Huge investor appetite for Emaar Misr IPO

Emaar Properties, the biggest publicly traded real estate developer in the UAE, said the initial public offering for its Egyptian unit had attracted more than 11 times the number of shares available for institutional buyers amid booming appetite for investing in the Arab world’s most populous nation.

Emaar Misr for Development said its offering shares to investors at 3.8 Egyptian pounds each, valuing the company at 17.6 billion pounds (Dh8.44bn), the biggest public offering in the Egyptian stock market since the property developer’s Talaat Moustafa Group’s IPO in 2007. The company has 15.4 million square metres of land spread out across its four luxury residential projects in Egypt, which includes a resort on the north coast.

Investors are lining up to tap economic growth as Egypt starts to show green shoots after four years of political turbulence in which two presidents were deposed in as many years. While the Egyptian stock exchange has rallied in the past two years as optimism grows, the economy is not without its problems – a shortage of hard currency chief among them. Still, demand for real estate in Egypt is high amid a shortage of property. Buyers in the country also purchase property as a hedge against inflation.

“In Egypt we see a continuation of IPOs, which has been very successful over the past six months and back to last year, when Arabian Cement listed after four years of no IPOs,” said Sherif Salem, a portfolio manager at Invest AD, an Abu Dhabi-based asset manager.

“It shows that there is interest in the Egyptian market despite some challenges. The macroeconomic fundamentals are improving, but they may be slower than people had hoped for or expected.”

That, however, has not stopped investors from pumping up the value of recent IPOs. Shares of Integrated Diagnostics Holding, a medical testing company, have soared 37 per cent since listing last month, while shares of Edita, a food company, have jumped 55 per cent since listing in April. IDH listed its shares in London and Edita ran a dual offering in London and Cairo.

Investor excitement over Egypt reached a peak in March, when Arabian Gulf countries and international corporations in March pledged about US$80 billion in aid and investment at an economic conference in Sharm El Sheikh to help the country get back on its feet.

At the economic conference, the country’s president, Abdel Fattah El Sisi, said he expected Egypt’s economy to grow at a rate of 6 per cent annually over the next five years.

Egypt’s benchmark stock index, the Case 30 Index, more than doubled in value from the time Mr El Sisi’s predecessor Mohammed Morsi was removed in July 2013 until January of this year, ahead of the economic conference.

Since then, however, the index has dropped 15 per cent on concerns that a shortage of hard currency would stall economic growth, as many businesses need US dollars to buy raw materials and machinery. The shortage of dollars has created a thriving black market for the currency, while the central bank has only made piecemeal moves to devalue the Egyptian pound to attract fresh investment, observers complain.

Emaar said that it was selling almost 13 per cent, or 600 million shares, of its 10-year-old Egyptian unit Emaar Misr and that the proceeds would go towards buying land. Its 3.8 pounds per share price tag comes towards the lower end of the 3.5 pound to 4.25 pound range it said it would sell at last month.

About 510 million shares have been earmarked to institutional investors in various countries and 90 million shares are being offered to Egyptian investors, the company said. The offering ends on Thursday and it is expected that the shares will start trading in Cairo on July 2.

The Egyptian investment bank EFG Hermes and JP Morgan are the joint global coordinators and joint bookrunners for the issue.

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