Emaar Misr IPO dampened by violence and Greek question

Emaar’s Mivida project in the suburbs of Cairo. Dana Smillie for The National

Emaar Misr shares rose by as much as 7.4 per cent on their first day of trading on the Egyptian Exchange on Sunday, in the country’s largest initial public offering in eight years.

However, the shares’ performance fell well short of analyst predictions, with investor sentiment subdued by recent violence in Egypt and uncertainties over Greece’s future in the euro zone.

Shares in the Egyptian property developer, majority owned by Dubai's Emaar Properties, soared in the opening minutes of trading before easing gradually as the day went on.

The stock eventually ended up 2.94 per cent at 3.94 Egyptian pounds, the day’s best performer. About 78.5 million Emaar Misr shares changed hands, 40 per cent more than the next-most traded stock.

Despite this, the shares’ debut failed to live up to analysts’ expectations.

“The shares hit their high at the start of the day, and then traded the rest of the day in a downward slope, almost closing below their offering price,” said Mohamed Radwan, the head of equities at Pharos Holding in Cairo.

“It was a disappointing start, as it was expected to rise by 10 per cent or more. You had a lot of quick traders getting in and getting out very quickly, going after a minimal profit.”

Mr Radwan said that investor appetite had been severely dampened by recent violence in Egypt, including last week’s assassination of the country’s public prosecutor Hisham Barakat and the death of 17 soldiers and more than 100 militants in the Sinai peninsula, as well as growing unease at the political and economic situation in Greece.

The Egypt Exchange’s headline index closed down 1.1 per cent at 8,218.25. After rallying in January, the index is down 7.9 per cent for the year.

Emaar Misr’s IPO, first announced in May, has involved the sale of 600 million shares, equivalent to a 13 per cent stake in the company, at 3.8 pounds each, giving the company an initial valuation of 17.6 billion pounds (Dh8.34bn).

The IPO was the largest offering of its kind on the Egyptian stock exchange since that of its fellow real estate developer Talaat Moustafa Group in 2007.

Shares in Emaar Misr allocated to institutions were about 11 times oversubscribed, and 36 times oversubscribed for the retail portion.

“This listing is the outcome of our strategic approach to providing both institutional and retail investors the opportunity to invest in and gain exposure to the solid domestic market,” said the Emaar Properties chairman Mohamed Alabbar.

“Proceeds from the IPO will be directed to allow the company to carry out its ambitious growth plans, which reflect our confidence in the strong potential of the Egyptian economy.”

The rise in Emaar Misr shares appeared not to impact on its parent company. Shares in Emaar Properties closed down 0.64 per cent at Dh7.74 on a thin day of trading for the stock. Less than 3 million Emaar shares changed hands on Dubai bourse on Sunday.

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