IPO WATCH- Eagle Capital has tapped EFG Hermes and Zulficar & Partners to act as financial and legal advisors on the restructuring of Egyptian Media Group (EMG), which Eagle Capital had acquired last month, unidentified sources tell Al Borsa. EFG Hermes had acted as the sole buy-side advisor to Eagle Capital in the acquisition, while Zulficar & Partners were the legal advisors on the transaction. According to the sources, Eagle Capital will likely IPO EMG once the restructuring process is complete within two years’ time. Studies are currently underway to remove EMG’s unprofitable activities to raise its profits to 5% of its capital, which is the minimum requirement to list the company, the story says.

IPO WATCH- The Egyptian Propylene and Polypropylene Company (EPPC) has reportedly appointed EFG Hermes and Citibank to help it secure USD 800 mn in funding for its petrochemicals plant in Port Said, Egypt Country Head at Amwal AlKhaleej Karim Saada told Al Mal. Amwal AlKhaleej owns about 16.4% of EPPC’s shares. The details of the expansion were announced last week. Saada says 65% of the required funding will be raised internally and through loans, with the remainder coming from listing on the EGX. He says an IPO is expected by April. EPPC will add new production lines that would increase output to 600k tons. Saada says CIB, Banque Misr, and Banque du Caire are preparing a bridging loan to fund the project. Law firms Matouk Bassiouny and Baker & McKenzie would be advising on the potential USD 250-300 mn listing, he adds. Saada has been floating the planned investment since last year.

IPO WATCH- Beltone Financial has two IPOs in the pipeline for potential execution this year, one each in the consumer goods and industrial sectors, head of investment banking Mohamed El Akhdar tells Al Borsa. One of the companies is currently in the final phases of an acquisition in preparation for its listing on the EGX, and is one of the biggest players in its sector, according to El Akhdar. He did not disclose further details on the company or the timeline of its planned IPO. Beltone is also advising on two M&As, including the merger of Zahran Group and Groupe SEB Egypt’s electrical appliances units, which Beltone expects to be completed in 2Q2018.

IPO WATCH- It was never going to be on the EGX, and in any case: Careem is not actively considering an IPO, CEO Mudassir Sheikha says, according to The National. “It’s nowhere on the horizon, we are not actively thinking of it, we are not actively planning for it … But we are at a scale already where bankers think we should consider it … We take these meetings, but we are not actively pursuing it, we just take the meetings because they want to meet us and we listen to them,” he says. Careem is still in the “investment phase,” Sheikha says, adding that the company is not yet profitable. “We do not make money yet but the business is growing quite handsomely. We are on the business plan that will make money in a couple of years,” he told The National.

M&A WATCH- Arqaam Capital is advising on four M&A in Egypt, Managing Director Radi El Helw tells Al Borsa. The transactions are in the healthcare, food, industrial, and ICT sectors, El Helw says, without providing further details on the value or nature of the transactions. He also said that Arqaam plans to add short-selling and equity lending to its activities if they are approved by the Financial Regulatory Authority. Don’t expect the firm to launch factoring or leasing services this year, though, he added.

INVESTMENT WATCH- The Arab Moltaqa Investments Company could invest up to EGP 200 mn in Egypt over the next two years, COO Ahmed Ibrahim tells Al Borsa. Moltaqa is looking to deploy excess liquidity it booked through the recent sale of assets including a stake in Al Tawfeek Leasing Co and Dar Al Fouad Hospital (the former at the time of its IPO). The company will focus mainly on the medical and industrial sectors, but is also looking to expand its real estate portfolio, Ibrahim said, adding that the company also likes industries with export prospects. Retail is also under the company’s radar and plans are already underway to launch a supermarket franchise targeting low- and middle-income consumers.

Etisalat Misr is joining the list of companies in Egypt raising capital to retire debt it accumulated to pay for its 4G license. In a high interest rate environment, the company has begun expediting the repayment of EGP 4 bn it owed to a domestic bank consortium, sources told Al Shorouk. Etisalat Misr had borrowed EGP 6 bn from a consortium that had CIB and NBE as lead arrangers which was used to pay for the rights for the 4G license in 2016. Sources say Etisalat Misr’s interest costs rose seven percentage points last year. Al Shorouk says nine multinationals in Egypt are working on retiring debt using funding from their parent companies.

Egypt paid USD 200 mn in arrears owed to international oil companies this month, Finance Minister Amr El Garhy said, according to Reuters. El Garhy said the government would be paying another USD 550 mn in February and March as well. The government has pledged to pay off all arrears by the end of June 2019 and not to accumulate more, Reuters says.

… El Garhy also said the government has plans to sell shares in eight to 10 companies on the EGX within 18 months. He says the companies that will be part of the planned sale include some that are already listed in addition to fresh offerings. El Garhy did not specify the companies or the stakes intended for sale.

Private investment is expected to make up 60% of total economic growth in Egypt in FY2017-18, up from 48% in the last fiscal year,Planning Minister Hala El Said told Bloomberg in an interview. The figure is expected to rise further next year to a range of 62-65%, as private investment becomes a main driver of economic growth, El Said said, hinting that “investor confidence had rallied enough to supplant what has so far been an overwhelming reliance on government spending.”

Tax revenues for the 1H2017-18 grew 62% y-o-y to EGP 249 bn, Vice Minister of Finance Amr El Monayer said yesterday, Al Mal reports. The growth was driven by a 41% y-o-y increase in income tax collections to EGP 103 bn, as well as 83% y-o-y rise in proceeds from the value-added tax, which reached EGP 21 bn for the first half of the fiscal year. Real estate taxes also grew by 70% y-o-y to EGP 1.6 bn, while customs reeled in EGP 15 bn for the period, an increase of 44% y-o-y, according to El Monayer.

Tax proceeds for FY2017-18 is expected to hover around 14.5-14.7% of total GDP, up from 13.6% in FY2016-17. The government is looking to raise that figure to 19% of GDP over the next four years, El Monayer also said, explaining that a number of legal and regulatory changes. These include legislation to unify and simplify all tax procedures, as well as the Customs Act, which primarily work to clamp down on tax evasion. El Monayer said a first draft of the bill, which has been under consideration for some eight years, is being reviewed now.

Capital gains tax update: The measure, currently on hold until 2020, would come into effect once the state establishes a clear framework for its implementation, Monayer said. He added that the stamp tax on capital market transactions — a 0.125% levy that will rise to 0.175% in its third year — is more convenient to current circumstances.

LEGISLATION WATCH- The Financial Regulatory Authority (FRA) is drafting an all-encompassing Insurance Act. A draft of the bill — which will cover everything from car insurance to policies for companies and private equity funds — will be put up for “national dialogue” at the end of February before it’s passed along to the various ministries to review, FRA Deputy Chairman Reda Abdel Moaty tells Al Mal. Actuarial studies to back the bill are now underway. Some of the proposals currently under study include amending capital requirements for insurance companies to a minimum of EGP 120 mn, compared to EGP 60 mn currently. The FRA is also considering setting a payout floor of EGP 60-70,000 (up from EGP 40,000) on life insurance policies for victims of traffic accidents, Abdel Moty adds.

In other news from FRA, the executive regulations to the new Capital Markets Act are 80% complete and should be ready by the time MPs are done revising the bill by the end of February, FRA Deputy Chairman Khaled El Nashar also said. In addition to introducing penalties for financial crimes and new rules governing taxes for the sector, the law — which is currently before the House of Representatives’ Economics Committee — is expected to introduce a number of new financial instruments to the market, including futures trading, a commodities exchange, and short-selling. An FRA committee is currently drafting the mechanisms through which short-selling will be implemented and these will be used to complete drafting the executive regulations.

Also on legislative docket, the House Planning and Budgeting Committee has approved extending the Tax Dispute Resolution Act for only one year, Vice Minister of Finance Amr El Monayer said, Al Borsa reports. Cabinet had agreed back in November to extend the act’s mandate, which expired in September, for an additional two years.

Elsewhere in parliament, the House Culture and Media Committee is set to resume discussions on part two of the Press and Media Act today. The second part of the bill, which had been divided into two in 2016, focuses exclusively on setting regulations and guidelines for those working in the media, while the first had been concerned with setting up the three main industry regulators.

The shifting dynamics of Egypt’s tourism turnaround: Egypt’s tourist numbers soared 55% last year, even as European numbers dipped, with Chinese and regional tourists supplanting them. “The European market, including Russia, accounted for almost 80% (of tourists), but now, 52%,” said Hisham El Demeiry, head of the Tourism Promotion Authority, according to Yahoo News. Chinese and Indian visitors rose from 5% last year to 12%, while tourists from Egypt's neighbours doubled their market share from 15% to 30%, he added.

This comes as the flow of tourists to the Middle East grew 5% y-o-y in 2017, with our region drawing in 58 mn tourists last year, according to figures released last week by the UN World Tourism Organization (UN WTO). This came on the back of “sustained growth in some destinations and a strong recovery in others” after a devastating 2016, the report stated. Jihadist attacks on tourist sites in Egypt, Tunisia and Turkey in recent years particularly hit the industry, but “over time, people forget and return,” said Jalel Gasmi, head of Granada Travel Services, at the Fitur international tourism gathering in the Spanish capital. Chinese and Russian visitors were the biggest drivers of this regional growth, which is projected to rise another 4-6% in 2018, according to the WTO.

Despite being safer options for investors, Morocco and Tunisia could be replaced by Egypt as an alternative, which seems to offer “huge potential” despite considerable risks caused by possible political change, a higher rate of attacks­­, and other substantial economic problems, Jeremy Weltman writes for Euromoney. Weltman lists three main factors behind Egypt’s recent slow but discernible recovery: floating the Egyptian pound, benefiting from improving global trade, and gaining a three-year financing arrangement from the IMF. “Egypt is still a riskier prospect, but it is closing the gap and offers huge potential if the reforms continue.”