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New IPO Heats Up the Market

October 2005
The broad-based HFI Index and the broader CIBC Index shot up 8.3 percent and 5.1 percent to close at 45062.51 and 160.49 respectively in the period from August 15 to September 15. For the third month in a row, advances led declines with a ratio north of 2-to-1. With the presidential election over, investors can now concentrate on economic indicators and financial performances to decide where and when to invest, especially with the impending AMOC IPO.

With AMOC due to trade on September 29, the market has developed an appetite for the petrochemicals sector. AMOC's public subscription opened from September 13 to 22, with an allocation rate of 3.7 percent, implying a whopping 28-fold over-subscription. It's worth noting that the very successful SIDPEC IPO, which held its 49-percent increase during the period, was only 2.6 times over-subscribed. Investors seeking a piece of the AMOC IPO scrambled to gather national IDs to get around the 1,000-share per subscriber limit. This resulted in the high over-subscription and extremely low allocation rate.

Veteran investors expected this and instead redirected their funds to old-timers such as EFIC, Abu Kir Fertilizers and Al-Ezz Steel Rebars, which closed the period at 27 percent, 22 percent and 21 percent higher respectively. It's worth noting that the Holding Company for Metallurgical Industries announced that it would offer 36 percent of EFIC to a strategic investor or a group of investors through bids, while Abu Kir Fertilizers released its yearly results posting a net income jump of 18 percent to £E 424.5 million.

Mergers and acquisitions continue to unfold, especially in the banking sector. NSGB, as part of its parent bank's strategy to expand in Egypt, acquired 90.68 percent of MIBank at £E 43.2 per share. While the deal creates a large bank with £E 30 billion in assets, it still falls short of Egypt's largest private bank CIB's £E 36 billion. Following the news, MIBank's share price jumped close to the deal price, but fell later to close the period 5 percent lower at £E 40.93. NSGB's share price cooled off 9 percent to £E 61.78, after a 12-percent increase during the previous period. By contrast, CIB's share price increased 8 percent to £E 51.37.

Elsewhere, the construction conglomerate OCI reported its first-half results posting a 57-percent increase in net income of £E 790 million. It also announced establishing a new subsidiary in Algeria to build a white cement plant as well as the acquisition of a 51-percent stake of a Spanish cement company. OCI's share price increased 16 percent from £E 172.33 to £E 199.03.

Its sister company Orascom Telecom (OT) reported first-half results with mobile subscribers of all its subsidiaries reaching over 21 million.

Net income reached £E 1.7 billion versus £E 1.2 billion last year. OT's share price increased 6 percent to £E 553.97. OT's Egyptian subsidiary, Mobinil, approved a cash dividend of £E 5.78 during its September 6 general assembly, with share price increasing 10 percent to close at £E 197.02. On the other hand, Vodafone Egypt's share advanced only 3 percent to £E 91.69.

The market seems to have digested AMOC's IPO with prices holding firm, partly because of its relatively low size versus SIDPEC 's. A few other offerings will soon be floated, forcing investors to decide whether to liquidate from the market to get into these offerings or wait for unused funds from those offerings to flow into the market.

© Business Monthly 2005