the government – plan to raise capital through the equity markets.

In a vote of confidence for Egypt’s economy, one of Dubai’s biggest investment banks plans to take part in the country’s first initial public offering since the fall of Hosni Mubarak in 2011.

The move by Al Mal Capital comes as a slew of Egyptian companies – along with the government – plan to raise capital through the equity markets after Egypt’s EGX 30 Index rose more than 20 per cent this year.

Even Egypt’s government is turning to the country’s bourse to fund infrastructure projects and public-sector companies.

Brokers say the government is signalling that a policy shift would occur under the administration of Abdel Fattah El Sisi, the former army chief who is expected to be elected president this month.

“Financial markets provide financing for companies as well as governments. That’s the case worldwide, but in Egypt the market has been a tool for companies. But the government never made full use of the stock market,” said Wafik Dawood, the director of institutional sales at Mega Investments Securities in Cairo.

“It’s a good thing ... the market has been suffering from capital flight over the past three years and lacks fresh stories or funds, and IPOs are a crucial part of any recovery cycle in a market.”

Egypt’s prime minister, Ibrahim Mahlab, last week said the government was planning to raise funds needed for public-sector businesses and infrastructure projects through the bourse.

The minister of trade and industry, Mounir Fakhry Abdel Nour, said plans were being studied for an investment fund to manage public-sector companies, while the country’s transport ministry revealed ambitions to fund a planned high-speed rail project through an IPO.

And the minister of communication said the government was turning to a public share sale to fund a high speed internet project at a value of 45 million Egyptian pounds (Dh23.4m).

“The situation on the ground has stabilised a little bit and capital markets have improved, and they want to take advantage of the market as well,” said Tariq Qaqish, the head of asset management at Al Mal Capital.

The size of Al Mal’s investment in the IPO by Arabian Cement will depend on how widely subscribed the new offering is.

“The key positive point we took back with us after meeting the chief executive and the management was that the cement plant is new, which brings in more efficiency and less maintenance shutdowns,” Mr Qaqish said.

“The plant’s proximity to the port and limestone reserves – the raw material – is strategic, bringing down logistics costs. On top of that, the location of this plant is where construction is happening, closer to Cairo.”

The region’s biggest investment bank, EFG-Hermes, which is managing Arabian Cement’s mandate, said the bank had also been mandated for another public share sale. Pioneer Holding, the country’s second-largest publicly traded brokerage, said it was planning to complete two public share sales between the fourth quarter of this year and first quarter of next year. Furthermore, the brokerage was in negotiations with three other corporates to list their shares.

“The stock market is really one of the bright sides of Egypt and has been holding very well,” Mr Qaqish said. “Their success is due to three points. They have very active brokers and asset managers. They are also part of the emerging markets. And more importantly, Egyptians are suave and make great salesmen.”

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Published: May 10, 2014 04:00 AM


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