EXCLUSIVE: HHD 10% stake + management contract to be awarded at the end of January -Tawfik: NI Capital will choose by the end of January the strategic investor to take over management of Heliopolis Housing & Development (HHD) along with a 10% stake in the company, Public Enterprises Minister Hisham Tawfik told Enterprise. HHD Chairman Hany El Deeb said last week that the final contracts would be signed at the end of 1Q2020.

NI Capital invites investment banks to bid: NI Capital, the state-owned investment bank overseeing the government’s privatization program, has invited a number of investment banks to bid for the contract, banking sources told the local press. The banks are expected to submit offers individually or as part of a consortium within the next two weeks, the sources said, without disclosing the names of the banks.

Who do we already know is in the running? Eight companies were initially reported to have been interested in HHD, including SODIC, EFG Hermes, BPE Partners, Emaar Misr, and Orascom Development. Sources said that as of Thursday, only SODIC and BPE Partners had purchased the prospectus, which went on sale last Monday.

Bidders have until 1pm on 14 January to throw their hats into the ring and must submit any enquiries by 18 December.

The latest on the state privatization program: The Public Enterprises Ministry is choosing from a list of eight companies to IPO on the EGX, including e-Finance, Banque du Caire, and El Nasr Mining company, Tawfik told us. One of these companies might be offered before the end of the government’s current fiscal year in June 2020, he said, adding that the government plans to list several companies in 2020. Alexandria Container & Cargo Handling Company and Abu Qir Fertilizers are also ready to take secondary offerings to the market and are waiting on the investment banks quarterbacking the transactions, Tawfik said at a conference last week.

Some analysts are skeptical that the program can meet its targets: Reuters reports that analysts have raised doubts the Madbouly government can keep to its current timetable for the privatization program, citing constant delays for “flimsy” reasons. The government announced plans to privatize 23 companies back in March 2018, but until now Eastern Tobacco’s 4.5% secondary offering in March is only the one to go to market. “The successive postponement of the IPO weakens the government's position significantly and loses confidence in the program,” said Wael Enaba, chairman of Royal Brokerage, who notes the successful private sector offerings that have taken place this year.

The government has cited procedural delays and market uncertainty as reasons for postponing the sales. Radwa El Swaify, head of research at Pharos, says that the government should take a more proactive approach. “We need to energize the market through government offerings, rather than waiting for market activity,” she said.

The continued delays could hit investor sentiment, said Amr Ghallab, an MP who sits on the House Economic Committee. The government “should announce a clear timetable and a new timetable for the IPO program ... When dealing with the capital market, transparency and clarity must be the master of the situation,” he said.

Still, we wonder: Have we not lost the plot with this constant hand-wringing about when the government will do an IPO or a secondary? First, nobody goes to market in adverse conditions — like when the EM Zombie Apocalypse bites or Aramco threatens to suck all the liquidity out of EM. Second, any policymaker (to say nothing of investment banker) who greenlights a transaction on a state asset that ultimately falls short of price expectations will be excoriated in the court of public opinion. And third, the only question that matters isn’t “when” the government pulls the trigger on the sales, but whether the companies themselves are serious about what it means to continue life reporting not to a holding company and “their” minister, but to public market shareholders.

Short selling comes to the EGX: The EGX and Misr for Central Clearing, Depository & Registry (MCDR) yesterday launched short selling on the bourse following approval by the Financial Regulatory Authority (FRA), sources told Al Mal. Beltone and HC Securities were the first brokerages to complete a short selling transaction yesterday, according to the newspaper, after the EGX and MCDR finalized preparations to begin receiving trading orders, including linking custodians with brokerage firms.

So, uh, what’s short selling? Let’s say you’re not a fan of Company X — and you’re convinced its share price will fall. Shorting its stock is how you make (or lose…) money on that belief. You borrow shares from your broker (for a fee, of course) for a set period of time, then you sell the shares immediately. If your hunch is correct and the stock price falls while you’re shorting the shares, you can then buy the shares back from the market (or “close out” your position) and return them to the person or institution from whom you had bought them. If you borrowed the shares at EGP 100, sold them into the market at the same price and then bought them back at EGP 70, then you made EGP 30 on the transaction (setting aside your broker’s fees and commission).

But wait … the downside is effectively unlimited: What if you borrow the same shares at EGP 100 — and then they go up to EGP 170 by the end of the period you specified on, say, news of a new CEO or some other great trigger? You now owe your broker EGP 70. You can learn more from the folks at Investopedia.

So, how does it work in Egypt? At the outset, there’s a list of about 30 securities you can short, and the EGX will review the list of eligible securities every six months. To qualify, shares need to be frequently traded and at least 10% of registered brokerage firms need to be trading the shares in question. Short sellers won’t be able to (easily) pick on the little guy under an anti-bullying provision: You can’t short a stock unless its shares in freefloat account for a minimum of 0.005% of the market cap made up of the market’s total freefloating shares, and any stock that’s going to be shorted has to have at least 300 mn issued shares.

And you had better have the money to put where your mouth is: Folks looking to open a short position will need to put down 50% of the value of the securities borrowed, and brokerages will be required to park 20% of that in fixed-income instruments while the position is open.

EGX negotiates lower software prices for smaller brokers: The EGX has negotiated with providers of the software used to trade shorts to reduce the prices to between USD 2,000-3,600 (EGP 32k-58k) from USD 9,500 (EGP 153k) after brokerages last month complained to the FRA that the high cost could place short selling out of their reach. The bourse has proposed that the 10 large brokerages that already have the software set up a joint company to provide smaller brokers with the software at lower prices, sources say.

Shorting on the EGX has been a long time coming: The EGX and MCDR moved in August 2017 to upgrade the bourse’s trading systems to handle short selling, which was theoretically allowable at the time. Fast forward to May 2018 and the FRA had approved the necessary amendments to the Capital Markets Act’s executive regulations, raising expectations that short selling could be introduced in September. More than a year and several regulatory approvals (see here and here) later short selling has finally made its way to the Egyptian market. The FRA has so far granted 51 brokerages licenses to facilitate short selling.

IPO WATCH- Rameda retail offering 1.6x oversubscribed on second day of subscription: Rameda Pharma’s retail offering was 1.6x oversubscribed at the end of the second day of subscription yesterday, according to the local press. Retail investors bid for 29.96 mn shares from a total 18.83 mn shares on offer. The offering was launched on Thursday for EGP 4.66 per share, and will close on Wednesday.

New products, export growth on the horizon: Rameda’s IPO comes as the company is planning to launch 21 new products on the market in the medium-term, and plans to double its manufacturing output in 2020, said Yasmine Negm, Rameda’s director of investor relations, according to Al Mal. The company is looking to more than double its exports to 15% of its total output over the next few years, CFO Mahmoud Fayek tells the newspaper. New export markets could include Uzbekistan, Palestine, Sudan, Niger, and Tanzania, while strengthening its foothold in Yemen, Iraq, and Libya, according to Fayek.

Background: Rameda priced its offering, which is heavily skewed toward institutional investors, last week. You can check out its intention to float (pdf) for more. Shares are expected to begin trading on 11 December under the ticker RMDA. Rameda’s IPO will be the second on the EGX this year, after e-payments company Fawry floated in August.

Advisors: HSBC and Investec are joint global coordinators and bookrunners for the international offering, while CI Capital is joint bookrunner. Compass Capital is the IPO advisor, and Inktank is investor relations advisor.

New export subsidies program exec regs finally see the light of day, but exporters have mixed feelings: Prime Minister Moustafa Madbouly ratified yesterday the highly anticipated executive regulations of the new export subsidy framework that the government had announced and approved earlier this year, according to a document seen by the local press. The regulations state that exports from the beginning of July 2019 will be eligible for subsidies from the EGP 6 bn that will be disbursed in FY2019-2020 under a framework to incentivize exporters.

Textiles and furniture makers not too excited: Both heads of the textiles and furniture industries export councils were quoted as saying authorities seem to have failed to carry through with promises made in meetings with the country’s export councils over the past months. They claimed the regs specified too many prerequisites for subsidy disbursals and that the bulk of the disbursals would be in the form of tax breaks, rather than direct cash transfers.

Those who make export-bound engineering products and printed materials, meanwhile, found the program’s application largely satisfactory, citing positive elements that will encourage SMEs activity and sector-specific factors they see as attractive.

Background: The new program is meant to be a start of an annual allocation from the state budget. When details were first unveiled, the government said that, of the EGP 6 bn allocated this fiscal year, some EGP 2.4 bn (or 40%) will be doled out as cash payments, EGP 1.8 bn (30%) as tax breaks and cuts to arrears owed to the Finance Ministry, and the remaining EGP 1.8 bn (30%) will be spent by the state-run Export Subsidy Fund in order to build up Egypt’s export capacity. The program also promised to make good on bns of overdue payments that have racked up under an older program that was also run through the fund since 2012. Settlements of the overdue payments have reportedly been moving forward since last September.

INVESTMENT WATCH- Tech investment fund A15 plans to invest EGP 250 mn over the coming period in fintech, e-commerce, digital advertising technology, and digital development projects, CEO Fadi Antaki tells Hapi Journal. The investments will be distributed between A15 and other investment partners, and the fund will announce the new projects successively in 1H2020, Antaki says. The new investments include entering two distinct areas related to e-commerce, he said, noting that A15 has invested an undisclosed sum in courier service provider R2S Logistics as part of its investment plans for the sector.

Ebtikar to invest EGP 35 mn in non-bank financing, e-payment apps: B Investments’ Ebtikar for Financial Investment has earmarked EGP 35 mn to invest in non-bank financing and e-payment startups as part of the company’s ambitious expansion plans, Chairman Aladdin Saba tells Hapi Journal. Saba did not disclose a timeline for the investments. The total sum could yield around 10 separate investments, the chairman says, noting that each investment usually lands in the USD 100k range. Ebtikar has been eyeing seven potential investment targets, and has agreed to invest in two of them in exchange for a stake of no more than 5% in each company, Ebtikar CEO Ayman El Dessouky tells the local press.

The company also plans to begin offering consumer finance services and is in the final stages of setting up two separate consumer finance arms, El Dessouky says. The new companies will be partially owned by TCV1 and Acquire for Investment, alongside individual investors. They should officially launch operations in 2020, according to Ebtikar’s CEO.

EFG Hermes topped the EGX’s brokerage league table for November with a market share of 45.3%, according to figures released by the EGX (pdf). Pharos Securities came in second with a 7.0% market share, followed by CI Capital (5.4%), Beltone (3.3%), HC Brokerage (2.8%), and Arqaam (2.7%).

EARNINGS WATCH- Orascom Investment reports EGP 61.2 mn profit in 3Q2019: Orascom Investment Holding (OIH) posted a EGP 61.2 mn net profit in 3Q2019, down from EGP 1.21 bn a year earlier, according to the company’s financial statement (pdf). Revenue for the period came in at EGP 344.3 mn, down from EGP 384.6 mn in 3Q2018. The company recorded a net loss of EGP 92.4 mn over the first nine months of 2019, compared to EGP 1.1 bn profit in 2018. The latest quarterly earnings statement see the company returning to profit after posting net losses of EGP 153.4 mn during the first half of the year.

MOVES- The Central Bank of Egypt has approved the appointment of Mohamed Abbas Fayed as CEO of First Abu Dhabi Bank, according to the local press. Fayed resigned from his position as CEO and managing director of Bank Audi Egypt in April, after holding the title since May 2016. He previously served as Banque Misr’s vice chairman between June 2010 and September 2014.

If you’re anything like us, your ever-expanding to-do list makes you wish you had a couple of robots to get things done. Enter Elves: In the latest episode of our podcast, Making It, we talk to the brains behind Elves — Karim El Sahy and Abeer El Sisi — about the challenges of being a married couple while trying to build the best AI-based digital concierge service provider there is. Listen here on our website or try Apple Podcast or Google Podcast.